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FUNDAMENTAL DIFFERENCES IN PRICING STRATEGIES

Ensayos Gratis: FUNDAMENTAL DIFFERENCES IN PRICING STRATEGIES

Enviado por:  LBALLEN8  10 diciembre 2013
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FUNDAMENTAL DIFFERENCES IN PRICING STRATEGIES

UNITED AIRLINE’S PRICING STRATEGY

Firstly, it is aimed at attracting new customers denominated Business Class customers who are assumed to value the additional service’s attribute and paid for it. The execution of this new target market led to reduce the availability of economic seating and the baggage and carry-ons for budget passengers. Therefore, the company is not focused on the retention of current budget customers who purchase approximately 80% of all airline tickets. Secondly, the price segmentation is not clearly justified or demonstrated as the service offered in counter tends to be undifferentiated between business travelers and budget passengers. Furthermore, the price segmentation is intended for Business Class customers which are the shortest segment that accounts for the purchase of 20% of the airline tickets. Thirdly, the pricing strategy is likely to increase the customer’s price sensitivity according to key factors such as (Bateson, 2006):

Ø Perceived substitute effect. The price for the service in United Airlines will be higher than the price of American Airlines.

Ø Fairness effect. Customers will perceive that the service of extra legroom is offered under similar circumstances by United Airlines and American Airlines. Nonetheless, they are able to pay a lower price with the last company.

Ø Unique value effect. The unique value of the service of extra legroom is likely to be perceived as equal between the companies. It can be pointed out since legroom tends to not be considered as key differentiator (Survey).

Finally, it can be seen that the company is more focused on the satisfaction-based pricing strategy which is aimed at developing a direct association between the price of the service and the components of the service that the customer value (benefit-driven pricing approach) (Berry, 1996). However, it is not certain that the customer will be valuing the service of extra...



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