MKT490 MODULE 5 CASE

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Module 5 - Case

THE MARKETING MIX: PRICING STRATEGIES

Questions/Tasks

What pricing and marketing (target market, product, place, and promotion) strategies should the airlines follow?

Defend your positions on why you selected the strategies you have chosen.

The Situation

Pricing strategy has to be considered in terms of target market, product, promotion, and distribution strategies. e.g. Less competition for seats on a route allows higher prices (fares) per distance traveled to be charged for that route. Or differences in seating preferences, aisle versus window versus middle, first versus business versus cattle, fore versus aft. The question was written so that the students SHOULD focus on SHOULD. SHOULD the airlines follow these pricing practices? If so, why? higher gross margins?
In addition, there is now the question of total service pricing vs paying for only those services used, pricing is based on use of agent versus internet, use of overhead, number and size of suitcases. SHOULD the airlines follow those pricing practices? If so, why? If not, why not

Pricing strategy has to be considered in terms of target market, product, promotion, and distribution strategies. e.g. Less competition for seats on routes allows higher prices (fares) per distance traveled to be charged for those routes. Or differences in seating preferences, aisle versus window versus middle, first versus business versus cattle, fore versus aft allows variation in pricing. And, if a plane's seats are being sold faster or lower than expected, prices are raised or lowered.

Note that question is written so that you SHOULD focus on SHOULD. SHOULD the airlines follow these pricing practices? If so, why? If not, why not?

Airline know that, among other factors, flights are chosen by flyers based on price. So, to make sure that their fares are the lowest when customers search for fares in Expedia or Travelocity; airlines load additional onboard or check-in charges such as baggage handling fees to the published fares. This practice leads into the issue of total service pricing vs making customers pay for only those services used, such as pricing based on use of agent versus internet, use of overhead, and number and weight of suitcases handled by the airlines. SHOULD the airlines follow those pricing practices? If so, why? If not, why not? In effect, should airlines publish all-inclusive fares thereby asking passengers who don't want or need the amenities to subsidize the fares of those that do OR should the airlines charge for each service that is rendered thereby causing (as described in the article) overhead bins being stuffed with luggage and service workers losing their cool?

Assignment Expectations

In answering the question make reasonable assumptions, (clearly you won't have the same information available to you as the VP of Marketing at an Airline, e.g. about costs, but make some assumptions and follow through in your analysis).

You should also bear in mind that a fundamental goal, as with all the cases you build in MKT490, is to demonstrate your learning.

In preparing your CASE5, ensure that you demonstrate your learning of the marketing concepts and frameworks for analysis outlined in the modular learning objectives by using and referencing the background and case material.

  1. Explain the pricing strategies that firms use.
  2. Explain what factors are involved in the development of a pricing strategy.
  3. Explain the relationship between costs and prices.
  4. Explain the relationship between a firm's pricing strategy and its product, distribution, and promotion strategies.

In particular, in answering the question, ensure that you demonstrate your understanding of pricing, the factors affecting success of pricing, as well as your learning from previous modules.

In particular, review what you learned about consumer behavior (Background Readings for Module 1) and bolster your argument in terms of when consumers make their decisions based on price, as opposed to brands and the locations of retailers.

Note that this assignment does NOT require you to prepare a detailed essay. Instead use section headings for each of the topics you address in your paper followed by a discussion of that topic.

Case Readings

Barron, James (2010). Flight attendant's tale resonates, and evolves. The New York Times (August 10).

Available March 8, 2013 at
http://www.nytimes.com/2010/08/11/nyregion/11attendant.html

Negroni, Christine (2010). Less baggage, big savings to airlines. The New York Times (April 6).
Available March 8, 2013 at
http://www.nytimes.com/2010/04/07/business/07bags.html

Mackey, Robert (2010). Anxiety over lost luggage fuels air wars. The New York Times News Blog. (August 11).

Available March 8, 2013 at
http://thelede.blogs.nytimes.com/2010/08/11/anxiety-over-lost-luggage-fuels-air-wars/

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