Service Pricing Strategy in Comparing

¶ … Service Pricing Strategy

In comparing and contrasting three key ways in which service prices are different for consumers, the service pricing strategy for Virgin America Airlines is analyzed. Airline pricing requires thorough price optimization and linear programming algorithms and processes to precisely define pricing tiers for each class of service, including restricted, unrestricted general public and unrestricted charter fares (Li, 2006). Further, the perception of airline pricing is that it is most expensive right before the seat availability expires as demand is greatest right before a flight leaves, therefore further supporting the concept of airline pricing strategies resembling those of perishable goods (Li, 2006). In fact airlines, including Virgin America, are increasing the use of more significant pricing differences to further communicate segmentation of services, a practice that is becoming more commonplace on consumer-based services (Bolton, Myers, 2003). Secondly, Virgin America doesn't seek to undercut Southwest and be a low-priced leader despite their fares being lower in selected markets. Virgin is instead using pricing as part of the unique value proposition (UVP) of the total flying experience on their modernized jets that have entertainment features and WiFi (later in 2008) only seen on much more expensive, longer-haul carriers. This strategy of using price as part of their UVP is also a key way services prices are significantly different for consumers (Docters, Reopel, Sun, Tanny, 2004). A third approach that service prices are different for consumers is in the area of incenting repeat purchase behavior, loyalty, and follow-on maintenance purchases as well (Kim, Park, 2008). While Virgin America has just begun flying in the U.S. On August 8, 2007, this last aspect of service pricing strategy is relatively new, yet the company has a very successful track record with global flights on Virgin Airways using this strategy. In summary, the three key ways in which service prices are different for consumers include the use of service pricing on the part of services providers (in this case Virgin America) to optimize pricing for given markets and audiences (charter vs. full faire), define services segmentation while underscoring their UVP, and lastly incent greater levels of loyalty over time through pricing that invites self-efficacy on the part of their customers.