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Requirement
Question 1
Analyze the price bundling strategies of WRS. Within the price bundles, describe the various price segmentation strategies being applied.
Solution:
The WRS keeping in point the interests and needs of customers along with their willingness to pay, reservation on prices and attraction factors, has provided the tourists and other people with the view of flooded Amazon Rivers basin floods, replicas of various rivers of the world, Okavango River in South Africa at the same place. Further WRS has integrated their park with the variety of scenic beauty views from almost all over the globe.
WRS has focused the attention to the geographical segmentation where they have adopted the geo-cluster approach that has combined the demographic data with the geographic data and created a more accurate and a more specific profile to attract the visitors. Geographic segmentation is extremely crucial and is regarded as the initial step towards international marketing of the product.
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Geographical segmentation is an effective approach because of various needs, wants and the cultural characteristics that can be amalgamated and presented to the targeted person. This segmented pricing structure has been used to take advantages of the disparity in the prices that has been observed in the parks located in various geographical areas. This has bundled the products together enabling the visitors to view the places present all over the globe at a lesser cost packed in a single bundle. This designed product has an optimal price where the market of WRS has been effectively segmented and has maximized the profitable sale for WRS. WRS has kept in mind the interests of visitors and included the views of the all the similar available products in the market. WRS has combined the market power of all the products along with some new creations, bundled them all together and have made it difficult for the rivals to enter the market. (Nalebuff, 2004)
But the problem with this segmentation method is that the geographic segmentation has to be used in conjugation with other segmentations for the better profitability. And WRS has used the benefits sought along with the geographic segmentation. Benefits sought is an effective method where the organization has offered unique features and these features have allowed the WRS to identify the designs and needs of the visitors and have promoted them with huge promotion.
This has helped WRS to cover all the key factors affecting the optimality of the bundling like conditional reservation prices of consumers, objectives, completion, cost, etc. This has decreased the competition and helped the WRS to increase its reputation as well as the profits of the organization. It has provided the customers with the integration of all the products and helped to secure a better plan in the market owning to its bundled products altogether. (Stremersch & Tellis, 2002) Thus, this product will be highly appreciated by the masses even if the product is a bit expensive than the other products as this product offers the amalgamation of all the similar products available in the market.
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You have been hired as the new Pricing Manager of WRS and your goal is to increase annual revenues of all four attractions. Your first task will be to review the current pricing of the four attractions under WRS and recommend pricing strategies that will improve profitability of the organization. Reviewing the current pricing across all the four attractions, propose and describe three (3) new pricing strategies that will enhance the profitability of WRS.
Solution
Wildlife Reserves Singapore (WRS) runs a total of four attractions in Singapore which include:
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Singapore Zoo;
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Jurong Bird Park;
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Night Safari and;
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The new River Safari.
Being the new Pricing Manager of WRS first step would be to align the prices according customer’s willingness to pay and consider the prices of rivals and build an appropriate price decision making. A proper Total Costs of Ownership model and Elasticity of Demand should be evaluated to visualize the understanding between price and the value of offerings by rivalry and the price, quality and most importantly the availability of the competitive offerings. This will help to have an estimate of the setbacks and drawbacks of all the four attractions and how these can be improved compared to the competitions. Further, the offerings can help to evaluated and can be easily compared with the offering by rivals. This way offerings can be improved and analyzed, the costs can be reduced proportionately keeping in accordance with offerings of every attraction by WRS.
Currently, the Pricing Manager will have to keep in check the following factors in order to increase the annual revenues for every attractions:
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(a.) The number of rival industries and their prices can help to get clearer picture and can help to suggest the offerings that should be made available in these four attractions.
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(b.) Keep a close check on competitors’ pricing and related policies. This will help to predict their response to WRS’ price and pricing reduction.
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(c.) Various incentives should be introduced in order to increase the market share so that when the industry will be more developed, we can leverage on the lower price structures.
Currently, the pricing strategy is customer-based pricing where the WRS has bundled the product and prices are in accordance with the product. WRS has bundled the product and offering involved in the product are higher than any rival in the market. The prices are higher than the rivals and products offer more scenic views and leisure to the visitors than any other rival in the market. Thus the strategy so far has been beneficial to WRS because it has thoroughly considered the customers’ willingness of pay along with high level of offerings. This integration has provide visitors with added values which will raise the reservation prices of the visitors for the product bundle i.e. the WRS Park compared with the sum of the reservation prices of the separate products like the Amazon River, Okavango River, and Taman Negara in Malaysia etc. Bundle pricing has allowed WRS to increase their profit collection by providing the visitors a collection of scenic views.
Pricing strategies that will improve profitability of the organization are as follows:
Off Peak Discount for locals:
WRS organization should fine-tune the pricing across all of their products and their offerings to align with the conditions ongoing in the market. A proper communication should be done within the market with the sales person, partners and the distributors to complete with the rivals effectively. WRS can provide discounts to the local people during the off peak season. The comprehensive volatility related to prices can be curbed by effectively pricing according to the response of the market. Luring local people can be beneficial by giving them discount on food, rides etc. can increase profitability even during off peak season. Heavy discounts on joint families, or free tickets for the kids, free food items or free one time meals can be offered for these local tourists. The WRS organization should make it a point to ensure that the visitors asking for these discounts are local people and thus their ID must be verified.
Reference Pricing:
Reference pricing means to set an artificially higher price than previous price and them entitle the visitors with discounts offers on their next visit. These offers can involve free food items, beverages, extra rides, lesser prices ticket for another attractions of WRS to promote those as well, free rides for kids etc. The visitors will be provided with these offers only if they are willing to pay additional/higher price on their first visit. The visitors who like to visit the attractions again in the near future can also be provided with reference pricing, by setting higher price in their first visit and a discount for their next visit or discount for the another attraction point of WRS. This way all four attractions can benefit from the business.
The primary goal of this strategy is promotion of price transparency that can encourage the visitors to visit on the basis of quality and offerings of organization. (Mitts, 2014)
Price Distribution:
The process of price distribution involves the method where the prices are charged differently depending on the different visitors coming to the place. The schemes might include student trips and thus providing a discount for the bunch of students on the educational trips to the attractions of WRS. A changed price for the families where the kids can be given the tickets at cheaper price; setting the fares at a cheaper price on off peak seasons. (Glass, n.d.)
This involves charging a different price to different groups of people for the same good. For example: student discounts, off peak fares cheaper than peak fares. This can involve the case where prices are increased to the best possible the customer can afford and will be willing to pay; or charging with different prices depending on the locations the visitors can visit in the park. Or simply setting different charges for different lots of visitors. But with this strategy comes a lot of responsibility like keeping a check on the market sale and preventing of sales. E.g if an adult buys a child’s ticket for visiting the park. Or the WRS organization can adopt a policy of providing free tickets to orphans once a year, this will help in increased popularity and a good reputation. The WRS organization can also lower the prices or give a certain amount of discount for the visitors who wish to pay online payment for the tickets.
Reference
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Nalebuff, B. (2004). Bundling as an Entry Barrier. The Quarterly Journal Of Economics, 119(1), 159-187. http://dx.doi.org/10.1162/003355304772839551
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Stremersch, S. and Tellis, G. (2002). Strategic Bundling of Products and Prices: A New Synthesis for Marketing. Journal of Marketing, 66(1), pp.55-72.
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Bhatt, T. (2010). Effective Pricing Strategies to Improve Profits - BusinessWeek. Businessweek.com. Retrieved 17 February 2016, from http://www.businessweek.com/smallbiz/tips/archives/2010/04/effective_pricing_strategies_to_improve_profits.html
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Mitts, L. (2014). How to Make Reference Pricing Work for Consumers (1st ed., p. 3). New York: FamiliesUSA. Retrieved from http://familiesusa.org/sites/default/files/product_documents/HSI%20Consumer%20Reference%20Pricing_Brief_web.pdf
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Glass, M. 3 Types of Price Discrimination. Smallbusiness.chron.com. Retrieved 17 February 2016, from http://smallbusiness.chron.com/3-types-price-discrimination-25634.html
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