Demand and Easyjet - Case Study Example

Name: xxxxxxxxxx Course: xxxxxxxxxx Institution: xxxxxxxxxx Title: Demand and Easyjet Date: xxxxxxxxxxxxx Demand and Easyjet Pricing is part of the four main factors considered to shape market mix; the others are place, product and promotion (The Times 100; Learn marketing.Net). In pricing to achieve the appropriate market mix, the right price to sell at should be established. Of the four elements of market mixing, pricing is unique since it is the one that brings in the profits while the others attribute to the cost. However, before setting the price of the product or service, there a number of things one should carefully consider in order to achieve the intended results. Key among these is the perception and mood of the market towards the product or service (The Times 100). How does the market view the product against other similar products in the market? If the product creates the necessary appeal and confidence in terms of its quality and usage then the pricing should be done to take advantage of this (The Times 100; Learn marketing.Net). However, the price should not be set too high. This can limit the volume of sales since a certain segment of the market may be unwilling to purchase it and opt for a cheaper alternative. The perception of the consumers should be gauged against their willingness to spend. Another aspect is the season. There are services and products whose demand changes with season. A good example will be warm clothing. When its summer, the demand for warm clothing is usually on the decline, therefore their pricing should be set lower than during the winter season. This will enable the business to still make sales as it waits for the favourable season to reach. A lower price will attract those consumers who purchase products early in preparation for the coming season. However, the price should not be set too low to after the profitability of the business. The price should be justified against the dynamic forces of the supply and demand affecting the product in question. It is also worth noting that, the final price of the product or service should also cater for the other elements in the marketing mix as well as the cost of production. In fact the cost elements of these factors form the non negotiable part of the price since they are expenses that have been incurred on behalf of the product or service. However the business should always strive to keep these expenses as low as possible in order to have a wide bargaining margin when setting the final price. Another factor that should be put into account is the level of competition in the market. A product or service can generate consumer appeal but due to tight competition from other products in market it may not rake in the desired sales volumes. Adjusting the price just a little bit may just do the trick. With so many products in the market the customers may end up confused which product to believe in. this is complicated further by the countless number of promotion campaigns seeking to influence the market in one direction. In such situations a small price adjustment can lure the market towards you product since the consumers are making a judgement based on the price rather than the quality attributes of the product (The Times 100). Below is a table showing the airfares for return flights from Rome-Fiumicino Airport to London-Gatwick Airport (modifies from Easyjet. Com). Outbound date Return Date Price (outbound Journey ) Price (Return Journey) Total Amount DEPARTURE TIME 10:55AM 3:30PM-4:05PM 8:00PM 8:55PM-9:20PM 18th ,Jan, 2011 19th ,Jan ,2011 £73.99 £73.67 £147.66 18th ,Jan, 2011 25th ,Jan ,2011 £73.99 £53.67 £127.66 18th ,Jan, 2011 18th ,Feb, 2011 £73.99 £53.67 £127.66 18th ,Jan, 2011 18th ,April, 2011 £73.99 £58.67 £132.66 The figure above shows the Easyjet airfares for a return ticket from London-Gatwick Airport to Rome- Fiumicino Airport. For the period between 18th, January, 2011 to 18th, April, 2011 (modified from easyJet.com). From the bar graph above it is clear that the airfare is fluctuating from a maximum of £147.66 to a minimum of £127.66 and then makes a slight rise to £132.66. The highest airfare will be paid on 19th January while the lowest fare will be paid on 25th January and 18th February. It is worth noting that there are only two return flights from Rome -Fiumicino Airport to London-Gatwick Airport on 19th and January that is at 10.55AM and 8.55PM. The number of daily return flights then increases to four on 18th February and 18th April (EasyJet.com). From the tabulated information coupled with the facts presented by the bar graph we can easily analyse the pricing strategy employed by Easyjet. First and foremost there are fewer people travelling between 19th and 25th January. This argument is based on the few daily return flights on these dates. It’s apparent that the price of the return airfare has been set highest on the 19th due to the few number of travellers on this route. The main reason for this could be the fact that the company needs to meet its operating costs during this period. The company may therefore have decided to make this increment to stay afloat during this period. However, in anticipation of an increase in the number of travellers in this route, the company lowers its airfare in order to attract customers. This is indicated by the low return airfare on 25th January although the number of daily flights from Rome to London remains two. On 18th February the airfare will be still at its lowest although the number of flights will be increased to four. By increasing the number of flights and maintaining the airfare at a minimum the company will be aiming at accommodating the new customers. The third and final stage of the pricing strategy by Easyjet will be witnessed on 18th April when the return airfare will be increased slightly from £127.66 to £132.66 (Easyjet.com). At this stage the company will be aiming at capitalising on the increased number of travellers on this route. The increment is reasonable since the company does not want its new customers to seek other services. It is at this stage the company could be expecting to recover from the difficult times when there was a decline in the number of travellers in this route. It is most likely that Easyjet had conducted an analysis of market prior to setting up the prices. In the analysis the company must have established the peak and dormant seasons for travellers in this route. Once this information had been determined, it was now easier to develop a pricing strategy that would enable the company achieve profitability. Below is a graph showing the price fluctuations for British Airways on the London to Rome route. From the graph, we easily note that the airfare is considerably high compared to that of Easyjet for the same period. Take for example 19th of January, Easyjet charged £147.66 while British Airways charged £595(British Airways, Easyjet). In addition British Airways has more flights compared to those of Easyjet. From this information is possible to say that British Airways is the dominant market leader on this route. This is because it has maintained a high charge while at the same time retaining the number of daily flights in this route. This can only mean that British Airways enjoys a considerable amount of Loyalty to its brand. Based on this argument it can be concluded that the pricing strategy at this stage is based on the Loyalty of its clients. Though there are other Airlines offering lower rates still many chose to travel with British Airways. Easyjet could be maintaining its prices at a high (though not comparable to British Airways) and also reduce the number of daily flights in order to meet its operational costs. On the hand, British Airways retains its prices to an all-time high and in addition maintains the number of daily flights (British Airways). In anticipation of a boom in the number of travellers on this route in coming days, British Airways plans to introduce price cuts to attract more customers. However, the price cuts remain considerably high compared to those of Easyjet. British Airways enjoys the dominant spot on this route. This being clearly indicated by the number of their daily flights (modified from British Airways.com). In conclusion, Easyjet aims at targeting customers at the lower end of the market. There pricing strategy is targeting those travellers that are more sensitive to the price of the ticket, while, British Airways aims at solidifying the loyalty of its customers to the brand. Many travellers from the Britain may patronise British Airways because they feel it represents their identity. With this in mind they may not consider the prices of other low cost airlines such as Easyjet. These aspects may play an important role in the pricing strategy employed by British Airways. Easyjet on the other hand, deploys a different strategy aimed at those who are more sensitive to the price on the ticket rather than the loyalty to a big brand. They aim at capturing the customers who feel disadvantaged by the high prices being charged by the dominant players in the market. Their strategy is to build a brand based on a low price charge. References The Times 100, n.d. Marketing mix (Price, Place, Promotion, Product). [online] Available at: [Accessed 18 January 2011] Learn marketing.Net, n.d. Pricing Strategies. [online] Available at: [Accessed 18 January 2011] easyJet, n.d. airline company ltd . [online] Available at: .[Accessed 18 January 2011] British Airways, n.d. Arrivals and departures. [online] Available at: . [Accessed 18 January 2011] Read More