Development of Pricing Strategy for the Restaurant - Essay Example

? Pricing Strategy Before settling on the form of business to pursue, businesses should determine the target market, mission, and the vision. Through doing this, the business gets to have clear roadmap and know the characteristics of their customers. Through this, customers’ expectations will be well served and thus making them get value for their money. In this case, I would prefer an upscale restaurant. An upscale restaurant is one that has fewer customers mostly from the rich class of the society/ economically capable members of the society since they have the ability to make payments promptly. To ensure that the number of customers is controlled, the restaurant will charge high prices for their products while ensuring that the quality of food and other services provided are great. The statement of the restaurant should be to offer high quality food to the target market by ensuring emphasis on customized / personalized services. By adhering to the statement, the restaurant will aim at offering good food to the customers and at the same time be driven by the changes in the market (Milligan, 2012). This will ensure that the customers’ needs are met in a timely manner with customer considered king in the business operations. At the same time, offering of quality food and drinks will make the business operate within the legal requirements and cater for the interests of their stakeholders (Gupta, 2009). Because of this, the business will remain socially responsible and reduce costs that are associated with litigation charges. Most cases involving restaurants are based on tortuous actions or criminal proceedings if customers get injured or incur losses because of consuming food or having injuries in the restaurants. If the statement guiding the operations of the restaurant is maintenance of quality, the cases of such litigations will be minimized hence reducing costs. This statement would simultaneously cause customer satisfaction and loyalty. Every retailer in conducting business has the objective of maximizing returns ion the investment. Pricing is the only marketing mix element that generates cash to the business hence its importance. However, settling on the pricing strategy to use may not be an easy task to businesses. There are various pricing strategies including cost plus margin pricing, competitive pricing, psychological pricing, multiple pricing, discount pricing, and prestige pricing (Nagle Hogan & Zale, 2011). Any business that considers profit key however must thus consider the cost of production and ensure that the prices are above all the total costs and other overheads used in production. For the case of the upscale pricing, there is need for exclusion and uniqueness. The kinds of customers who are expected to be served in the restaurants are those of high class and will be interested in high quality services. They will thus be less sensitive to changes in the prices since they are also capable of paying even where charges are very high. Prestige pricing will therefore be the best pricing strategy to adopt in the restaurant (Nagle Hogan & Zale, 2011). Prestige pricing is one way that will ensure that the prices charged are above the costs and therefore make the business make huge profits to justify its operations and expansion of their services. In addition, the customers of upscale restaurant are those who need a feeling of being very important and non-ordinary. This makes them associate the high price with very high quality ad uniqueness. They will therefore be more comfortable with paying high prices than just the normal prices as a cost to the exclusive nature of their environment. In an upscale restaurant, highly qualified staffs who also expect to be paid highly normally prepare the food. The hotel attendants must be people with great skills and knowledge whose services are compensated very highly. In addition, the furniture, jewelers, and other beautification products to make the environment look prestigious make the customers overlook the prestigious prices (Gupta, 2009). Besides, the customers’ demand security assurance in such restaurants. They value security and are ready and willing to pay so long as their security is guaranteed. This implies that the restaurant premises have to be insured and have physical securities offered by reputable security firms. These increases the cists and make the business set high prices that will cover for any risk and uncertainty that might cause losses to their customers and other occupants. In doing businesses, customers expect to know the value for their resource. Sellers therefore have the objective of communicating value to their suppliers in order to keep them buy the products and to gain satisfaction. This is a challenge that the sellers have to contend with and communicate appropriately to their target market. In the case of an upscale restaurant, the business has to justify the high prices of the products that they sell and to ensure that their consumers pay comfortably without viewing the price as very high. The restaurant should therefore communicate the value to the buyers through the quality of the products it offers. The food and drinks served in the restaurant should be of high quality and meet the expectation of the customers as his is the easiest ways that will see customers make payments for their services. Quality in this case means safety; required nutrients and the tastes al meet the requirements of the customer. The environment in which the business operates must also e serene and tranquil to enable the customers enjoy their stay in the premises even if the time taken in the restaurant is long. Customized services are also a better way of communicating value to the customers. Customized services ensure that the customers’ tastes and choice are upheld when preparing the meals and the foods. In the food industry, customers have diverse tastes and unique preferences that can only be satisfied if customized orders are used in making customers orders. Through this, customer of the restaurants will see the special service as a justification to the high prices charged on the foods and services. Moreover, the interaction between the restaurant employees and the customers is also crucial in having the business retain their customers and attract new customer base. Customers who are highly welcomed in the premises and treated decently by the attendants will not have any reason of failing to make repeat purchase and remain loyal to the business (Milligan, 2012). Furthermore, customers should be treated with dignity and decency to make them feel respected and valued. This will make them have a prefer the restaurant as a place of choice. When the customers get convince that they receive value for their resources, they get to make repeat purchase and become important stakeholders of the business. Because of these, the restaurant will experience increase in the customer base and increased turnover. This will lead to increased profits and long-term success of the business. Enthusiastic customers will also play promotional role for the business. By making positive comments about the business, new customers will be attracted and the market share of the restaurant will swell hence ensuring sustainable sales and long-term survival. In adding a daily special that is unique to the restaurant, the management will have the responsibility of determining the logistics and the way that the prices would be charged. Since the restaurant is an upscale on, it would be irrational and impossible to increase the prices further if the intention of such a service is to be realized. In this case, lowering the cost of the meals will be appropriate because of various reasons. First, through lowering the prices, the restaurant will get the opportunity to increase their sales turnover by increasing their buyers for that particular day. When prices are lowered, individuals who might not lack the ability to sustain continuous purchases will get a one-time opportunity to visit the restaurant and enjoy the services (Milligan, 2012). Because of the increased number of buyers purchasing at a relatively lower costs, the total turnover will increase hence increasing the profits derived from the days sales. Secondly, such special meals will allow the restaurant to attract new customers through promotion. On such occasions, the restaurant will get the opportunity to serve new potential customers who might have not been war of the quality of services and the types of foods that are served on normal basis. Such potential customers if well served and get satisfied by the kind of service and foods they receive, will turn, and become regular customers of the business. Through this, the market share and number of loyal customers will inflate thus increasing the profitability and growth of the new restaurant. Likewise, by charging lower prices for the products, the restaurant would become socially responsible to the society. An upscale restaurant excludes the middle income and low-income class from accessing their service and food. This makes the public negatively view them as discriminating and biased by only looking at the interest f the top income earners (Milligan, 2012). By reducing their costs on the special occasions, the middle-income earners will get the opportunity to visit the restaurant and enjoy the meals that are served. Through this, the restaurant may be forced to subsidize their cost and therefore make it a way of giving back to the community. If viewed in this manner, the restaurant will benefit from the goodwill of the society and realize long-term success of their operation. It will also provide the opportunity for the less privileged in the society to interact with the rich thereby becoming a popular strategy. In conclusion, the determination of the characteristics of the customers to serve in the restaurant is indeed important in the setting of prices and the management of the business. The target market will assist in the formulation of policies that will guide the business in the achievement of the long-term objectives through overcoming the impediments and other barriers. Choosing of an upscale restaurant would make the restaurant have specific customers who can be easy to contact and serve best. Pricing will forever remain an important element in ensuring business success as it generates revenues to the business. If properly set, the restaurant will record tremendous growth and increased profitability. References Gupta, V. K. (2009). Restaurant Management. Chandni Chowk, Delhi: Global Media. Milligan, S. (2012). Marketing Strategies. Delhi: Research World. Nagle, T. T., Hogan, J. E., & Zale, J. (2011). The Strategy and Tactics of Pricing: A Guide to Growing More Profitably (5th ed.). Boston: Prentice Hall. Read More