Marketing
Price
Case #1 - Summary of Pricing Strategy and Ethics: Wet ‘n Wild
Wet ‘n Wild is a company that owns water parks all over the world. (It has chains that extended through China and to the U.S. Since Wet 'n Wild opened in 1984 it has reached 8 locations including Hawaii and Las vegas. Though all this success, Wet ‘n Wild has opened a new water park in Sydney, Australia.
Prior to Wet 'n Wild opening, it gained a lot of media attention because of it being the only major amusement park in Sydney despite being a major city that has many tourist attractions. To reduce competitors (the beach), they decided to build the water park an hour inland, but it was still close and convenient. They plan to make most of their profits on seasonal pass rather than individual pass.
To do this, they made the individual passes really expensive compared to the seasonal pass, which made the seasonal pass look like a great deal.(For example the single day ticket could cost 25 dollars and the seasonal pass is 83 dollars making it look like a great deal).
The Christmas period in Australia is in the middle of summer, so these season passes became popular Christmas gifts as well. Some of the problems the seasonal pass caused were overcrowding because everyone would go and the park would pass full capacity meaning people who paid couldn't get in. Another thing that contributed to this was Wet 'n Wild was not open every day, in fact, it was not open 7 days a week most of the time. This results in major dissatisfaction that was expressed through social media.
Discussion Question
1. As a new facility, Wet ‘n Wild was keen to recoup their infrastructure investment as quickly as possible. Therefore, do you agree with their pricing strategy or would there be a more appropriate approach to pricing?
I personally disagree with the Wet'N Wild pricing strategy(skimming for individual pass and penetration for the seasonal pass). It is because of their bad pricing strategic it creates a great deal of dissatisfaction. Since the only competitor would the beach or tourist attraction near the beach they have already solved that problem by moving an hour inland. When you do this it creates a monopoly competition(Which is what the monopoly company wants). Therefore, it would be logic to use the skimming strategic since no one will know the average price since there is no average price. So I think the Wet ‘n Wild tried to sell so many seasonal pass were because they were afraid of not breaking even.
2. As the number of season passes sold was significant, do you think that is ethical of the company to keep promoting these passes or do you think that they have a responsibility to their shareholders to maximize profitability?
I think the company shouldn't have kept promoting the pass because they would have foretold an event like this would have happened. As we learned in the previous unit CSR is very important and loyal customer will earn you more money in the long run.
3. Given that season pass holders paid for a service that was not always available (that is, the park was full), do you think that they should be entitled to some form of refund or compensation? If so, how could this be implemented given thousands of people could have been affected.
I think they are not entitled to a refund fully because the company is protecting their safety, but that will not satisfy the consumer. Therefore, I think they should have some kind of compensation like a tag or a gift bag to thanking them for coming here today. Also, if the user hasn't been in Wet 'n Wild ever I think they should have gotten a refund.
4. As there were reasonable numbers of dissatisfied season pass holders, what do you think would be the long-term implications of Wet n’ Wild’s objective to sell as many season passes as possible?
I think that the Wet'N Wild try to sell as many passes because there were afraid no one would come and visit their park. They wanted to sell as many passes as possible then never provide the service afterward because sometimes it wasn't open 7 days a week(yeah not open whole week). The result of this would lead to major dissatisfaction and no one will ever buy a seasonal pass again or go there creating a bad public image for the company. This will create global loss of sales for this chain company.
Break-Even Analyias
The four steps to analysis break-evens:
Fixed production costs for a product(The price of item that won't need to be brought recently ex. for the picture machine)
Variable production costs for a product(The product that needs to be replenished ex. lemons)
Unit price(the price of product ex. 10 dollars for a lemon)
Expected unit sales(how many sales you are expecting ex.10 sales = 100 dollars)
Economies Scale
The meaning of economies of scale is doing things efficiently.
1: Purchasing (purchasing bulk materials for a company in the long run)
2: Managerial (More specific manager to manage a company )
3: Financial (Asking the banking for lower interest and give more money to you)
4: Marketing (Advertise your product to everyone)
5: Technological (using technology to increase production)
All these things reduce the time to do things and we all know time is money.
Pricing Strategies
The four pricing strategies includes:
Economy: Low quality, Low price ex. Great Value Walmert
Skimming: High price, Low quality ex. Limited Edition Power Rangers
Penetration: Low price, High quality ex. Wind free plan
Premium: High price, High quality ex. cars
Free Market V.S Command Market
A free market is an economy that allows for profit, private property, competition. Examples are the USA. While a commanding market is an opposite. Examples are the North Korea.
Canada is not a fee market because government regulation minimum wage and monopolies VIA rail and Healthcare. Also guides certain industries oil & gas. Canada is a mixed economy, like most countries, are in the world.
The definition of market power is the ability to alter the market price of a good or service.
4 Types of Competition
1) Perfect Competition a large group of small companies selling the same products doesn't exist in the real world theory.
2) Monopolistic Competition a large number of small companies with small chances of controlling the product that is slightly different from each other (examples coffee).
3) Oligopoly a small number of companies huge chances for growth and control over the product (ex. lock builders).
4) Monopoly a single company has complete market control (ex. healthcare).
USP
To make more money than the other company you need USP. What is USP, well it is (a benefit) that the competition does not have and likely will not develop or match. The two types of advantage you can have over a company is sustainable and non-sustainable.
Sustainable:
1. Intellectual Property ex. light bulb Note: patents have a time limit
2. Service a niche market (unique locations)
3. Create customer loyalty
Non-sustainable:
1. Placement (where located)
2. Quality(quality of item/service)
3. Benefits of use(in demand)
4. Price (special price)
5. Design features (special feature)
