Supply and Demand Easyjet
Assignment 2.5 Supply, Demand and Easyjet
The Marketing Mix is the name given to the elements which are the key components which a marketing plan should be based upon. Typically in Marketing literature there are four elements: price, place, promotion and product, however this is now sometimes expanded to incorporate another 3 elements: people, physical evidence and process. Pricing policy is clearly very important to the marketing mix and is affected by variables such as firm’s objectives, the nature of competition, demand and firm costs. Firms operate pricing in different ways according to their marketing strategy and the industry in which they participate; an example of pricing methods will be shown and evaluated further in the essay in reference to EasyJet and British Airways flight pricing.
As mentioned in the introduction, the role of pricing within the marketing mix is a varied one depending on what the firm is trying to achieve and the conditions within which it is operating. This contradicts what economic theory tells us: that pricing should be based upon setting prices at the point where Marginal Revenue = Marginal Cost in order to maximise firm profits. However, in real life “few firms explicitly follow the economic model in developing pricing policy” (Doyle 1997), because firms may be trying to achieve other things than maximising profits such as gaining market share, in which case they could be using the loss-leader tactic (where prices are set at a point which actually makes a loss for the firm which they are able to recoup through customer retention once prices increase or through the sale of full price complementary products). Doyle suggests that there are several common type of pricing policies such as: market-penetration pricing, market-skimming pricing, cost-orientated pricing, perceived-value pricing and price discrimination.
Market penetration pricing refers to the concept discussed above such as loss-leading where short-term
The Marketing Mix is the name given to the elements which are the key components which a marketing plan should be based upon. Typically in Marketing literature there are four elements: price, place, promotion and product, however this is now sometimes expanded to incorporate another 3 elements: people, physical evidence and process. Pricing policy is clearly very important to the marketing mix and is affected by variables such as firm’s objectives, the nature of competition, demand and firm costs. Firms operate pricing in different ways according to their marketing strategy and the industry in which they participate; an example of pricing methods will be shown and evaluated further in the essay in reference to EasyJet and British Airways flight pricing.
As mentioned in the introduction, the role of pricing within the marketing mix is a varied one depending on what the firm is trying to achieve and the conditions within which it is operating. This contradicts what economic theory tells us: that pricing should be based upon setting prices at the point where Marginal Revenue = Marginal Cost in order to maximise firm profits. However, in real life “few firms explicitly follow the economic model in developing pricing policy” (Doyle 1997), because firms may be trying to achieve other things than maximising profits such as gaining market share, in which case they could be using the loss-leader tactic (where prices are set at a point which actually makes a loss for the firm which they are able to recoup through customer retention once prices increase or through the sale of full price complementary products). Doyle suggests that there are several common type of pricing policies such as: market-penetration pricing, market-skimming pricing, cost-orientated pricing, perceived-value pricing and price discrimination.
Market penetration pricing refers to the concept discussed above such as loss-leading where short-term
Bibliography: Baker, J (1997) The Marketing Book, The Bath Press, Bath, UK. BritishAirways.com [on-line] http://www.britishairways.com/travel/home/public/en_gb Doyle, P (1997) Managing the Marketing Mix, reproduced in The Marketing Book, The Bath Press, Bath, UK Easyjet corporate website [on-line] http://www.easyjet.com/EN