1. Pricing

2. Price
• If you were manager of a hotel. How would
you set your hotel rates?

3. Pricing

4. Pricing - Considerations, Approaches, Strategy
Ryanair
• Michael O’Leary chief executive of Ireland’s
Ryanair, wants to make air travel free, as in
zero cost.
– by the end of the decade, he promises, “more than
half of our passengers will fly free.”
– http://www.bbc.co.uk/news/business-20202579
tab

5. Factors affecting Price Decisions

6. The Dual Role of Pricing
Pricing plays a dual role in business:
As a direct determinant of profitability
As an implicit promotional-mix element

7. Marketing Objectives
• Survival
• Current Profit Maximization
• Market Share leadership
• Product Quality Leadership
• Other Objectives

8. Marketing Objectives:
Product Quality leadership
• Red Sage restaurant in Washington D.C

9. Marketing Objectives:
Market Share leadership

10. External Factors Affecting Pricing Decisions
Market and Demand

11. Cross-Selling and Upselling

12. Consumer Perception of Price and Value

13. The Hypothetical Demand Schedule

14. Inelastic and Elastic Demand

15. Factors Affecting Price Sensitivity
1. Unique Value Effect
“Give them value and you will create volume” Ralph Hiltz

16. Factors Affecting Price Sensitivity
2. Substitute Awareness Effect

17. Factors Affecting Price Sensitivity
3.End-Benefit Effect

18. Factors Affecting Price Sensitivity
4. Price Quality Effect
Four Season Hotels

19. General Pricing Approaches
a. Cost based pricing
b. Break-even analysis
c. Value based pricing
d. Competition based pricing

20. Break-Even Analysis
Break-even analysis involves developing
charts that show the relationship of costs,
customer demand volumes, and profits
Costs are separated into fixed and variable
in order to do break-even analysis

21. Break-Even Chart

22. Pricing Strategies
a. New-product pricing
b. Prestige Pricing
c. Market-skimming pricing
d. Market-Penetration pricing

23. Revenue Management
The Fairmont Story
• http://www.ideas.com/index.php/tools-
resources/videos/understanding-the-value-of-revenue-
management-the-fairmont-story