Nowadays, the demand of air travelling is increasing quickly leads to the appearance of many low cost carriers which focus on popular class. This had made huge changes in the original service and pricing strategy. Easyjet is one of the most successful low-fare airlines in the World, which has a noticeable measure of pricing it product.
“Price” is one of the “four Ps” in marketing mix but its role is different from the other Ps: “promotion”, “product” and “place”. By studying about the comparison between a low cost carrier and a normal one, which head to different priorities, this assignment will help us to understand how the prices of low cost airlines could be opposed with normal ones, so they can orient their goal to achieve in the best way. Besides, we can see the actual level of importance of “price” in business, how it flexibly applies theory into real complex business environment.
I. The role of pricing within the marketing mix
Price is one of four Ps of marketing mix which is the process of determining the value of a company’s received things in a product exchange. Pricing is the work of calculating the price for a product, which can affect directly business performance, so price is considered to be very important. This part of the assignment will point out the differences between price and other marketing mix factor to help us to understand the unique role of it. Firstly, price is flexible while decision and performing processes related to the rest of 4 Ps including product, place and promotion take a long period of time to make changes or carry out. Marketers can quickly increase or decrease the price of a product in order to satisfy consumers’ demand or respond competitors’ action. This flexible characteristic of pricing helps organization adapt effectively to market changes. Price is the most adjustable element of all marketing decision and depend on marketers’ decision, can lead to different results. A wise strategy on pricing can save a nearly collapse business but a wrong one can ruin a favorable business. Secondly, price generate the amount a business can earn while the rest Ps generate the amount of expenses and costs. Revenues are decided by the quantity of good sold and price is the factor which influences this figure. In other words, it puts an impact on customers’ decisions, depend on their evaluation and impression of the product. If an organization have unsuitable pricing strategy, their benefit will be damaged. A too high price can make consumer turn their back on product and make the strategy become meaningless. But when the price is set too low, organization will lost significant profit while customers are willing to pay more and the worse thing is they think the product quality is not good. Thirdly, price represents the company's image. Pricing need to satisfy customers’ demand and reflect business aspiration. Towards company image, an unsuitable price can lower its position in the market. For example, Rolls-Royce brand name would become trivial if they decide to produce low-price cars. Therefore, the pricing has to be done appropriately with careful analysis and research to avoid the situation that customer misunderstand organization characteristics. Next, price is the best weapon that can rival and respond to competitors’ action. It is necessary to know the company’s position, research carefully the market situation and set out a strategy to deal with competitors’ responses before make any changes in product price. Using price war is also dangerous because it can lead to a possibility of losing market share and profit. Finally, changing a price or setting a new price is very difficult. When a new product enters the market, pricing can decide whether the product can attract customer and create good attitude toward buying it or not. Pricing is affected by product life cycle, time period, scarcity of the product and social...