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Unit 6: Pricing - Coggle Diagram

- - - - for each type of room you have a different rate and the price varies depending on the rate fences
- - - - First best contacts with wholesaler partners
        
        Dynamic rates
        
        No LRA clauses
        
        Do not allow B2C in the contract
        
        Allotment to wholesale partners only in off-season periods
- - - - Leisure/Business, adult/young, foreign/local
    - - Single / double / suite
      - Single+breakfas/Double+breakfast/suite+breakfast
    - - Official website, OTA, Tour-operator
  - - - Location
      - View
      - Furniture
      - Amenities
      - Size
    - - lead time
      - quantity of purchase
      - flexible cancellation
    - - Age
      - Affiliation to an institution or group
      - Frequency or volume of consumption
    - - geographical critiria
      - Distribution channels
- - - - Cost of shutdown = TOTAL REVENUE
      - Benefit of shutdown = VARIABLE COSTS
      - Shutdown iff = VC > TR
      - VC/Q > TR/Q = AVC > ADR
  - - - cost of exiting the market, is the TOTAL REVENUE
      - benefit of exit is THE TOTAL COST
      - Exit iff: TC (BENEFIT) >TR (COST) =D
      - TC/Q > TR/Q = ATC > ADR (if this happens you exit)
- - - - Charge a mark-up over the cost.
      - COST + MARK-UP % = FINAL PRICE
    - - Penetration pricing
        
        Charge a lower price than your competitors
        
        It might be useful for new entrants or when your demand is too low.
        
        It might have long-term negative effects
      - Skimming pricing
        
        Charge a higher price than your competitors
        
        Many customers believe that a higher price equals higher quality. Yet, you need to really offer something better that your competitors
        
        You need to innovate and create value for your product
      - Market price
        
        Many small hotels that cannot differentiate from their competitors use this strategy
        
        Charge same price as your competitors > average price for at least one of your products
    - - You need to have an approx idea on how is the demand for your product
      - Elasticity concept: the effect of change in price on the quantity of demand
        
        PRICE ELASTICITY OF DEMAND = % CHANGE IN QUANTITY DEMANDED / % CHANGE IN PRICE
      - Pricing considerations
        
        The greater the need the less is the elasticity
        
        Leisure travelers have a more elastic demand than business ones
        
        The elasticity of demand is higher in the long term than in the short term
      - How to get an estimate of our demand?
        
        Historical Data per segment (PMS)
        
        Experiments
        
        Surveys
        
        Qualitative techniques
      - How to set price
        
        consider the three approaches
        
        Cost
        
        Competitors price
        
        Maximum willingness to pay
    - - Effect of useless price points
      - Ending a price with 9
      - Price font size
      - Different price per each product