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ch03 - Value

The document discusses value from the perspectives of buyers and sellers. It covers factors like quality, service, and price that influence a buyer's perception of value. It also examines lessons from auctions like eBay that demonstrate how buyers determine value based on their willingness to pay compared to other buyers.

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FATIN FARZANA NASORUDDIN
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© © All Rights Reserved
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159 views25 pages

ch03 - Value

The document discusses value from the perspectives of buyers and sellers. It covers factors like quality, service, and price that influence a buyer's perception of value. It also examines lessons from auctions like eBay that demonstrate how buyers determine value based on their willingness to pay compared to other buyers.

Uploaded by

FATIN FARZANA NASORUDDIN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 25

© 2011 John Wiley and Sons, Inc.

All Rights Reserved


Part I: Revenue Management Principles

© 2011 John Wiley and Sons, Inc.. All Rights Reserved


3

Revenue
RevenueManagement
Managementfor
forthe
theHospitality
Hospitality
Industry
Industry

Chapter
Chapter3:3:Value
Value
Chapter 3 Lesson Outcomes
4

1. A detailed examination of how buyers utilize


personal value formulas when considering a
purchase.

2. A discussion of the roles of quality, service and price


in a buyer’s value formula.

3. A rationale for the use of data analysis and personal


insight when implementing strategic pricing.
Chapter 3: Value
The Role of Value in Pricing
5

Seller’s view of a sale


 
Selling price
– Costs
Organizational profit
(a tangible benefit)

Chapter 3: Value
The Role of Value in Pricing
6

Buyer’s view of a sale

Perceived value (an intangible benefit)


 
- Selling price
  Personal profit

Intangible (benefit)

Lacking material qualities, not able to be touched or


seen, but nonetheless perceived.
Chapter 3: Value
The Role of Value in Pricing
7

The prices charged by RMs must be viewed as a


verb; an active series of strategies designed to
identify and communicate the value of what they sell

Chapter 3: Value
The Role of Value in Pricing
8

Lessons from eBay

In an auction:
 Everyone is bidding on the same item
 Everyone has the same chance to win
 Many people are willing to bid when the price is
low
 As prices increase, buyers drop out
Chapter 3: Value
 Only one buyer will win
The Role of Value in Pricing
9

Lessons from eBay

In an auction; the winner is stating:


 
I am willing to pay more for this item than
anyone else. To me, the benefits I receive are
greater than the price I will pay.

Chapter 3: Value
The Role of Value in Pricing
10

Lessons from eBay

In an eBay auction, potential bidders will stop bidding


at the point that their:
  Desire

 Ability

 Willingness to buy

 Is too low to convince them to stay in the auction


Chapter 3: Value
The Role of Value in Pricing
11

The Buyer’s Multiview of Value


Four Alternative Value Formulas

SPENT ON
You Someone else
WHOS Yours A B
E
MONE Someone
C D
Y else’s
Chapter 3: Value
The Role of Value in Pricing
12

The Buyer’s Multiview of Value

Formula A: Buyers spend their own money on


themselves

Formula B: Buyers spend their own money on someone


else

Chapter 3: Value
The Role of Value in Pricing
13

The Buyer’s Multiview of Value


Formula C: Buyers spend someone else’s money on
themselves. (Corporate expense accounts)

Formula D: Buyers spend someone else’s money on someone


else. (Meeting Planners/ travel agents)

Chapter 3: Value
The Role of Value in Pricing
14

The Buyer’s Multiview of Value

All buyers making purchases will ultimately evaluate


three factors that affect their perceptions of value
received:
Quality Service Price
Quality Service Price

Chapter 3: Value
The Relationship Between Quality
15
and Price

Quality

The degree of excellence of something as measured


against other similar things.

Examples include the USDA grade assigned to a cut of


meat or the thread count of sheets.

Chapter 3: Value
The Relationship Between Quality
16
and Price

Service

Intangible activities or benefits provided to buyers


either alone or in conjunction with the purchase of a
product.

Chapter 3: Value
The Relationship Between Quality
17
and Price
Quality, Service, and Price

If quality is constant and price increases ↑,

then value decreases ↓.

If quality is constant and price decreases ↓,

then value increases ↑.

Chapter 3: Value
The Relationship Between Quality
18
and Price
Quality, Service, and Price

If quality increases ↑ and price decreases ↓,

then value increases ↑.

If quality decreases ↓ and price increases↑,

then value decreases ↓.

Chapter 3: Value
The Relationship Between Quality
19
and Price
Quality, Service, and Price

If service is constant and price increases ↑,

then value decreases↓.

If service is constant and price decreases↓,

then value increases↑.

Chapter 3: Value
The Relationship Between Quality
20
and Price
Quality, Service, and Price

If service increases ↑ and price decreases ↓,

then value increases ↑.

If service decreases ↓ and price increases ↑,

then value decreases ↓.

Chapter 3: Value
The Relationship Between Quality
21
and Price
Quality, Service, and Price
Four Is of Service: Four unique characteristics of
services:
• Intangibility
• Inconsistency
• Inseparability
• Inventory
Chapter 3: Value
The Purpose of Business
22

Quality, Service, and Price


“I” of Service Characteristic
Intangibility A service cannot be touched or seen before it is
purchased.
Inconsistency Uneven performance results from variations between
the skills of those who are actually delivering the
service.
Inseparability It is often impossible to make a distinction between
the individual delivering the service and the service
itself.
Inventory Unsold inventory vanishes if not sold and the costs
associated with idle production capacity can be high.

Chapter 1: Introduction to Revenue Management


The Art and Science of Strategic
23
Pricing

Effective Revenue Management depends on

Science Insight
Science Insight

Chapter 3: Value
The Science of Data Management
24

From a purely mathematical viewpoint, the forecasting


and optimization problems posed by revenue
management are far more complicated than those
involved in a space shot.

~Robert Cross

Chapter 3: Value
The Art of Insight Application
25

Insight

The ability to see clearly and intuitively into the nature


of a complex person, subject or situation.

Chapter 3: Value

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