“Good pricing starts with an understanding of how customers’ perceptions of valu
ID: 1216070 • Letter: #
Question
“Good pricing starts with an understanding of how customers’ perceptions of value affect the prices they are willing to pay.” (Kotler and Armstrong, 2013, p. 302) In the case of Virgin Galactic, the price is clearly set to cater to the millionaires and billionaires of the world. Sir Richard Branson understands the psychology of the market and understands the relationship between the price and the demand for the flight to space. It’s not about going on a trip, it’s about spending, at a premium of $250,000 no less, to be part of something bigger. Clearly this is an example of “elastic demand” because this is an expensive trip that most of us can live without. In addition, Branson understands the monopoly and trade-offs between the life-changing experience and the price of the “Human SpaceLift” (product characteristics) the millionaires and billionaires are willing to pay. (Kotler and Armstrong, 2013, p. 305)
On the other hand, I would not burn $250,000 to fly to space to experience:
“As SpaceShipTwo coasts up into space, our astronauts will leave their seats and experience true, unencumbered weightlessness. The pilots will maneuver the spaceship in order to give the astronauts the best possible view of Earth and the blackness of space from the vehicle’s twelve large cabin windows.”
Mr. Branson targets the rich and positioned his product to offer a “life changing experience,” a different brand with a large price tag.
What do you think of this article? How effective does he pricing strategy have to be when offering premium services for the wealthy to spend their money on it? Please use valid research.
Explanation / Answer
The article suggests a pricing strategy. There are different classes of people in the society. All don’t have same worth of value of a product or service. If a premium service is offered at high price, it creates no demand on general people. On the other hand, it becomes worthy to the rich people because of their affordability. Pricing strategy would be based on tapping a particular class of people, since a single price can’t meet the demand for all.
His pricing strategy should be effective, since a particular class of people (wealthy) is tapped here. They may opt for such life-time experience at any cost. Therefore, higher pricing is not a problem for them.
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