Full Paper Driving value through pricing Strategies adopted by Managers in price sensitive and fierce competitive markets
Driving value through pricing: Strategies adopted by Managers in price Sensitive and fierce Competitive Markets
Introduction
Buffett told the Financial Crisis Inquiry Commission in an interview that “If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business”. Yet pricing has been neglected area in many hospitality organizations. Mc Kinsey and Company has estimated that fewer than15% of the organizations have a dedicated function in pricing and fewer than 10% of the colleges teach pricing (Hinterhuber, 2004). Quite a few academicians have confirmed that pricing has been of the neglected components as compared to other components of marketing mix (Avlonities and Indounas, 2006; Hoffman et al, 2002). Hotel room prices faces challenges of intangibility, perishability, fixed supply, administrative costs, brand image, customer relationship etc. making it more difficult, challenging and complex for revenue managers. In the focus of balancing all potentially differing objectives, room pricing may not get due attention but the financial impact may be enormous and destroying for the organization.
Hotel managers have always faced the challenge of use of pricing strategies to achieve both revenue and customer satisfaction. The objective of this paper is to identify existing practices of price setting in hotels of National capital region and strategies adopted by managers in price sensitive and fierce competitive market. This information will enable us to analyze the thoughts and price pressures hotel managers go though in driving value for customers through pricing strategies and to make recommendations accordingly.
The chapter uses qualitative primary research through structured open ended interview to discuss in detail pricing strategies. The interviews were conducted with senior management
Introduction
Buffett told the Financial Crisis Inquiry Commission in an interview that “If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business”. Yet pricing has been neglected area in many hospitality organizations. Mc Kinsey and Company has estimated that fewer than15% of the organizations have a dedicated function in pricing and fewer than 10% of the colleges teach pricing (Hinterhuber, 2004). Quite a few academicians have confirmed that pricing has been of the neglected components as compared to other components of marketing mix (Avlonities and Indounas, 2006; Hoffman et al, 2002). Hotel room prices faces challenges of intangibility, perishability, fixed supply, administrative costs, brand image, customer relationship etc. making it more difficult, challenging and complex for revenue managers. In the focus of balancing all potentially differing objectives, room pricing may not get due attention but the financial impact may be enormous and destroying for the organization.
Hotel managers have always faced the challenge of use of pricing strategies to achieve both revenue and customer satisfaction. The objective of this paper is to identify existing practices of price setting in hotels of National capital region and strategies adopted by managers in price sensitive and fierce competitive market. This information will enable us to analyze the thoughts and price pressures hotel managers go though in driving value for customers through pricing strategies and to make recommendations accordingly.
The chapter uses qualitative primary research through structured open ended interview to discuss in detail pricing strategies. The interviews were conducted with senior management
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