Pricing Solution Case

1. Pricing Solutions Case Study
June 13, 2019
Harshdeep Singh
Associate Researcher, Smith School of Business, Queen’s
University

2. Agenda
• Revenue Analysis
• Customer Count Analysis
• Pricing Analysis
• Observations and Insights
• Recommendations

3. Revenue Analysis (2017)
TOTAL REVENUE FOR 2017: 17.2 million
Breakfast : 5235500 = ~ 5.23 M
Lunch: 6675800 = ~ 6.67 M
Dinner: = 5306000 ~5.30 M
8.38 M
2.54 M
2.50 M
1.99 M
1.79 M

4. Revenue Analysis (2018)
TOTAL REVENUE FOR 2018: 8.49 million*
Breakfast : 2465400 = ~ 2.46 M
Lunch: 3345300 = ~ 3.34 M
Dinner: 2680500 = ~2.68 M
4.12 M
1.29 M
1.27 M
0.91 M
0.89 M
*For months Jan to June

5. Revenue Analysis
Months: January – June*
*Analysis for Comparable Months
For comparable months in 2017, revenue increased
by 118500 in 2018
* Joe Green faced the biggest challenge as his revenue
from Ohio was lower as compared to last year (1.73m vs
1.67m). Similar trends were observed in his West Virginia
Properties (0.99M vs 0.91M)

6. Revenue Analysis By Categories
-2.35%
+ 0.51
+ 0.55 + 0.70
+ 0.55 -0.04 + 0.24
- 0.07 - 0.17 + 0.08 Most of the product categories
show an increase in contribution to
revenue except Breakfast menu
items.

7. Analyzing Customer Counts
2017: 1177789
2018: 1136657 *
-3.5%
*Analysis for Comparable Months
The customer counts show a declining trend in 2018
as compared to 2017.
Breakfast customers declined significantly. A
possible reason is that these customers might
have other cheaper alternatives available.
Dinner customers are largely indifferent to price
changes.
Average Price increased by 5% from 2017 to
2018
Prices for 2018 menu prices are higher than that of 2017
Pennsylvania shows an upward trend in 2018-
1. Customers in PA are less price sensitive
2. Customer mix has a higher proportion of dinner customers

8. Analyzing the Price
* Months such as May, June and July usually experience a hike in menu prices. However, despite the price increase,
demand during these months also show a corresponding rise. This can be in part due to the fact that these months
are summer vacation seasons and enjoy a lot of customer attraction. Winter months typically observe a weaker
price and demand curve.

9. Differential Pricing
* The restaurant follows a
differential pricing strategy. This
practice might be inspired by the
notion of Willingness to Pay.
Different customers are willing to
pay different prices for similar
goods. By offering different menu
prices, the restaurant can take
reach out to different customer
segments and match their
Willingness to Pay.

10. An Example: Understanding Willingness To Pay
Consumer Surplus
Unaccommodated Demand
* By allowing different prices to exist in the market, the supplier can capture a higher portion of the demand
curve, and hence make more revenue.

11. Insights and Observations
1. Revenue increased-Despite price increase in 2018, the restaurant chain is making more revenue overall compared to
2017. This is because the restaurant is correctly able to assess the Willingness to Pay for some sections of its customer
base. For example- dinner and lunch customers are largely price insensitive, and are largely indifferent to the increased
price, and are willing to pay more. On the other hand, the breakfast customers are highly price sensitive.
WTP is low
WTP is high
2. Seasonal Trends- Like most of the businesses, this restaurant chain experiences seasonal trends with demand
peaking in certain parts of the years such as May, June, and July and week in winter months such as November,
December, January and February.
3. Burden on Certain Regional Directors- Joe Green takes care of two regions- West Virginia and Ohio. His revenues
show a decline for both regions while revenue figures for James Yellow show an upward trend- he too manages Ohio.
Possibly because of too much burden on Joe Green. Let James take care of Ohio properties.

12. Recommendations
2. Access to point of sales data: The hotel should certainly try accessing other relevant customer information to better
understand the trends. The include measuring KPIs such as-
• Sales per Labor Hour Cost
• Food and Drink Sales per Guest
• Revenue per Available Seat
• Table Turnover Rate
1. Change Price Strategy for Breakfast Items- Current pricing correctly assesses the Lunch and Dinner customer’s WTP
but misclassifies it for the breakfast customers. Hotel is losing breakfast customers to its competitors who are
possibly charging cheap prices for similar food items.
3. Bundling Food Items: Restaurant should find innovative ways to bundle its food items in forms of combos. Such
practice will certainly help the chain to improve sales for its worst performing items. For example: A customer that
orders quesadillas is also likely to order guacamole on the side. With this insight, you can create a bundled menu
promotion to allow for greater margins.
4. Create Customer Profiles: By analyzing customer and marketing data such as group sizes, reservation data, tipping
and buying patterns, the restaurant can create successful customer profiles and segments. Targeted marketing
campaigns should be used for different customer segments.
5. Inventory and Staff Optimization: KPIs to measure employee performance and inventory management will help the
restaurant to understand staffing issues that can directly affect the bottom line. Optimization strategy will help to
wisely manage food inventory

13. APPENDIX

14. Revenue (2018)
TOTAL REVENUE FOR 2017