Week 6

Price Analysis
Hospitality Marketing
Nur Agustinus
PRICING PERCPECTIVES – Lancecter-Reynolds -

• ECONOMIST’s approach
The price is the means through which supply and demand
is brought into equilibrium

• ACCOUNTANTS’s approach
The price covers the costs and make profits

• MARKETER’s approach
Effect of price on the organisation’s competitive
market position
Setting the Right Price
Steps in Setting the Right Price

Establish pricing goals

Estimate demand, costs, and profits

Choose a price strategy

Fine tune with pricing tactics

Results lead to the right price

Setting the Right Price
Choose a Price Strategy
A firm charges a high
Price
Skimming introductory price, often coupled
with heavy promotion.

A firm charges a relatively low

Penetration
Pricing price for a product initially as
a way to reach the mass market.

Charging a price identical to or

Status Quo
Pricing
very close to the competition’s
price.

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 Price Skimming

Inelastic Demand

Situations Superior Product

when
Price Legal Protection of Product
Skimming
is
Successful Technological Breakthrough

Limited Production
 Penetration Pricing
Advantages Disadvantages

 Discourages or blocks  Requires gear up for

competition from mass production
market entry
 Selling large volumes
at low prices
 Strategy to gain
market share may fail
 Status Quo Pricing
Advantages Disadvantages

 Simplicity  Strategy may ignore

demand or cost
 Safest route to long-
term survival for small
firms
 The Legality and Ethics of
Price Strategy

Laws that prohibit wholesalers

Unfair Trade
and retailers from selling
Practices
below cost.

An agreement between two

Price
or more firms on the price they
Fixing
will charge for a product.
 Predatory Pricing

Predatory The practice of charging a very

Pricing low price for a product with
the intent of driving
competitors out of business or
out of a market.

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 Tactics for Fine-
Fine-Tuning
the Base Price
Quantity Discounts

Cash Discounts

Functional Discounts

Seasonal Discounts

Common Promotional Allowances

Tactics
for
Fine--Tuning
Fine Rebates
the Base Price
Value-Based Pricing
 Tactics for Fine-
Fine-Tuning
the Base Price

Discounts

Fine-Tuning
Fine-
Pricing Geographic Pricing
Tactics

Special Pricing
Tactics
 Economic Environment

Inflation is a sustained
increase in the general price
level of goods and services
in an economy over a period
of time.
A recession is a significant decline
in economic activity that goes on
for more than a few months.
 Inflation

Cost-Oriented Tactics

High Inflation

Demand-Oriented Tactics

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 Cost-Oriented Tactics
Problems with Cost-
Cost-Oriented Tactics

 A high volume of sales on an item with a low profit

margin may still make the item highly profitable.

 Eliminating a product may reduce economies

of scale.

 Eliminating a product may affect the

price-quality image of the entire line.

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 Demand-Oriented Tactics
Cultivate selected demand

Strategies Create unique offerings

to Make
Demand
More Inelastic Change the package design

Heighten buyer dependence

 Recession

Value-Based Pricing

Bundling or Unbundling
Value-Based Pricing
Bundling
Unbundling
 Assignment
• Watch a movie: MADRE
• Link: https://www.youtube.com/watch?v=4XK23tEMu5s
• Write a reflective journal after watching the film.
– Write your response about experiences and opinions after
watching the film.
– Write your thoughts and feelings.
– Write what you learned from the film.