Supply and Demand Easyjet

Assignment 2. 5 Supply, study and Easyjet The selling Mix is the name assumption to the elements which argon the key components which a marketing plan should be found upon. Typically in Marketing literature there be four elements impairment, place, promotion and crossway, however this is straight some condemnations expanded to incorporate another 3 elements people, physical march and process. Pricing policy is glide byly very important to the marketing cockle and is affected by variables much(prenominal) as unfluctuatings objectives, the disposition of competition, quest and firm costs.Firms operate determine in incompatible ways according to their marketing outline and the industry in which they participate an pattern of set methods will be shown and evaluated further in the essay in reference to EasyJet and British Airways escape set. As mentioned in the introduction, the role of price within the marketing mix is a varied one depending on what the firm is tr ying to achieve and the conditions within which it is operating. This contradicts what scotch theory tells us that pricing should be based upon setting tolls at the point where marginal Revenue = Marginal Cost in order to maximise firm profits.However, in real life hardly a(prenominal) firms explicitly follow 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 sh ar, in which case they could be using the dismissal-leader tactic (where legal injurys argon set at a point which actually makes a loss for the firm which they are able to recoup through customer retentivity once damages increase or through the sale of full terms complementary products).Doyle points that there are several common type of pricing policies such as market-penetration pricing, market-skimming pricing, cost-orientated pricing, perceived-value pricing and price discrimination. Market penetration pricing refers to the notion 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 employ of setting high prices with subsequent high profits and expect to unaccompanied sell a small volume of products this can only transaction if there is no risk of nother company being able to tout ensemble 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 have intercoursen 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 permit of your firms product relative to other products in the market. Finally, the belief of price discrimination is one of particular importance to this essay given its data content of skyway pricing.Perfect price discrimination is an econo mic concept where a firm call inks to charge every buyer exactly the price that they are prepared to pay. In reality, this is very difficult to achieve as how can a firm possibly be expected to know the exact value which distributively individual buyer places on their product? The only way that perfect price discrimination can be achieved is through an auction format, but this is debatable. General Price discrimination is a common dodging, however, and this involves firms charging different groups of customers different prices for the same product.In order for it to work, Doyle states that customers in the highest-price particle must not be allowed to buy from the lower-price segment e. g. there must be boundaries in place to ensure that a high-price customer cannot sneakily purchase at the low price. Within the airline industry this is achieved by differentiating amongst time of bookings long-term leave bookings are the lower price customers and bookings made close to the ti me of departure are high price customers. The prices for Easyjet flights from London Luton to Madrid are as follows under Tomorrow = 124. 98 One hebdomad = 183. 98 One month= 82. 98 3 months = 70. 98 The key difference amid these prices is that the more than in make you book, typically the cheaper it is. This indicates that Easyjet flight pricing is based upon demand (and supply but supply is fixed) 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 much higher(prenominal) as your need/demand is more imperative and thus you will pay a higher price. However the plain exception here is that it is nearly ? 60 cheaper to fly out tomorrow than it is to fly out in a weeks time.I would suggest that this appears to be an anomaly, as the obvious pattern of decreasing prices with advance bookings joined with the knowledge that Easyjet formulates its prices based on supply and de mand for each particular day and thus rewarding advance bookings (lower demand for farthest away examines) with cheaper prices suggests that this is an unusual 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 beforehand Valentines Day so may be booked 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 represents that Easyjet is employing an almost near perfect pricing object in an economic sense e. g. each consumer is being charged a slightly 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 chart above represents graphically 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 e xpect 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 advocate is because once were getting to booking a few months in advance the prices are getting near to Easy jets lowest price point so there isnt much room to decrease- thus I would anticipate the bottom price for the journey being about the ? 0 mark (as at 3 months in advance it is ? 70. 98). twist now to the British Airways data, below are the prices for a BA flight from London 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 (next 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 motivity tickets being the discriminating factor. Therefore similarities between the devil airlines are in the nature of their pricing strategies price differentiation and so 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 special occasions such as Valentines Day weekend in its pricing in comparison 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 exhaust baggage check-in) and also the Brand-name of British Airways commanding a higher price. To conclude, pricing is a vital 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 call for (economy, business class, first class) and their time of booking (advance, the day before etcetera . From evaluation of comparable 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 Marketing Book, The vat Press, Bath, UK. BritishAirways. com on-li ne http//www. britishairways. com/travel/home/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