INTERNET EXERCISES
Chapter 14: Managing the Pricing Function
Exercise 1 – Pricing Can Be a Basis for Segmentation
in Some Markets
Exercise 2 – Pricing Management is Critical for All
Sizes and Types of Companies
Exercise 1 – Pricing is a Very Powerful Marketing
Mix Tool
Vignette: Westjet’s success with meeting the demand
for low-cost air travel led Air Canada to launch Tango. Tango is doing
better than expected and making a profit.
Featured URL:
www.aircanada.ca
The Marketing Approach to Price Setting Takes Consumer Analysis
into Account
Air Canada launched Tango to compete with Westjet in the low-cost air
travel market. Tango has been highly successful to date, filling 83.4
percent of its seats in its first quarter, well above Air Canada’s
74.6 percent. It is a clear example of the marketing approach to pricing,
i.e., basing price decisions on consumer and competitive analysis. Tango
is expected to account for 20% of Air Canada’s domestic capacity
in the near future. Financially, it has done quite well since it is modelled
on the Westjet and Southwest Airlines approach of no unions, and scheduling
and aircraft operations that cut operating costs.
Activity
-
Tour the featured Web site for Air Canada. Look specifically at
the Tango portion of the Web site.
-
Select a date, time, and destination for a vacation you would like
to take and compare the price you would pay for a round trip ticket
on Air Canada and on Tango. Is there a significant difference in the
prices of these tickets? Is there any information on the Web site
about the service you will receive that justifies this price difference?
-
What policies and practices are influencing the prices for Air Canada
and Tango? For example, do they use psychological pricing? Do they
charge different prices for flights that depart at different times
of the day?
-
Based on the information you have garnered thus far, what do you
think are the pricing objectives for Air Canada and for Tango? Do
they represent an example of price lining? If so, does that require
that they have the same pricing objective?
-
Resources
Information about pricing objectives and policies:
Professional Pricing Society: – a U.S.-based
professional association dedicated to pricing management; this Web site
includes several recent “white papers” discussing pricing
management issues
MMcKinsey & Company
– a well-established North American marketing consulting firm; this
portion of the McKinsey Web site focuses on pricing objectives and management
Victoria
Transport Policy Institute – a general summary of road pricing
objectives and policies (with regard to tolls, etc.) from a B.C.-based
policy institute
Exercise 2 – Pricing Management is Critical for
All Sizes and Types of Companies
Featured URL: www.pricingmanagement.com
Diagnosing Pricing Problems
The Pricing Management Group Inc. (TPMG) is a consulting company that
specializes in pricing strategies, tactics, and management. Their objective
is to help companies make better pricing decisions and thus be more profitable.
Although they focus on large clients, they have developed a free diagnostic
test that any company can take to assess its pricing situation.
Activity
-
Tour the Web site for The Pricing Management Group Inc. Look over
their featured case studies and articles. Read the information they
provide on the “five pricing problems that plague successful
corporations.”.
- Take the 25-question pricing diagnostic test provided on this Web
site, basing your answers on your family’s business or a business
you have recently worked for or a business you would like to operate.
Based on your knowledge of this business, has the test correctly identified
this business’s key pricing problem areas? What action would you
recommend taking to address these problems?
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