Analysis of Service Pricing Strategies
Added on 2021-06-15
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Analysis of Service Pricing StrategiesAnalyse the pricing policy and methods currently undertaken by the company. If relevant, also analyse the company’s approach to managing capacity and demand. Your analysis of pricing strategies should take into consideration the type of service, competitors, objectives and target market. Consider the use of marketing mix elements apart from price that shape service demand patterns.Pricing is a crucial element in any marketing plan especially for a company like Qantas, which often has to compete against competitors. Considering Qantas is Australia’s biggest domestic airline used, their pricing must often be subject to abrupt changes usually as quick as possible. Prices were regulated in the past by the International Air Transport Association (IATA) meaning that there was a duopoly and a formula for all fares based on flag fall/distance.During this time pricing methods used by Qantas included a combination of:- Cost plus pricing: The cost of production was determined then a margin for profit was included in the pricing (Qantas investors soruce).- Market determined: The market was often analysed by Qantas executives to find that the demand was matched with supply to determine the pricing of fares.- Competition based: Determine prices based on the action of other companies such as Virgin, there biggest competitor during this time.Following the Ansett collapse of 2001 however, Qantas domestic flights were swayed by a lack of competition for a long time. With the introduction of Virgin Australia (Virgin Blue) and TigerAirways (Owned by Virgin Australia), Qantas faces increasingly larger amounts of competition. Qantas today still faces serious competition on both its domestic and international front hence a need for a multitude of pricing strategies to be employed. These pricing strategies include:- Price penetration: A strategy used by Qantas for its low-cost airline Jetstar. Initially they charged the lowest possible prices for the service in order to gain traction in the consumer marketplace (source).- Non-discounted fares/Flexi-fares: Qantas employed a full fare that can be refunded and the dates changed. This was especially important for those considered business travellers.- Promotional fares: Usually offered in the economy classes, Qantas would quote a given price on a fare rather than a discount rate. This was used to subdue the demand of its match competitors.Some promotional fares made by Qantas can be conditional such as:
- Minimum stay away: Offers on fare deals often require a minimum stay of seven days to dissuade business travellers who want to stay away during the weekdays only, with weekend travel costing an additional fare.- Departure time limitations: The period of departure would often be limited which allows Qantas, outside of peak demand periods to propose low cost faresAnalysis of Customer Relationship ManagementAnalyse whether customers’ loyalty is important for the firm. What affects loyalty to the firm andis the firm attracting customer loyalty the right way? Why do customers stay with the firm and are customers remaining with the firm for the right reasons? If they leave, how do they end the relationship and is itAnalysis of Service Environment (Servicescape)The ServicescapeWhen a service provider like an airline requires lengthy waiting periods or transport periods of its customers, comfort and safety of their physical service environment is crucial. A significant portion of this is part of the public airport and cannot be influenced by a singular airline. This includes purchasing tickets, checking in bags, undergoing security checks, entering the departurehall and even waiting at a gate. Airlines rely on customer relationship management to ensure their customers experience the quality of service they need during these stages.Departure LoungesAn airline has little control in the physical dimensions of their service until passengers have boarded the actual plane. However, as a precursor to that experience, most airlines have speciallydesigned departure lounges that offer services ranging from dining to showering in between connecting flights. Faithful+Gould, a designer of these spaces, deems these lounges to be an increasingly important differentiator in service and branding for an airline.A 2016 survey found that nearly 60% of consumers find access to a premium lounge a main factor in choosing their airline, with roughly 40% preferring to revolve their entire wait around lounges, avoiding the airport environment altogether.As such, airlines are motivated to cater to lucrative classes of consumers by providing premiums within these lounges. At Perth’s main airport, Qantas has three uniquely designed lounges – the Qantas Club Lounge, the Perth Domestic and International Business Lounge and the Perth International Transit Lounge. All share similar conditions of entry and a range of luxuries of relaxation from “light therapy” in the shower to wellbeing studios with guided exerciseThe AirplaneWhen it comes to the airplane itself, most consumers are concerned primarily with safety above all else. Despite the reassuring chances that only 1 in more than 7 million flights are at any risk, the perceived risk based on media exaggeration of incident coveragehas led consumers to value safety of an airline in their choices.Over the years, Qantas has strived to cater to this concern and is well-known for its ideals of safety and comfort. It has a record for zero fatalities or losses over its entirety of service and has endorsements or full accountability from organizations such as the Federal Aviation Authority or
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