'Supply and Demand Easyjet\r'

'Assignment 2. 5 Supply, Demand and Easyjet The securities industry Mix is the name addicted to the elements which atomic number 18 the key components which a marketing conception should be based upon. Typically in grocery storeing literature thither are four elements: wrong, place, promotion and harvest-feast, however this is now some cadences expanded to make up another 3 elements: people, physical evidence and process. set policy is distinctlyly very important to the marketing mix and is affected by vari ables such as starchy’s objectives, the genius of competition, necessitate and upstanding cost.Firms operate set in several(predicate) ship faecal matteral according to their marketing scheme and the industry in which they participate; an example of set methods will be shown and evaluated push in the look for in informant to EasyJet and British Airways flight determine. As mentioned in the introduction, the lineament of pricing within the market ing mix is a varied one depending on what the slopped is exhausting to secure and the conditions within which it is operating. This contradicts what economic theory tells us: that pricing should be based upon setting bells at the bear witness w present Marginal R crimsonue = Marginal address in order to maximise steady profits.However, in real life â€Å"few firms explicitly deliver the goods the economic model in developing pricing policy” (Doyle 1997), because firms may be trying to achieve other things than maximising profits such as gaining market share, in which case they could be victimisation the loss-leader tactic (where footings are set at a point which actually makes a loss for the firm which they are able to recoup with customer retention once termss increase or through the sale of full expense complementary products).Doyle suggests that in that respect are several common type of pricing policies such as: market-penetration pricing, market-skimming p ricing, cost-orientated pricing, perceived-value pricing and impairment secernment. Market penetration pricing refers to the concept discussed above such as loss-leading where short-term profits are sacrificed in order to increase/gain a market share(Baker, 1997). Market-skimming is the practice of setting spirited sets with subsequent high profits and expect to only sell a small volume of products; this can only meet if there is no risk of nother company universe able to completely take- over your potential sales with a cheaper price. Cost-orientated pricing is where prices are set as a basic mark-up on top of product costs, which can be known in business as ‘cost-plus’ pricing or target pricing when it refers to a certain level of return on investment. Perceived value pricing is based on the perception that buyers birth of your firm’s product relative to other products in the market. Finally, the concept of price discrimination is one of particular impor tance to this essay given its information content of airline pricing.Perfect price discrimination is an economic concept where a firm findks to charge every buyer hirely the price that they are prepared to pay. In reality, this is very baffling to achieve as how can a firm possibly be expected to know the exact value which each individual buyer places on their product? The only way that ideal price discrimination can be achieved is through an vendue format, but this is debatable. General Price discrimination is a common strategy, however, and this involves firms charging diametrical groups of customer’s different prices for the same product.In order for it to work, Doyle states that â€Å"customers in the highest-price segment must(prenominal) not be allowed to buy from the lower-price segment” e. g. there must be boundaries in place to control that a high-price customer cannot sneakily purchase at the low price. Within the airline industry this is achieved by differentiating between time of involvements †long-term adduce betrothals are the lower price customers and bookings made close to the time of departure are high price customers. The prices for Easyjet flights from capital of the United Kingdom Luton to Madrid are as follows on a lower floor: • tomorrow = 124. 98 • one(a) hebdomad = 183. 98 unmatchable month= 82. 98 • 3 months = 70. 98 The key difference between these prices is that the more than in advance you book, typically the cheaper it is. This indicates that Easyjet flight pricing is based upon pack (and supply but supply is wintry) for the flights, as the further in advance you book, the cheaper it is and on the flipside if you discover you have to go to Madrid tomorrow the price is untold higher as your need/ make is more urgent and thereof you will pay a higher price. However the intelligible exception here is that it is nearly ? 60 cheaper to fly out tomorrow than it is to fly out in a hebdomad’s time.I would suggest that this fronts to be an anomaly, as the obvious pattern of diminish prices with advance bookings coupled with the cognition that Easyjet formulates it’s prices based on supply and demand for each particular mean solar day and thus reward advance bookings (lower demand for far away dates) with cheaper prices suggests that this is an uncommon occurrence. One reason for the flights in a week being higher than a flight tomorrow to Madrid may be because the flight in a week is the weekend before Valentine’s day so may be book up more than we would typically expect from a normal day a week in advance.This peak and higher price for a potentially popular weekend encounters that Easyjet is employing an almost near perfect pricing scheme in an economic common sense e. g. each consumer is being charged a more or less different price relative to the level of demand for the flights (there is a fixed supply due to the fixed number of seats available). [pic] The graph above represents diagrammatically the information from the Easyjet website which is displayed in bullet points above.As is clear to see †apart from the peak at 1 week †there is a downwards trend over time which I would expect to be even more obvious if we were to add in more data for weeks between 1 week and 1 month and between the periods of 1 month and 3 months. The decrease in price does appear to be flattening between month and 3 months which I would countenance is because once we’re acquire to booking a few months in advance the prices are getting near to Easy jet’s worst price point so there isn’t much room to decrease- thus I would bide the bottom price for the journey being close to the ? 0 mark (as at 3 months in advance it is ? 70. 98). Turning now to the British Airways data, below are the prices for a BA flight from capital of the United Kingdom Heathrow to Madrid at the same time of day and date as the Easyjet prices above: • Tomorrow = 316 • One week = 217 • One month= 130 • 3 months =126 Again, we can see both in the data and in the graph below that the same price discrimination strategy is being pursued by British Airways as by Easyjet: the advance flights represent the cheap-price customer segment and the close flights ( undermentioned day to next few weeks) represent the high-price segment.In both companies the price discrimination policy works as they are able to enforce the different price/customer brackets because of time of purchase of lead tickets being the discriminating factor. then similarities between the two airlines are in the nature of their pricing strategies †price differentiation †and therefore the decreasing trend in air fares if booked in advance. The differences between the two companies from the data collected appear to be two different things: firstly that British Airways has a higher base price than Easyjet (circa ? 20 to circa ? 70) and that British Airways has not taken into account high-demand finicky occasions such as Valentine’s Day weekend in its pricing in par to EasyJet, as shown by the lack of spike in price at the one week point on the British Airways graph. The higher base price of almost ? 50 more commanded by British Airways (BA) is probably due to both higher costs than EasyJet (who follow a low-cost strategy and thus deliver less service than BA on its flights e. g. ess cabin crew, no complimentary food/beverages, no free baggage check-in) and also the Brand-name of British Airways peremptory a higher price. To conclude, pricing is a lively part of the marketing mix and overall strategy of all firms. Within the airline industry, the tendency is for price discrimination as due to the nature of travel and the booking of flights it is possible to discriminate between different bands of customers booking the same service based on their needs (economy, business class, firs t class) and their time of booking (advance, the day before etc. . From evaluation of corresponding data taken from both EasyJet and British Airways it is clear to see that both are operating a policy of price-discrimination based on advance booking of fares. Bibliography Baker, J (1997) The merchandise Book, The Bath Press, Bath, UK. BritishAirways. com [on-line] http://www. britishairways. com/travel/ substructure/public/en_gb Doyle, P (1997) Managing the Marketing Mix, reproduced in The Marketing Book, The Bath Press, Bath, UK Easyjet corporate website [on-line] http://www. easyjet. com/EN\r\n'