1 / 13

Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management Amy.Gregory@UCF.edu. Strategic Pricing. Today’s topic:. The Function of “Price”. Business objective Break even Profit Loss Consumer objective Worth Status

gomer
Download Presentation

Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management Amy.Gregory@UCF.edu

  2. Strategic Pricing Today’s topic:

  3. The Function of “Price” Business objective Break even Profit Loss Consumer objective Worth Status Signal to consumer Fair Expected Equivalent to value It’s not about the gas…

  4. Motivation • The “right” price is equal to exactly what the customer is willing to pay…. • $ = WTP • $ > WTP (seller lost buyers) • $ < WTP (seller lost revenue) Desire Ability Willingness

  5. Willingness to Pay • Discounting • Good “deal” for the consumer • May attract the “wrong customer” • Does not create loyalty or repeat purchase • Not a long term strategy • Basic math…. • Price – Fixed & Variable Costs = Profit Value What is received for what is paid….

  6. Right Price Choose your customer Find the value Price accordingly Add some psychology!

  7. Interesting headlines…. • Hotel guests willing to pay extra for good service (PwC Experience Radar, 2012) • Hotels.com Price Index Shows Hotel Pricing Up 4 Percent Worldwide • Add-on fees poised to expand beyond airline industry (Chicago Tribune, September 2, 2012)

  8. Mindset shift • Business pricing for the mind of the consumer • Neoclassical Price Theory (Marshall, 1890) • Maximization of utility • Law of diminishing marginal utility • Consumers are rational • Psychological Price Theory (Ajzen & Fishbein, 1975) • Theory of reasoned action • A persons’ behavioral intention depends on the attitudes about the behavior and the subjective norms • Combination of the two (Gu, 2011)

  9. Consumer Price Processing • Involvement • Active • Inactive • Attention to specifics • Value judgment • Specific • Reference

  10. Pricing Theory • Magnitude effect • Odd effect • Left digit effect • Influence of color • 5 has special status • 2, 3, 4 = small • 7, 8, 9 = large

  11. Something to think about… Which appears to be most different? Pricing Set “A” $79 $93 Pricing Set “B” $75 $89

  12. Conclusion • Position your product • Choose your customers • Set your price • Value • Willingness to Pay • Psychology

  13. Thank you for your attention. Amy Gregory Amy.Gregory@UCF.edu 407-903-8176

More Related