1. The role of pricing in the marketing mix
Pricing is a very important element of the marketing mix. The process of setting the right price for a product plays an essential role in determining the overall success of not only the other elements of the marketing mix but also the overall success and profitability of the firm. It is thus very important that the pricing process of any product of a firm be undertaken carefully to ensure optimal results for the company.
Pricing is the most flexible of the marketing mix elements. This ability to change prices according to the existing market situations plays an important role in the overall flexibility of the marketing mix. The flexibility in the development of the product, its placement and promotion depend to a great extent on the pricing of the product. If the pricing is inflexible, there is a high possibility that the other marketing mix variables will also be inflexible and this will jeopardize the successful implementation of the marketing mix strategies.
Pricing plays an important role in the performance of the other marketing mix elements. The successful pricing of a product has a positive effect on the performance of the product development, its placement and promotion. This ability to influence performance of the other marketing mix elements may also be negative; if the pricing is not well done, the performance of the other elements in the marketing mix will likely be poor.
Perceptions by buyers of a product are influenced by the pricing of the product. The impressions that customers have about a particular product are based to a great extent by the price of the product. Impressions of the product by customers play a role in determining the success of the product in the market. The right pricing will lead to positive impressions on the customers and this enables the smooth and successful implementation of the other marketing mix variables for the product.
Pricing forms a core part of all the other marketing mix variables. Price plays a very important role in product development, placement and promotion. The development of product should be done with the expected range of its pricing in mind. This allows for the development of a product that meets the needs of the buyers while at the same time having an appealing price to the customers. This consideration for price will ultimately lead to the development of a successful product.
Pricing plays an important role in the promotion of a product. In many sales promotions, one of the popular incentives offered to customers to promote the product is a temporary reduction in the price. This means that for a promotion of a product to be successful, pricing adjustments for the product should be considered as part of the promotion strategy.
Placement of a product also relies on the pricing. Market segmentation is a strategy that is adopted to ensure successful placement of a product in different segments of the market. To ensure effective placement, different pricing is used appropriately for each segment of the market. This ensures that markets which would be lost if a fixed price was used for all the market segments are retained. This illustrates the role that pricing plays in the placement of a product.
2. Pricing strategies by the Easyjet airline company
Easyjet is an airline company which operates some of the cheapest flights across the major cities in Europe. Its website offers potential clients the available air fares to different destinations at various points in future and makes a point of adjusting the fares according to demand on the route, competiveness of the route and how far into the future the flight is.
The following table is a summary of the air fares for a return trip from the London Gatwick airport to Rome in British pounds at various booking dates in the future.
1
7
30
90
One week return airfare (£)
London to Rome
128.69
79.69
76.69
59.69
A plot of the price against the number of days before the flight
From the table and the graph, it is evident that Easyjet tries to give lower prices to customers who make bookings early in advance. Those who book flights a day before pay almost three times the amount paid by those who book three months (90 days) in advance.
The pricing strategy adopted by Easyjet airline is the dynamic pricing strategy. The company employs the use of prices which are determined by various factors such as availability of flights in a given route, the season and the demand. It is through the use of this strategy that Easyjet airlines is able to provide particular prices for every flight and no one flight has the same price as the other even when using the same route.
Another pricing strategy adopted by the Easyjet airline is the differences in price depending on the date of booking the flight. Customers who book their flights early in advance receive lower prices than those who book late. This is a strategy that encourages buyers to make their purchases higher earlier. It is also an appropriate strategy since it enables the company to anticipate demand early in advance.
Easyjet has adopted another pricing strategy of having fixed prices for both inbound and outbound flights. An individual flying one way will pay as much amount as the individual flying a return. The only difference is that one flying a return trip will pay for both inbound and outbound trips. This is a useful strategy since it enables the airline to cut the losses in profits that are associated with lower prices for return flights.
The company also employs the use of group pricing. It has grouped is potential clientele into adults, children and infants below two years. The rates for these three groups are different. This is a good pricing strategy since it’s effective and easy to implement in the airline industry.
Bundling is another pricing strategy adopted by the Easyjet airline. The company offers to its customers bundled services that include the airline flight, car rentals apartment and hotel rentals. This pricing strategy ensures that the company also taps into the services that are supplementary to its operations.
Comparison between Easyjet and British airways
British airways are also an airline company which offers the same services as Easyjet worldwide. A comparison between the prices offered by the two companies on the London to Rome route indicates some similarities and differences.
Booking days before flight
1
7
30
90
One week return airfare (£) Easyjet airline
128.69
79.69
76.69
59.69
One week return airfare (£) British airways
302.20
153.40
148.20
136.40
Prices form both companies seem to follow the same pattern, being lower for flights booked early in advance and high for flights that are booked late. This timing strategy has been adopted by both companies and it encourages potential clients to commit to make the purchase of the service early.
Another similarity in the pricing strategies of the two companies is the use of the use of group pricing. Both airlines classify their customers according to age and offer different prices for the different age groups. The strategy seems appropriate since classification of customers by age is easy to implement.
Bundling pricing strategy has been adopted by both companies. Prices are offered for bundled services with additions such as sightseeing, car rentals, apartments and hotel bookings as part of the service package. This enables the customers to make a one stop purchase of the relevant services they need after a flight.
A major difference in the pricing strategies of the two companies is the price level. Easyjet airlines offer lower prices as compared to British Airways. On the London to Rome route return, Easyjet offers lower prices. This is a pricing strategy which the company may use to counter competition from the more established competitors like the British Airways.
Versioning is a price strategy used by British Airways which is not used by Easyjet airlines. It involves the classification of customers according to their ability to pay. British Airways offers several classes of travel at different prices. These range from the executive business class to the economy class. This is a pricing strategy that enables the company to charge different prices to different groups of customers.
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