Marketing , Dev Eloping Economies

Field of Research

–

Marketing

, Dev

eloping economies

1.

Introduction

Price is the weapon of choice for many low cost airlines in the competition for market

share

s,

m

any marketers believe that the most powerful competition trend currently

used by shaping the marketing and business strategy is the

pricing strategy because

it has a direct impact on a company‟s profitability.

It is clear that low cost airlines

faced stiff

competition among themselves. The competition has an important

implication for market share low cost airlines have to use effective pricing strategies

to increase profitability, boost brand power and fight off competitors.

Business is a game and e

very f

irm is vulnerable to attack by the competitors,

for long

term sustainability airlines need to play the role effectively in this game.

Pricing

Strategies have been assumed as a

strategic financial control tool

.

The phenomenal growth of low cost airlines has triggered the interest of people to

believe that they will become successful mainly due to their pricing strategy.

Nevertheless, in a turbulent business environment (rising investment risks, intense

competitio

n among airlines and potential liability), there is a greater uncertainty and

challenges to the success of the airlines‟ existing pricing strategy in fulfilling

expectation of the customers. In the attempt to provide further insight into the link

between p

rice setting behaviour of the low cost airlines , this research presents an

empirical research on the question of the

competitive

pricing strategies of low cost

airlines, the degrees of competitiveness and what are the factors that affect ticket

price sett

ing.

Research Questions

1.

Whether low cost airlines price setting strategies are influenced by

different variables?

2.

Whether

there is a significant relationship

between

ticket price of the low

cost airline

s and their competitors

?

2. Literature Review

Pricing is the only element of marketing mix that produces revenue for the firm

Lovelock (1996) Similarly, Shipley and Jobber (2001) had pointed that pricing can be

a powerful tool in every business. They also pointed that “price management is a

critical e

lement in marketing and competitive strategy and a key determinant of

performance.” Besides the operation effectiveness and outstanding efficiency the

most important determinant of survival of a company is its pricing strategy.

Bilotkach

(2007) examined pr

ice setting strategy among low cost airlines concluded that low

cost airlines had implemented dynamic pricing strategy; the price of the ticket was

fluctuated according to the demand curve.

(Poala et al 2007) examined low cost

airline business model by con

cluding that low cost airline implemented the

optimisation strategies by using dynamic pricing strategy ticket fares tend to change

based on the demand curve.

Mason (2001) has pointed out that low cost airline has

promoted the concept that the cheapest far

es it offers are the further away from the

date of departure and prices rise as the day of departure nears as available capacity

is taken up. This finding is also supported by the Bilotkach et al (2007) survey which

identified that the rate of increase in

offered fares accelerates as the departure date

nears.

Airlines implemented price discrimination to customers. Button ( 2007) In the

airline oligopoly business model, price leadership strategy is implemented by airlines

in situation in which a market lead

er