Internal factors affecting pricing include the company’s marketing objectives, marketing mix strategy, costs, and organization considerations. Marketing objectives before setting a price, the company must decide on its strategy for the product. If the company has selected its target market and positioning carefully, then its marketing mix strategy, including price, will be fairly straightforward. AirAsia is introduced as Asia’s first low-fare, no-frills airline in 2002, according to its tagline “ now everyone can fly”, this positioning required charging a low price.
Besides, marketing mix strategy which is price is only one of the marketing mix tools that a company uses to achieve its marketing objectives. Price decision must be coordinated with product design, distribution, and promotion decision to form a consistent and effective marketing program. Decision made for other marketing mix variables may affect pricing decision. 4P’s includes product, place, price and promotion. For examples, flies only one type of aircraft, operating 13 Boeing 737s on a 12-aircraft schedule, reduces staff training, operating and maintenance costs In addition, use secondary airports like Subang, procedures are cheaper and less complicated Then, promotion such as price promotions, it set aside 100000 seats for sale on the internet, charging one-way fares ranging from S$ 2.60 to S$ 23.70 on selected routes
Costs set the floor for the price that the company can charge. A company’s costs may be an important element in its pricing strategy. AirAsia with lower costs can set lower prices that result in greatest sales . Then, AirAsia implement such ways to make costs lower, for examples quicker turnaround time, flight utilization of its aircraft, flies only one type of aircraft to reduces staff training, operation and maintenance costs, does not offer complimentary meals or drinks. use secondary airports because procedures are cheaper and less complicated,reduces circling time and simpler baggage handling systems, provide ticketless travel to save cost of printing and delivering
Organization considerations, management must decide who within the organization should set prices. Company handle pricing in a variety of ways. In industry in which pricing is a key factor, company often have a pricing department to set the best prices or to help others in setting them. AirAsia have a pricing department to set the prices for each flies. This department reports to the top management.
External factors that affect pricing decision include the nature of the market and demand , competition.The market and demand in oligopolistic market, pricing in oligopolistic competition, the market consists of a few sellers who are highly sensitive to each other’s pricing and marketing strategy. There are few sellers because it is difficult for new sellers to enter the market. The price of AirAsia’s ticket is lower, MAS has slashed domestic fares in half. Consumer perception of price and value also affected the price. AirAsia now flies to over 20 cities with one-way fares as low as S$16 for flights from Kuala Lumpur to Penang, is cheaper than going by bus. Consumers perceive that the price is below the value, they will continue to consume it. AirAsia’s fares are based on supply and demand, prices generally increasing as seats are sold.
Next factor is competition in the market. In setting its prices, the company must also consider competitor’s cost and prices and possible competitor reactions to the company’s own pricing moves. In addition , the company’s pricing strategy may affect the nature of the competition it faces. AirAsia’s prices have led to a shakeup in the regional aviation industry. The price of AirAsia’s ticket is lower, MAS has slashed domestic fares in half.
2. What type of new product pricing strategy did AirAsia...