13
Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management [email protected]

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

  • Upload
    gomer

  • View
    55

  • Download
    0

Embed Size (px)

DESCRIPTION

Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management [email protected]. Strategic Pricing. Today’s topic:. The Function of “Price”. Business objective Break even Profit Loss Consumer objective Worth Status - PowerPoint PPT Presentation

Citation preview

Page 1: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

Amy M. Gregory, PhDUniversity of Central FloridaRosen College of Hospitality [email protected]

Page 2: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

STRATEGIC PRICINGToday’s topic:

Page 3: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

The Function of “Price”Business objective Break even Profit LossConsumer objective Worth StatusSignal to consumer Fair Expected Equivalent to value

It’s not about the gas…

Page 4: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

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

Page 5: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

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

ValueWhat is received for what is paid….

Page 6: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

Right Price

Choose your customer

Find the value

Price accordingly

Add some psychology!

Page 7: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

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)

Page 8: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

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)

Page 9: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

Consumer Price Processing• Involvement

• Active• Inactive

• Attention to specifics• Value judgment

• Specific• Reference

Unconscious Concious

Page 10: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

Pricing Theory• Magnitude effect• Odd effect• Left digit effect• Influence of color• 5 has special status

• 2, 3, 4 = small• 7, 8, 9 = large

Page 11: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

Something to think about…

Pricing Set “A”

$79$93

Which appears to be most different?

Pricing Set “B”

$75$89

Page 12: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

Conclusion

• Position your product• Choose your customers• Set your price

• Value• Willingness to Pay• Psychology

Page 13: Amy M. Gregory, PhD University of Central Florida Rosen College of Hospitality Management

THANK YOU FOR YOUR ATTENTION.

Amy [email protected]