Pricing Strategy in Airline Industry (Comparison Between Easyjet and British Airways)

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PRICING STRATEGY
Easyjet Essay

Hanoi, January 12, 2011

From: Trinh Phuong Thao
To: Miss Thuy and Miss Dung Hue, Integrated Business lecturers Subject: Easyjet Essay

Table of content

Introduction………………………………………………………………………………………..2 Role of pricing…………………………………………………………………………………….3 Easyjet fare fluctuation…………………………………………………………………………..5 Easyjet and British Airways pricing strategies……………………………………………………7 Conclusion……………………………………………………………………………………….10 Recommendation………………………………………………………………………………...11 Reference………………………………………………………………………………………...12

INTRODUCTION

In the airline industry around the world has appeared low cost carriers as major players who have created huge changes in the original service and pricing strategy. Easyjet is one of the most successful low cost short-haul ones in England as well as European. Along with the development of airline industry and the increase of air traveling demand, low cost flights become more and more common attracting much effort to research pricing strategies in this field in order to reach improvement opportunities. There are some different methods about the way carriers hold their flights. Studying this issue can help managers understand clearly how the prices of low cost airlines in fact could be opposed with normal ones, so they can adjust their oriented goal to achieve good performance. On the other hand, this essay provides a chance to challenge the role of pricing within four Ps of marketing mix and see its actual level of importance in the business environment. Therefore, it will bring marketing theory into reality, which shows the necessity to be flexible applying theory into changing business situation. Generally, this essay gives out the mode operation of two airline companies heading to different priorities when they offer their products. It will study and represent the result of the comparison between a low cost carrier and a normal one.

ROLE OF PRICING

Price which is one of four Ps of the marketing mix talks about the value placed on something that is exchanged. The work of calculating the price for a product is called pricing which can influence directly business performance. These are several aspects making pricing important. To begin, let’s look at how price is different from other marketing mix factors to understand the unique role of it. While decisions and performing processes related to product, place and promotion take a long period of time to carry out or to make changes, price is much more flexible. Marketers can quickly decide to adjust a product price in order to respond to either consumers’ demand or competitors’ action. This nature of pricing helps organizations adapt effectively to market changes. Specially, in the time that a business is on the verge of collapse, a wise strategy on pricing can prop it up when this work can keep goods flowing out and cash flowing in. Like this, price is the most adjustable element of all marketing decisions. Besides, contrary to cost drivers like the rest Ps, price generates revenues which influence how much a business can earn. While revenues are decided by the quantity of good sold, price is the factor that affects this figure. In other words, price puts a strong impact on customers’ decisions involving their evaluation and impression of the product. If pricing is not done appropriately, organization’s benefit will be damaged. When the price is set too high, consumers can turn away making all the work it has done wasted. Conversely, too low price not only results in the loss of additional profit when customers are willing to pay more but also creates an impression that the product quality is not good. Pricing then is a distinctive process for the reason that its outcome provides the foundation of both recovering costs and making profit. In addition, pricing and organization objective are connected closely. Pricing is affected by corporate strategy...
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