Overall Costs of the Lounge, Case Study Example

Before setting the prices for the services at the lounge, it is essential to first determine the full costs of running it. These should include the fixed costs as well as the variable costs.  It can be explained in the table below.

Price Setting

The process of strategic pricing is divided into two phases. The first is determining the appropriate level of price the second being price mechanisms determination. Levels of price allows us to set the money quantity for a service transaction, given the overall market, it segment, or the customer. Pricing mechanisms are necessary to allow us set the price to appropriate level of price. In order to come up with a successful pricing strategy, four crucial components are considered. These include price sensitivity, competition, costs, and the lifecycle of the service.

Pricing Mechanisms

There are qualitative and quantitative methods of price mechanisms. Qualitatively, comparable benchmarks are used to arrive at the desired the level of price. The more the resemblance of the benchmark and the service, the more important it is in price setting. There are two approaches to quantitative methods. Price sensitivity metrics reveals price expectations by the customers for the new service. Conjoint analysis quantifies the willingness-to-pay of the customer and requirements are set for management of the service.

Price Promotion

Price promotions are not advised since increased sales at a reduced price are at the expense of sales in future at the price in full.

Profits

The targeted profits are US$ 10 million after tax. This is expected to rise by 20% annually.

Conclusion

All the above requirements should be accounted for in order to have an excellent marketing strategy for the business. Batian Leisure Lounge, having gone through all these stages is able to meet its objectives and able to handle the competitors.