The Price-Quality Case

In your answer to the price/quality assignment you will need to describe a hospitality or tourism business of your choosing that is not as competitive as it could be, and suggest multiple solutions as to how it should be studying its competition and what it should do about it. More specifically, you will try to describe the alternative pricing and product/service design or production strategies it should be considering in order to more successfully compete. As always, note the grading rubric for further indication of the type of information that is expected in your answer. The presentation on the topic of quality, provided in Part 4 of the course, offers multiple possible definitions of the term, and its potential relationship to price, all of which may help to provide you with perspective on how the perception of value can be impacted by pricing strategy. The discussion below may help to spur your ideas about what type of business example you might want to use in your discussion.

Frequently students choose for this this last assignment to describe a business in which they work, or have been a customer or guest. Your choice of example situation should be of one of two types. One type of situation that you could choose to discuss is that of a business that is facing competition from a lower-priced competitor business that is selling a product/service that is perceived as lower in quality but better in value. The other type of situation that you could choose to discuss is that of a manager who is facing competition from a higher-priced business but is selling a product/service that is perceived as higher in quality, and therefore still better value.

In the first possible situation explained in the paragraph above, management can be challenged to figure out ways to lower their cost without lowering perceived quality in order to attract some of its competitors customers. For example, imagine you manage a prime steak restaurant such as Ruths Chris, and you find that in the very slowest season of the year your restaurant is largely empty during weekday happy hour periods, but that during those same periods you notice there is a Buffalo Wild Wings nearby that is relatively busy at those times. Are there ways that your Ruths Chris could better compete during these day parts by reducing prices? It might do this in a number of ways such as selling beef trimmings, or end cuts of beef, which it might normally throw away, as happy hour snacks. Should it try to do so or not? What indirect dangers might there be to its brands image in doing so? How might it do so without negatively impacting image? Remember what you learned about the role of the customers themselves in creating the experience.

An example of the later type of situation mentioned in paragraph #2 above could be that of a manager of a business that is experiencing competition from a business that is able to charge higher prices. For example, management of a limited-service lodging property notices that a full-service convention hotel nearby seems to have a loyal customer base that is consistently willing to pay higher prices, and the property consistently runs a higher occupancy percentage than the limited-service property, even though the limited service propertys sleeping rooms are actually larger and newer. The full-service property has convention facilities which do help it, but most importantly it prides itself on its repeat business travelers during the mid-week periods. What are some ways that management of the limited-service property could better compete with that property? Should it try to do so, or should it simply concentrate on keeping labor cost low? What are the pros and cons of each strategy you suggest? How could you better compete with a higher-priced lodging property while reducing costs in the long run?

Applied Learning Assignment - Price-Quality Analysis - see below and the attached document for further explanation and instructions.

• Define the targeted quality level of a hospitality or tourism service property of your choosing. Quality should be identified by industry segment (e.g. family restaurant, sports bar, or fine-dinning restaurant; limited-service or convention hotel) as well as by quality level of tangible and intangible components of the products/services (e.g. utilizes only prime beef, provides highly personalized service, etc.)

• List the firms direct competitors as well as indirect competitors one quality-level above and below the firm.
• Explain how pricing impacts the perception of quality. Shop pricing levels, utilizing the Internet and shop calls, for the firm and its competitors; determine if the pricing level is appropriate based upon quality and the level of value provided to the customer/guest.
• Determine if the firm offers different prices to different market segments; if seasonal, how does the firm alter its pricing during the off-season versus the peak-season
• What is the lowest price the firm should charge in order to drive demand for the business? Explain the reason for your decision?
• Suggest a strategy that allows your chosen business to better compete when needed to with a competitor that is one price point above, or one price point below, your chosen property.