Question

You own a franchise of rental car agencies in Florida. You recently read a report indicating that about 80 percent of all tourists visit Florida during the winter months in any given year, and that 60 percent of all tourists traveling to Florida by air rent automobiles. Travelers not planning ahead often have great difficulty finding rental cars due to high demand. However, during non winter months tourism drops dramatically, and travelers have no problem securing rental car reservations. Determine the optimal pricing strategy and explain why it is the best pricing strategy.

NOTE: YOUR ANSWERS IN THIS SECTION WILL BE SUBJECTED TO A PLAGIARISM CHECK AND ANY ANSWER WITH MORE THAN 20% SIMILARITY INDEX WILL BE AWARDED ZERO POINTS. YOUR ANSWER TO EACH QUESTION SHOULD NOT BE MORE THAN ONE PAGE.

Answer 1

The company I own is a franchise of rental car agencies in Florida. The situation is that, about 80 percent of all tourists visit Florida during the winter months in any given year. and 60 percent of all tourists travelling to Florida by air rent automobiles. Traveller not planning ahead often have great difficulties to find rental cars due to high demands. But during non winter months tourism drops dramatically and travelers have no problem securing rental car reservations. Hence we can see the problem arises in winter season due to high demand.

The appropriate pricing strategy in this circumstances should be Demand pricing. Demand pricing system is kind of pricing in which price of goods and services depend on solely on demand of the goods and services. This is also called Dynamic pricing. When demand of the service (rental car service for this case) increases, price of rental car service also increases. On the other hand when demand of rental car service decreases, price of the same should also fall. Hence during winter season when the demand of rental car services increase, price must inrease too. This must generate a good amount of revenue for the company. Travellers will not hesitate to pay more price during winter if they are provided with good service and well maintaine cars. On the other hand during non winter seaason, when demand for rental cars decrease, price of the service should also fall. Providing rental cars at a lower price must attract more peop,le to rent cars from the company.

The pricing strategy might be placed keeping in mind the amount of pricing other companies are setting on rental cars. This is called Competitive pricing. If there are many other companies who run rental car service, as a franchise of rental car services I must keep a close look to the price other companies setting and I should raise the price according to that with providing good service and well maintained cars.

In this situation there might be two extreme circumstances. First if the company I take fraanchise is a new entry in the rental car agency I must introduce Penetration pricing initially. In this pricing system the company should place a lower price for the rental cars for first few months to capture the market. After a certain period when the company is able to capture a good portion of market, it may introduce Demand pricing as discussed above. On the other hand if the company possesses a competitive advantage from the very time of entering the market, it might place a higher price for the service it provide. This is called Price skimming. Price skimming is dome by the companies with competitive advantage in the market to gain higher revenue till its competitors come with lower price.