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3. Competitor Pricing
(Competitor-based
Pricing)
1. Cost-based Pricing
• Establishing the Costs of Providing Service
• Activity-Based Costing
• Pricing Implications of Cost Analysis
2. Value-based Pricing
• Understanding Net Value
• Managing the Perception of Value
• Reducing Related Monetary and Non-Monetary Costs
3. Competition-based Pricing
• Price Competition Intensifiers
• Price Competition Inhibitors
Revenue Management
• It is most effective when applied to service businesses
characterized by :
– High fixed cost structure and relatively fixed capacity, which
result in perishable inventory
– Variable and uncertain demand
– Varying customer price sensitivity
Reserving Capacity for High-Yield Customers
• Revenue management involves setting prices according to predicted
demand levels among different market segments.
• Firms need a disciplined approach to save capacity for them instead
of simply selling on a first-come, first-served basis.
Price Elasticity
• How sensitive demand is to changes in price.
• If a small change in price has a big impact on sales, demand for that
product is said to be price elastic.
Rate Fences
• Non-Physical Fences
Transactional Characteristics
Time of booking or reservation
Location of booking or reservation
Flexibility of ticket usage
Consumption Characteristics
Time or duration of use
Location of consumption
Fairness & Ethical Concerns in Service Pricing