HMD407 UNLV Ch 11 Pricing Considerations Approaches & Strategy Questions You need to read 4 files that I attached first and then please answer follow quest

HMD407 UNLV Ch 11 Pricing Considerations Approaches & Strategy Questions You need to read 4 files that I attached first and then please answer follow questions.

Answers are expected to be written in full sentences and be thoughtful.

You are to type your responses underneath each question in this document. Please make sure there is a space between the question, your response, and the next question.

you don’t need to write cover page for this assignment.

before answering the question, please read carefully all of the 4 files.

just need short two or three paragraphs for each question.

thank you

Chapters 11-12

Please answer the following questions completely.

Question 1 (10 points)

You have just been hired as the dining room manager at a local hotel. The manager asks you to evaluate the menu prices to see if they need to be adjusted. How would you go about this task?

Question 2 (10 points)

What are the major differences between a distribution channel for a business making tangible products and a firm producing hospitality and travel products? Chapter 11: Pricing Products: Pricing Considerations, Approaches, and Strategy
Chapter Outline/Notes (sections marked with * are most important)
I.
*Price. Simply defined, price is the amount of money charged for a good or service. More
broadly, price is the sum of the values consumers exchange for the benefits of having or
using the product or service. [Slide 11-4]
II.
Factors to Consider When Setting Price [Slide 11-6]
A.
Internal factors [Slide 11-7]
1.
Marketing objectives [Slide 11-8]
a.
*Survival. It is used when the economy slumps or a recession is
going on. A manufacturing firm can reduce production to match
demand and a hotel can cut rates to create the best cash flow.
b.
*Current profit maximization. Companies may choose the price that
will produce the maximum current profit, cash flow, or return on
investment, seeking financial outcomes rather than long-run
performance.
c.
*Market-share leadership. When companies believe that a company
with the largest market share will eventually enjoy low costs and
high long-run profit, they set low opening rates and strive to be the
market-share leader.
d.
*Product-quality leadership. Hotels like the Ritz-Carlton chain
charge a high price for their high-cost products to capture the luxury
market.
e.
Other objectives. Stabilize market, create excitement for new
product, and draw more attention.
2.
Marketing mix strategy. Price must be coordinated with product design,
distribution, and promotion decision to form a consistent and effective
marketing program.
3.
Costs
a.
Fixed costs. Costs that do not vary with production or sales level.
b.
Variable costs. Costs that vary directly with the level of production.
4.
Cost Subsidization
5.
Organization considerations. Management must decide who within the
organization should set prices. In small companies, this will be top
management; in large companies, pricing is typically handled by a
corporate department or by a regional or unit manager under guidelines
established by corporate management.
B.
External factors [Slide 11-9]
1.
Nature of the market and demand
a.
Cross-selling. The company’s other products are sold to the guest.
b.
Upselling. Sales and reservation employees are trained to offer
continuously a higher-priced product that will better meet the
customer’s needs, rather than settling for the lowest price.
2.
*Consumer perception of price and value. It is the consumer who decides
whether a product’s price is right. The price must be buyer oriented. The
3.
4.
5.
6.
7.
price decision requires a creative awareness of the target market and
recognition of the buyers’ differences.
Analyzing the price–demand relationship. Demand and price are inversely
related; the higher the price, the lower the demand. Most demand curves
slope downward in either a straight or a curved line. The prestige goods
demand curve sometimes slopes upward. [Slide 11-10]
*Price elasticity of demand. If demand hardly varies with a small change in
price, the demand is inelastic; if demand changes greatly, the demand is
elastic. Buyers are less price-sensitive when the product is unique or when
it is high in quality, prestige, or exclusiveness. Consumers are also less
price-sensitive when substitute products are hard to find. If demand is
elastic, sellers generally consider lowering their prices to produce more
total revenue. The following factors affect price sensitivity: [Slide 11-11]
Factors Affecting Price-Demand Relations [Slide 11-12]
a.
Unique value effect. Creating the perception that your offering is
different from those of your competitors avoids price competition.
b.
Substitute awareness effect. Lack of the awareness of the existence
of alternatives reduces price sensitivity.
c.
Business expenditure effect. When someone else pays the bill, the
customer is less price-sensitive.
d.
End-benefit effect. Consumers are more price-sensitive when the
price of the product accounts for a large share of the total cost of the
end benefit.
e.
Total expenditure effect. The more someone spends on a product,
the more sensitive he or she is to the product’s price.
f.
Price quality effect. Consumers tend to equate price with quality,
especially when they lack any prior experience with the product.
Competitors’ price and offers. When a company is aware of its competitors’
price and offers, it can use this information as a starting point for deciding
its own pricing.
a.
Price-Rate Compression
Other environmental factors. Other factors include inflation, boom or
recession, interest rates, government purchasing, and birth of new
technology.
III.
General Pricing Approaches [Slide 11-13]
A.
Cost-based pricing. Cost-plus pricing: a standard markup is added to the cost of the
product.
B.
Break-even analysis and target profit pricing. Price is set to break even on the costs
of making and marketing a product, or to make a desired profit.
C.
Value-based pricing. Companies based their prices on the product’s perceived
value. Perceived-value pricing uses the buyers’ perceptions of value, not the
seller’s cost, as the key to pricing.
D.
Competition-based pricing. Competition-based price is based on the establishment
of price largely against those of competitors, with less attention paid to costs or
demand.
IV.
Pricing Strategies [Slides 11-14 to 11-15]
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
V.
*Prestige pricing. Hotels or restaurants seeking to position themselves as
luxurious and elegant enter the market with a high price that supports this
position.
*Market-skimming pricing. Price skimming is setting a high price when the market
is price-insensitive. It is common in industries with high research and
development costs, such as pharmaceutical companies and computer firms.
*Marketing-penetration pricing. Companies set a low initial price to penetrate the
market quickly and deeply, attracting many buyers and winning a large market
share.
*Product-bundle pricing. Sellers using product-bundle pricing combine several of
their products and offer the bundle at a reduced price. Most used by cruise lines.
*Volume discounts. Hotels have special rates to attract customers who are likely to
purchase a large quantity of hotel rooms, either for a single period or throughout
the year. [Slide 11-16]
Discounts based on time of purchase. A seasonal discount is a price reduction to
buyers who purchase services out of season when the demand is lower. Seasonal
discounts allow the hotel to keep demand steady during the year.
Discriminatory pricing. Segmentation of the market and pricing differences based
on price elasticity characteristics of the segments. In discriminatory pricing, the
company sells a product or service at two or more prices, although the difference
in price is not based on differences in cost. It maximizes the amount that each
customer pays.
Revenue management. A yield-management system is used to maximize a hotel’s
yield or contribution margin.
Rate Parity Pricing
*Value Pricing
*Psychological pricing. Psychological aspects such as prestige, reference prices,
round figures, and ignoring end figures are used in pricing. [Slide 11-17]
*Promotional pricing. Hotels temporarily price their products below list price, and
sometimes even below cost, for special occasions, such as introduction or
festivities. Promotional pricing gives guests a reason to come and promotes a
positive image for the hotel.
Price Changes [Slide 11-18] *
A.
Initiating price cuts. Reasons for a company to cut price are excess capacity,
inability to increase business through promotional efforts, product improvement,
follow-the-leader pricing, and desire to dominate the market.
B.
Initiating price increases. Reasons for a company to increase price are cost
inflation or excess demand.
C.
Buyer reactions to price changes. Competitors, distributors, suppliers, and other
buyers associate price with quality when evaluating hospitality products they have
not experienced directly.
D.
Competitor reactions to price changes. Competitors are most likely to react when
the number of firms involved is small, when the product is uniform, and when
buyers are well informed.
E.
Responding to price changes. Issues to consider are reason, market share, excess
capacity, meeting changing cost conditions, leading an industry-wide program
change, temporary versus permanent.
Marke&ng for Hospitality and Tourism
Tony L. Henthorne, PhD
TCA380
Pricing: Understanding and Capturing Customer Value
Chapter 11
Learning Objectives
1. Outline the internal factors affecting
pricing decisions, especially
marketing objectives, marketing mix
strategy, costs, and organizational
considerations.
Learning Objectives (cont.)
2. Identify and define the external
factors affecting pricing decisions,
including the effects of the market
and demand, competition, and other
environmental elements.
Learning Objectives (cont.)
3. Contrast the differences in general
pricing approaches, and be able to
distinguish among cost-plus pricing,
target profit pricing, value-based
pricing, and going rate.
4. Identify the new product pricing
strategies of market-skimming
pricing and market-penetration
pricing.
Learning Objectives (cont.)
5. Understand how to apply pricing
strategies for existing products,
such as price bundling and priceadjustment strategies.
6. Understand and be able to
implement a revenue management
system.
Learning Objectives (cont.)
7. Discuss the key issues related to
price changes, including initiating
price cuts and price increases, buyer
and competitor reactions to price
changes, and responding to price
changes.
Price
• Simply defined
– Price is the amount of money charged
for a product or service.
• Broadly defined
– Price is the sum of values consumers
exchange for the benefits of having or
using the product or service.
Factors to Consider When
Setting Prices
Internal
Factors
Factors that
Affect
Pricing
Decisions
External
Factors
Internal Factors
Internal Factors
Marketing Objectives
Current Profit
Maximiza&on
Survival
ProductQuality
Leadership
Other
Objec&ves
Market-Share
Leadership
External Factors
The Nature of
Market & Demand
Consumer
Percep&ons
of Price &
Value
Compe&&on
Figure 11–2 Two
hypothetical demand
schedules.
Determinants of Price Elasticity
The Product is
Unique
Buyers are
Less Price
Sensitive
When:
Substitute Products
are Hard to Find
The Product is
High in Quality,
Prestige or
Exclusiveness
Factors Affecting Price
Sensitivity
Unique Value
Effect
EndBenefit
Effect
Subs&tute
Awareness
Effect
Total
Expenditure
Effect
Business
Expenditure
Effect
Price
Quality
Effect
Hidden
Fees
Approaches to Pricing
Cost-Base
Pricing
Value-Based
Pricing
Break-Even
Pricing
CompetitionBased Pricing
New Product Pricing Strategies
Pres&ge
Pricing
MarketPenetra&on
Pricing
MarketSkimming
Pricing
Existing Product Pricing
Strategies
Product-Bundle
Pricing
Existing Product
Pricing Strategies
Price-Adjustment
Strategies
Price-Adjustment Strategies
Discount Pricing
and Allowances
Discriminatory
Pricing
Revenue
Management
Revenue Management
Dynamic
Pricing
Bar Pricing
Rate Parity
Overbooking
Psychological Pricing
Price Endings
Promo&onal
Pricing
Value
Pricing
Price Changes
Ini&a&ng Price
Changes
Price Cuts
Price Increases
Marke&ng for Hospitality and Tourism
Tony L. Henthorne
TCA 380
Distribu(on Channels
Chapter 12
Learning Objectives
1. Describe the nature of distribution
channels, and tell why marketing
intermediaries are used.
2. Understand the different marketing
intermediaries available to the
hospitality industry and the benefits
each of these intermediaries offers.
Learning Objectives (cont.)
3. Discuss channel behavior and
organization, explaining corporate,
contractual, and vertical marketing
systems, including franchising.
4. Illustrate the channel management
decisions of selecting, motivating,
and evaluating channel alternatives.
5. Identify factors to consider when
choosing a business location.
Supply Chain
• The Supply Chain consists of
Upstream and Downstream
partners.
– Upstream partners are firms that supply
what is needed to create a product or
service.
– Downstream partners connect the firm
with its customers.
Supply Chain (cont.)
• A better approach is to think of the
supply chain as a Value Delivery
Network where all parties partner
with each to improve the
performance of the entire system
Distribution Channel Functions
Informa&on
Nego&a&on
Promo&on
Physical
Distribu&on
Contact
Matching
Financing
Risk Taking
Major Hospitality Distribution
Channels
Hospitality
Distribu&on
Channels
Vertical Marketing Systems
Corporate
VMS
Contractual
VMS
Administered
VMS
Contractual VMS
Franchises
Contractual
VMS
Alliances
Advantages and Disadvantages
of Franchises
Advantages
Disadvantages
Brand recogni(on
Fees and royal(es are required
Less chance of failure
Limits the products and recipes
Premade ads and marke(ng plans
Requirements for opera(ng hours
Faster business growth
Required to offer certain products
Help with site selec(on
A poorly operated company can
nega(vely affect the reputa(on of the
en(re chain
Architectural plans
Support for opera(onal systems
Na(onal contracts with suppliers
Product development
Consul(ng
Help with financing
Franchisor’s performance affects
franchisees
Some franchisees may benefit more than
others
Other Management Systems
Horizontal
Marketing Systems
Other
Management
Systems
Multichannel
Marketing Systems
Evaluating Channel
Alternatives
Economic
Feasibility of the
Channel Member
Levels of
Sales
Costs
Control Criteria
Business Location
Understanding
the Marke&ng
Strategy & Target
Market
Selec&ng an Area
Within that
Region
Conduc&ng a
Regional Analysis
Choosing
Individual Sites
Chapter 12: Distribution Channels
Chapter Outline/Notes
I.
Supply Chains and the Value Delivery Network [Slide 12-3]
II.
Nature and Importance of Distribution Channels. A distribution channel is a set of
independent organizations involved in the process of making a product or service
available to the consumer or business user.
III.
Reasons That Marketing Intermediaries Are Used. The use of intermediaries depends on
their greater efficiency in marketing the goods available to target markets. Through their
contacts, experience, specialization, and scale of operation, intermediaries normally offer
more than a firm can on its own.
IV.
Distribution Channel Functions [Slide 12-4]
A.
Information. Gathering and distributing marketing research and intelligence
information about the marketing environment.
B.
Promotion. Developing and spreading persuasive communications about an offer.
C.
Contact. Finding and communicating with prospective buyers.
D.
Matching. Shaping and fitting the offer to the buyers’ needs.
E.
Negotiation. Agreeing on price and other terms of the offer so that ownership or
possession can be transferred.
F.
Physical distribution. Transporting and storing goods.
G.
Financing. Acquiring and using funds to cover the cost of channel work.
H.
Risk taking. Assuming financial risks, such as the inability to sell inventory at full
margin.
V.
Number of Channel Levels. The number of channel levels can vary from direct marketing,
through which the manufacturer sells directly to the consumer, to complex distribution
systems involving four or more channel members.
VI.
Hospitality Distribution Channels [Slide 12-5]
A.
Major Hospitality Distribution Channels
a. Direct Booking
b. Online Travel Agencies
c. Global Distribution Systems
d. Travel Agents
e. Tour Wholesalers
B.
Specialists: Tour Brokers, Motivational Houses, and Junket Reps
C.
Hotel Representatives
D.
National, State, and Local Tourist Agencies
E.
Consortia and Reservation Systems
F.
Concierges
G.
Restaurant Distribution Systems
VII.
Marketing Intermediaries. Marketing intermediaries available to the hospitality industry
and travel industry include travel agents, tour operators, tour wholesalers, specialists,
hotel sales representatives, incentive travel agents, government tourist associations,
consortia and reservation systems, and electronic distribution systems.
VIII.
Internet. The Internet is an effective marketing tool for hospitality and travel companies.
Companies can use pictures, both still and moving, to display their product. Customers
can make reservations and pay for products directly from the Internet.
IX.
Channel Behavior
A.
Channel conflict. Although channel members depend on each other, they often act
alone in their own short-run best interests. They frequently disagree on the roles
each should play on who should do what for which rewards.
a. Horizontal conflict. Conflict between firms at the same level.
b. Vertical conflict. Conflict between different levels of the same channel.
Channel Organization. Distribution channels are shifting from loose collections of
independent companies to unified systems.
A.
Conventional marketing system. A conventional marketing system consists of one
or more independent producers, wholesalers, and retailers. Each is a separate
business seeking to maximize its own profits, even at the expense of profits for the
system as a whole.
B.
Vertical marketing system. A vertical marketing system consists of producers,
wholesalers, and retailers acting as a unified system. VMSs were developed to
control channel behavior and manage channel conflict and its economies through
size, bargaining power, and elimination of duplicated services. The three major
types of VMSs are corporate, administered, and contractual. [Slide 12-6]
a. Corporate. A corporate VMS combines successive stages of production and
distribution under single ownership.
b. Administered. An administered VMS coordinates successive stages of
production and distribution, not through common ownership or contractual
ties, but through the size and power of the parties.
c. Contractual. A contractual VMS consists of independent firms at different levels
of production and distribution who join through contracts to obtain economies
or sales impact. [Slide 12-7]
i. Franchising. Franchising is a method of doing business by which a
franchisee is granted the right to engage in offering, selling, or distributing
goods or services under a marketing format that is designed by the
franchisor. The franchisor permits the franchisee to use its trademark,
name, and advertising. [Slide 12-8]
ii. Alliances. Alliances are developed to allow two organizations to benefit
from each other’s strengths.
C.
Horizontal marketing system. Two or more companies at one level join to follow
new marketing opportunities. Companies can combine their capital, production
capabilities, or marketing resources to accomplish more than one company
working alone. [Slide 12-9]
D.
Multichannel marketing system. A single firm sets up two or more marketing
channels to reach one or more customer segments.
X.
XI.
Channel Management Decisions
A.
B.
C.
Selecting channel members. When selecting channel members, the company’s
management wants to evaluate each potential channel member’s growth and profit
record, profitability, cooperativeness, and reputation.
Motivating channel members. A company must motivate its channel members
continuously.
Evaluating channel members. A company must regularly evaluate the performance
of its intermediaries and counsel underperforming intermediaries.
XII.
Selecting Channel Members
A.
Customer Needs
B.
Attracting Channel Members
C.
Evaluating Major Channel Alternatives [Slide 12-10]
a. Economic Feasibility of Channel Member
c. Control Criteria
XIII.
Responsibilities of channel members and suppliers. The company and its intermediaries
must agree on the terms and responsibilities of each channel member. According to the
services and clientele at hand, the responsibilities are formulated after careful
consideration.
XIV.
Business Location. There are four steps in choosing a l…
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