This report refers to the Chief Finance Officer of Chatsworth Trust to implement a new pricing strategy to boost the business of the trust.
Chatsworth House is home for the Duke of Devonshire, a royal house situated in Derbyshire. This property is run by Chatsworth Trust own by Devonshire group with other property. The USP of the property is that still royal lives in his house which has a huge collection of historic artefacts. (www.chatsworth.org)
In this report, various pricing strategy will be discussed, and the best suited will be recommended to the board for consideration.
Price is the amount of money paid for given product or services. It sometimes also defines the value of the product. Chatsworth House deals with the hospitality industry. Europe is famous for its castles turned resorts and hotel which provide world-class service at a competitive price and Chatsworth is one of them.
Hospitality Industry is a very fast growing the dynamic market with coming of new brands hotels with competitive price Chatsworth has to face the loss of significant share of market and business.
In today’s world consumer has become very proactive while spending. They do a lot of detail study before buying anything. They too want to experience luxury but at accommodating price. Devonshire has many luxury hotels like Radisson Blue, The Palace Hotel, and Hilton Hotel etc. these hotels provide luxury at affordable prices to their target segment (Nair, 2018).
Europe is one of the most renowned tourist destinations. People from all over the world travelled to witness the scenic beauty. Europe is not only famous for its beautiful location but also its beautiful forts, palaces and churches. Many Castles and forts have been restructured and renovated and turned into hotels which cater common man. Many renowned Brands like Starwood, Hilton, and Britannia etc. have undertaken such property and provide best services and product to its customer. They run huge loyalty program which they have through the large database (Bar-Gill and Stone, 2012).
People worldwide have an interest in historic monuments and places. Europe is one such place. Many places and artefacts are from renaissance period. People visit to see the historic work of Da Vinci, Leonardo and many another famous artist of that time. This is the selling point in Europe. Great Britain is the house of Royals, and various duke and duchess have their palaces and forts. These forts and palaces are huge and attract large tourist from the world. Many of such places has been restored and reconstructed and converted into luxury hotels to generate revenues. Either they been run by their trust or have gone undertaking of any brands like Starwood or Hilton (Zhang et al., 2018).
These brands have less difficulty in positioning themselves as they have experience and manpower to run the business. They have experience of managing multiple properties worldwide. They have various properties which target different market at the same time. Their values and service differ from each other. For example, Starwood Sheraton provides budget service to its customer whereas St. Regis provides butler services, it’s a super luxury hotel. Their pricing and positioning strategies differ from each other. It’s a value-added service that differs from each other so the target audience(Su and Liu, 2017).
Devonshire Group is a local group which has property primarily based in Britain. To establish themselves they have to look out for their target market and according to them have to come up with its price. Their price should fit with customer perspective and idea. Lowering the price will not solve its problem as they have to determine other factors like services and product which satisfy the customers at large. Price is the important component of the marketing mix. It also determines the people, position and place. They only give its consumer the insight of historical artefacts but also give a glimpse of royal heritage and their lifestyle. They should target such a market where the consumer has no pain in shedding its money for luxury and experience. With fairytales like gardens and sculptures, they stand out in front of its competitors. The main palace rooms are closed for the visitor, but they buy tickets to visit the palace and its garden. They can stay in outhouse and hotel made on the premises of the palace. They have their gift shop which attracts people from all over the world (Kilburn, 2012).
Pricing if done properly keeping all the factors in mind, then it could cost to the organisation at large because people post their reviews which becomes one factor which determines the visit of another tourist. With the world becoming so small because of technology and the internet it is now straightforward to get the information regarding anything whether good or bad and based on that to make our choice to buy anything. Price is one of the very important determinants of the marketing strategy. It’s placing, and position of the target market is determining its audiences (Ozhegov and Sidorovykh, 2015).
By looking and doing the detailed study of competitors, it is inferred that a mix of different strategies is used for pricing the product and to make its position in the market.
Pricing approach is done keeping the product in mind, its quality and service. In the Hospitality Industry, it is simply based on its service and product they offer to the price to be paid. Two or three strategies could be mixed to standardize the pricing (Mark, 2012).
There are mainly five different types of pricing strategy namely
Cost-plus pricing – the cost of the product is evaluated, and markup is added to sell it. So other value is added to the service. It’s a very niche pricing strategy. It’s for the product which has large target market share and produces in quantities. The value ad on cost is not applicable here.
Competitive Pricing – in this kind of strategy the detailed study of competitors is done as per that the pricing of product done. Vast variations in prices are avoided as this consumer compares rates before buying anything. If the cost of the product is high as compare to its competitor and offers same services, then it will attract negative response from people, and they will not avail its services(Kachani and Shmatov, 2010).
Value-based pricing – Company based its price assuming consumer will pay as per its value(Trierweiler, 2011).
Price Skimming – the Initially Company, sets the high price, and as demand rise, it reduces it to target more audiences. Initially, the product is priced high so that fewer sales can achieve break-even point in less time.
Penetration Pricing – it is done when product newly launches. So to enter the special market prices are kept, and later on, it gets increased as per the demand. It is done so to have its share of market gain and consumer
Management will think and evaluate various prospect and two or more strategies will be applied to revive the business and to increase its revenue. Pricing strategy is a kind of marketing strategy which gives away to any organisation to make its position in the market. In the hospitality industry it’s easy to understand the nerves of the market and its completion, and according to it the pricing of the product is done. The prices of the service and product can’t vary with its competitors as a consumer is very active and do its research before any booking.
Hotels are also categorized into different segments like budget hotels, lodges, luxury hotels, boutique hotels and so there target market, or audiences are different.
Chatsworth House is a luxury experience for visitors because of its lush garden and statues. It gives an insight into the royal living and their lifestyle. Like Amusement park they have their target audience who has an interest in the historic monument and part of that era. They have to understand their audience that what they want if they are paying a good amount of money to avail their services and product (Kuncoro and Sutomo, 2018).
Chatsworth House gives a tour around to its guest for a fair amount. People from all over the world come and have a look at the art and statues of this place. There are many gardens of thirteen and fourteen century with beautiful waterfalls and fountains and situated. They host many parties and catering to a royal family of Devonshire and their counter families. They have huge real estate property which could cater to the need for many people.
They should mix two strategies like competitor pricing and value-added pricing strategy to redesign their pricing structure. As many royal places have come been acquired or transformed into hotels and resort, Devonshire not only provides services but also connect the people with the art and tradition of the golden era at that time. This is their USP. They should focus on that. They should segment their target audience who has a love for and are ready to pay for it (Dou and He, 2016).
Destination weddings these days are one of the factors which can increase their revenue. They should sell their property in the market as the best location for a destination wedding which can cater to the large and sophisticated group. They have their in-house cottages and hotels which can accommodate people who are travelling to Devonshire and exploring the royal heritage of Britain. Chatsworth is famous for its elaborate and exclusive artwork which is a rich heritage to the royal of Britain. Their pricing strategy will be appealing to the particular target market or the people who are ready to pay for royal experience (Yu et al., 2011).
With a target market share, it’s become easy to project our pricing share. Our target market is an upper-income audience who travels the world have known about art and culture and readily pay for the royal experience. Here we are well aware of the crowd we are catering to who has no issue in paying little extra for value-added services like parking etc. (Johansson et al., 2011).
Trust has to understand the need and demand of such clientele and according to that have to plan for its course of action. They have to sell their USP and position itself unique in the market.
Using Data analytics, they can predict the sales so they can mark up the prices keeping the competitors in mind. They not only sell their property as a tour around but as a whole package which serves and meet all demand of the consumer (Feng, Li and Zhang, 2014).
Suggested methods for calculating the pricing for a product: –
Fig 1: – Profit With Value-Based Pricing
Source: -https://www.priceintelligently.com/blog/value-based-pricing
Fig 2: – Profit with Competitor-Based Pricing
Source: -https://www.priceintelligently.com/blog/value-based-pricing
Fig 3: – Profit With Cost-Plus Pricing
Source: – https://www.priceintelligently.com/blog/value-based-pricing
Each of the presented pricing strategies is affecting the pricing strategies of the business world. A small gas-station should take up the cost-pricing method. Ultra-Competitive retail business will prefer using the pricing in line with competitors is very important in making it profitable using the Profit with Competitor-based Pricing strategy. But, in the present case in hand the only viable option is Value-based as the organization in question is SaaS, where the company is earning through offering value to the customers (Paunovi?, & Jovanovi?, 2017).
Before introducing any price strategy Trust has to learn the few key points about its competitors in the vicinity and services provided by them.
Target Market will help to make them understand better about the pricing of the product. They should not target the whole market to high revenues generation because it will all be jumbled up. The as different market has different needs, and they cannot cater to everyone needs (Snelgrove, 2017).
Chatsworth House should be following the value-added and competitors pricing strategy to boost their revenues and have set target market. It will be easy for them to meet the demand of the consumer. This pricing will be the best fit for the consumer perspective. This will allow them to more profitable and help them to grow their business and resources. To match the market need they have to adapt better production value.
Pricing Strategy is best method o built image and targets its market share. The pricing strategy is not price or number, but basically, it’s a relationship between the demand and supply chain. They need to be updated from time to time about the hottest trend in the market, and according to that, they can redesign the pricing structure. They have to try a different combination of strategies to mark their foot f=print in the business. They have to establish their self as a premium brand in the area so that they cut down on their competition when it comes to royal treatment and experience (Hinterhuber, 2017).
They should follow the best practice in the industry to meet the demand of their consumer which eventually helps them to grow their business.
References
Bar-Gill, O. and Stone, R. (2012). Pricing Misperceptions: Explaining Pricing Structure in the Cell Phone Service Market. Journal of Empirical Legal Studies, 9(3), pp.430-456.
Dou, G. and He, P. (2016). Value-added service is investing and pricing strategies for a two-sided platform under-investing resource constraint. Journal of Systems Science and Systems Engineering, 26(5), pp.609-627.
Hinterhuber, A. (2017). Implementing pricing strategies. Journal of Revenue and Pricing Management, 17(1), pp.1-2.
Johansson, M., Hallberg, N., Hinterhuber, A., Zbaracki, M. and Liozu, S. (2011). Pricing strategies and pricing capabilities. Journal of Revenue and Pricing Management, 11(1), pp.4-11.
Kachani, S. and Shmatov, K. (2010). Competitive Pricing in a Multi-Product Multi-Attribute Environment. Production and Operations Management, 20(5), pp.668-680.
Kilburn, K. (2012). The Chatsworth Uranographia Britannica. Astronomy & Geophysics, 53(1), pp.1.22-1.22.
Kuncoro, A. and Sutomo, Y. (2018). Pricing Strategies and Implementation Promotion Strategies to Improve Customer Loyalty. Jurnal Dinamika Manajemen, 9(1), pp.89-99.
Mark, J. (2012). Pricing Strategies. SSRN Electronic Journal. 11(1). pp. 1-13.
Nair, G. (2018). Dynamics of pricing and non-pricing strategies, revenue management performance and competitive advantage in the hotel industry. International Journal of Hospitality Management. Assessed through https://www.sciencedirect.com/journal/international-journal-of-hospitality-management/articles-in-press.
Ozhegov, E. and Sidorovykh, A. (2015). Sellers’ Heterogeneity in Housing Market: Difference in Pricing Strategies. Journal of Housing Economics. 37(1), pp.42-51.
Paunovi?, I., & Jovanovi?, V. (2017). Implementation of sustainable tourism in the German Alps: A case study. Sustainability, 9(2), pp.226.
Snelgrove, T. (2017). Quantified value first, then price: realizing the positive impact of a value pricing strategy. Journal of Revenue and Pricing Management, 17(1), pp.41-44.
Su, Q. and Liu, W. (2017). Market segmentation and pricing strategies based on product platform. Asia Pacific Journal of Marketing and Logistics, 29(1), pp.183-199.
Trierweiler, J. (2011). Pricing Linkages Between Added Value Levels Of The Beef Industry: A Systems Approach. International Business & Economics Research Journal (IBER), 1(3).
Yu, M., Pubu, Z., Zhou, Q. and Xu, J. (2011). Study on Pricing Model of Online Auction under Competitive Strategy. Journal of Software, 6(2).
Zhang, D., Sogn-Grundvåg, G., Asche, F. and Young, J. (2018). Eco-Labeling and Retailer Pricing Strategies: The U.K. Haddock Market. Sustainability, 10(5), p.1522.
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