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Pricing Strategy - Essay Example
Pages 6 (1506 words)
Restaurant Pricing Strategy Customer inserts his/her name Institution’s name Question 1 The mission of the upscale Chinese restaurant is to deliver premium quality food to our customers whom we regard as patrons. Our fine dining experience and exclusive ambience express the highest level of hospitality and service to our customers…
As opposed to the conventional practice of setting prices to cover costs in the restaurant industry, this upscale Chinese restaurant shall adopt a demand-based pricing strategy. Demand-centric pricing usually has three major components. Firstly, such a pricing allows companies to set prices to achieve particular sales targets (Levy & Weitz, 2012). Secondly, it allows the firm to assess the maximum and minimum prices acceptable by the target market (Levy & Weitz, 2012). Finally, psychological pricing allows companies to take advantage of the “high price, high quality” rule as well as odd pricing (Levy & Weitz, 2012). A cost-based approach is an inside-out approach which is clearly not suitable for the cafe as it would leave the cafe vulnerable to fluctuating commodity prices. Such a strategy would downplay customers’ perceptions of the upscale image of the restaurant. There may be certain food items for which customers would be willing to pay more yet the cost-based approach treats every offering equally and fails to capture the added profit that can be earned from such products. In such cases, a demand-based approach would be most suited which would allow the restaurant to charge a premium price for its high demand dishes such as Chicken Szechwan and Tempura fish. ...
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