Channel Tunnel and Market-penetration Pricing Strategy

Topics: Channel Tunnel, Elasticity, Price elasticity of demand Pages: 2 (626 words) Published: November 15, 2012
Eurotunnel vs. the Ferries Case Analysis

Marketing Problem:
The main problem faced by Eurotunnel’s senior management is that they have not developed a competitive pricing strategy to increase its passenger and freight travel market share. Case Solution:
Eurotunnel should use a market-penetration pricing strategy at all times to gain freight customers. It should use a market-penetration pricing strategy during non-peak periods and a premium pricing strategy during peak periods with passenger car customers. Rationale:

This strategy works best for Eurotunnel to gain market share for three main reasons: * Passenger preference among Le Shuttle users
* Patterns among peak travelers
* Price elasticity of freight traffic
Among users of Le Shuttle passenger car service, it was noted that the top three important factors in crossing included reliability (70%), value for money (65%), and speed (30%). As reliability is assumed equal between the tunnel and ferries, the next biggest factor in customer value is price. By offering even a slightly reduced price than the ferries, many customers will switch to using Le Shuttle. Off-peak car travelers also placed a high value on speed. By offering a lower price than the ferries along with quicker speed in crossing the channel, the tunnel will be the more valuable choice among passenger cars. In the minds of the customer, the price will be lower than the perceived value of the amenities offered and this will cause a significant amount of customers to switch. Passenger car customers in peak periods tend to book ahead for ferry trips and have specific travel dates due to work and holidays. The customers traveling in peak periods are fairly cost inelastic because they prioritize availability and schedule above travel cost. Regardless of the price to cross the channel, if Eurotunnel proves to have capacity available for customers even without making reservations, customers will perceive the tunnel as a reliable...
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