Mkt 362 Pricing

NAME: CHAN CHEE KIAT

STUDENT ID: K1511358

COURSE TITLE: MKT 362 PRICING

ASSIGNMENT NO: END OF COURSE ASSIGNMENT

Question 1a)

With the $140 million investment into the attraction and an expected span of around 20 years for the attraction based on assumption, it would mean that over 7,300 days, Straco Corp. would need Singapore Flyer to earn an average of $19,178 daily just for the fixed cost to breakeven. If we were to include the variable cost of electricity to be at $500 daily, and cost of manpower to be at $1,500 daily, that would be another $2,000 to be earned daily. This brings the total cost per day to be at $21,178.

With the above assumptions, we have derived that the cost to operate a day for Singapore Flyer would cost around $21,178. Therefore by breaking down to the operating hours of 14hours a day, it would require them to earn $1,513 per hour. In an hour, there could be 2 trips, with 28 capsules and each capsule able to hold a maximum of 28 pax, in an hour the maximum number of people it can ferry is 1,568. However to be reasonable, it would be projected that the rides have an occupancy of 50% throughout the day, therefore the figure would be 784.

Therefore based on that, the minimum price that Singapore Flyer has to charge to its customers to not make a lost would be at $1.93. Hence, we found out that the cost structure for the Singapore Flyer consist mainly of Fixed cost as compared to the variable costs based on the above assumptions.

Question 1b)

The current pricing strategies of Singapore Flyer include the following;

Price Versioning, this strategy offers a range of products that is actually based upon a core product. In Singapore Flyer’s scenario, the core product is the ride in the capsule. However, there are at least 4 other versions that have been created apart from the core product which is the Singapore Flight. These 4 versions are, Premium Champagne Flight, Signature Cocktail Flight, Singapore Sling Flight and the Full Butler Sky Dining Flight.

For this strategy to improve, I would suggest that there are slightly more difference in between each version. As the Premium Champagne Flight, Cocktail Flight and Singapore Sling Flight are offering something almost similar and priced at the same price. This offering does allow the customers to perceive a difference as it could be perceived as only 3 versions, the basic version (Singapore Flight), alcohol version (Premium Champagne, Signature Cocktail and Singapore Sling Flight) and a dining version (Full Butler Sky Dining Flight). Therefore to improve this strategy, I will suggest a clear definition within the versions to ensure that I can capture different markets’ target audience as compared to offering 3 variations to one target market. Therefore, I would suggest themed styled capsules as a version on its own, such that hotels have themed rooms, Singapore Flyer can consider themed capsules to draw repeated customers to experience the new theme as a version on its own.