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Restaurant Essay

Hospitality Marketing: Restaurant Pricing Strategy


This essay makes an individual aware of the formation of pricing strategy of restaurants. While pricing goods in a restaurant, a number of factors must be considered. Demand management is done while measuring the elasticity of goods. Yield management is taken care of as the capacity of a restaurant is limited. Price bundling is done, in order to manage the demand of all the goods in the market. All these factors play a pivotal role in forming the pricing strategy. 

Hospitality Marketing: Restaurant Pricing Strategy

Price elasticity of demand is the responsiveness to which the demand varies, given a change in price. Now the change in price could be both; an increase or a decrease. The restaurants in United States of America use the concept of demand elasticity in their pricing strategy. This concept helps them to analyze that if the price elasticity of demand is high, that means, even a slight increase in their prices would make the demand fall immensely. And even a slight decrease in their prices would make the demand rise significantly. Lower prices stimulate higher demand only if the price elasticity of demand is high, otherwise if the price elasticity is low, so no matter the price increase or decrease, the demand is not going to get affected. 

Yield management is how the company can influence the behavior of the consumers to maximize the profits when having a limited capacity of service area. In restaurants, the seating is limited, so yield management is done while making a pricing strategy. Yield management manages the restaurants in United States of America in such a way that they provide service, at the right time, to the right people, at the right price. 

Price bundling is the marketing technique in which two or more products are sold at a single price. It can also be called package deals. In the restaurant world of today, everyone sells products in bundles. Every restaurant has either combo meals or package deals. In such deals, the image is give to the consumer that if they buy the combo meal, they can get more food in fewer prices. This is true to some extent too, but in this way the consumer buys products that previously he had no intention of buying. While forming the pricing strategy of restaurants, price bundling plays a vital role. It enables the marketers to make bundles of those good that are high in demand with those goods that are in least demand. In this way, the sales increase.    

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