Pricing Strategy
Introduction
Owning a business means that the owner is the strategist, and even where there are other people assigned to carry on with the daily chores, the owner has to track and monitor how the business is progressing. As applicable to a restaurant, one important consideration is the specifics of the restaurant and the pricing strategy that would be used. The pricing strategy is the overall strategy and may be determined by a number of other factors. It creates the value which the customer would associate with the restaurant. According to Smith (2011), the pricing strategy has a significant role in holding the customers to the business or eventually losing the customers. It is like the ultimate consideration for a restaurant but may mostly be determined by a number of factors such as the locality of the business, requirements of customers, the quality and value of food and customer capacity. This discussion looks at the value of an Upscale Casual restaurant and the variety of pricing strategies that are applicable.
Value Statement for the Restaurant
An upscale casual restaurant aims at providing a casual, as well as an upscale services dining experience for the customers. This is not like the fast food restaurant; the main concentration is on giving customers a feeling of experience and value. The value of the restaurant is everything to customers, and mostly, when they are sampling where to have their foods, they look at the hue of value that is associated with the restaurant. For example, if the restaurant does not have a strong value in the market, it may not come to it, but if there is a strong, positive value that is associated with the restaurant, the customers would not hesitate in having an experience in the restaurant. There are a number of things that have to be done so as to create a strong, positive value statement to customers for upscale casual type.
Defining the value statement, Brown (2003) notes that the first consideration should be on the personal interactions and relationships the restaurant wants to have with customers, or in essence, the attribution the manager or the owner of the restaurant wants the business to have. The restaurant must have a striking value to the customers, lest they may not associate themselves with the business. Positive and negative attribution in restaurant determines a lot whether this business would be running at a loss or profit. According to Enz (2009), the value statement of any business is the utmost focus of business and is mostly contained in the important records, the walls of the restaurant and in communicating documents for the restaurant. For this particular upscale casual restaurant, the elements of the value statement would be the food, the service, the environment and the experience. The following statement represents the value statement for the upscale casual restaurant.
American Uptown Foods:
“A world-class restaurant combining quality of service and food and a low priced host of American, Italian, Hispanic, Japan, Chinese, African and Indian delicacies.”
As a value statement, there are a number of expectations from the customers, especially in the way they attribute the restaurant. First, the customers would have an experience of world class restaurant service, which includes good dressing the restaurant attendants, quality foods from all over the world, and the capability of any type a person from the world coming to experience the food. This restaurant has a focus on offering low priced delicacies from major regions in the world, and this means that it is a place where people of different class status and from the whole world can come and socialize. It not only becomes a place to sample foods, but a place to exchange cultures and ideas.
Pricing Strategy
As noted, pricing strategy is like the ultimate strategy for a business, and especially if the owner and managers of the business wants to attract and retain customers. According to Rainsford (2000), it is crucial for a business person to plan effectively on the pricing to be used in the business. A research study should be conducted before starting up a business, and especially for a restaurant, and this study should focus on people in the locality, their social status, their cultures and their willingness to buy foods at a certain price. For the ”American Uptown Foods restaurant”, all sorts of factors must be considered. Moreover, the restaurant has been dormant, and this means that previous strategies did not work, and hence there is a need to come up with a new strategy. This restaurant is located strategically in a mixed population; a population that has virtually everyone from the world. On this, therefore, the pricing strategy must mind that some people may not afford high priced delicacies, and at the same time, it is not wise just to put a low price for the sake of attracting customers. Some may not come to the restaurant because of a low price, and on this, therefore, a medium price is good.
The medium price for foods in this restaurant is determined majorly be the market segmentation. According to Weinstein (2004), there is a strong connection between the market segmentation issue and pricing strategies. The pricing strategy must bear in mind the desires of people targeted by the business. In this case, the targeted people are people in Chicago, who come from across the world, and who probably may have or may not have enough cash to buy expensive and quality food. It is all about being price sensitive, where an unfavorable price may dismiss a group of people. However, if there is a level of the price that has quality in it, virtually everyone would come to the restaurant, and this would be good for marketing and profitability.
Pricing Strategy as a Marketing Strategy
The pricing strategy used for this restaurant is, indeed, a marketing strategy. When managers want to put the business to the people in a good way, the price must be evaluated well. The price put when marketing the product would determine the number of customers who would come to buy goods and services. In this regard, the restaurant’s profitability and positive attribution would highly be determined by the price put for foods and other services. For this restaurant, the option is on providing a low price, but it is not necessarily low. The determinant of the level of price cut is on the people in the region. By and large, it is a medium range of price, but when advertising, it should be that the price is low. It is low for people with a higher social status in the locality and medium or good for people who may not be of a high social status. This is the first thing people would be looking at when they are considering sampling food from the restaurant.
Strategies in Pricing
There are a number of strategies that must be used in coming up with an appropriate price for foods in this restaurant. The first of the factors is on first impression. In this consideration, the restaurant was inactive, and it means that the customers had opted for the competitors. Therefore, the first impression is very important which may become a lasting impression. The second of the factors is on profitability, where, the managers and the marketers must focus strongly on getting value of a price. The price must be able to result to profits, due to other accompanied services in this restaurant. The third of the factors in pricing is sustainability of the price. The price must not be high if the managers would be forced to lower it down at some point in the future of the running of the restaurant.
Value Communication Strategy
According to Doyle (2008), communication strategy of a company or a business becomes the selling or marketing strategy. If the company’s management wants to create a strong marketing ability, the communication must be of high value for the business, lest, customers would disregard. The communication must focus on telling the customers the reasons why they have to come to sample the products and services on offer. For this business, the customers must be communicated to in a way that creates value. The value statement of this restaurant is capturing enough to make the customers come to have a look at what is on offer. That is the focus is not only on the price of food, but also on service. There is the creation of the first impression that this business has quality services and foods, and hence a high need to come and get some of these values. When putting an advert in any of the media, or the communicator must focus on a number of elements in creating a value based communication and marketing.
According to Taylor (2004), there is a number of elements that creates value in any form of communication. These are; the economic value, offering solutions and improving their welfare. These three major elements have to be considered, but there may be differences in how this is created. For a restaurant such as American Uptown Foods, the economic value is the level of price the foods in this restaurant cost. For the solving their problems, the focus is on how quality food that is lowly priced can help them manage their finances appropriately while still accessing quality foods from the restaurant, as opposed to the competitors. Lastly, on improving their livelihood and status in society, the focus is on their ability to afford quality food with low prices, something which may not be practiced by other restaurant, which focuses on giving quality food at a very exorbitant price.
Adding a Special Item
As noted in the marketing strategy in pricing, first impression is geared to last. When the customers have become accustomed to the quality of foods and service in the restaurant, it is time to go upscale in price, but only bit by bit. In this strategy, the focus is on introducing a new item in the menu with slightly higher price for some of the customers who can afford to buy. Since this item is special, and some of loyal customers may want to have it, they are likely to invest more on the item. This strategy is good because it will set a pace for all others. New items would be introduced, and customers are likely to get accustomed to the new prices introduced gradually. In this, the first impression is not destroyed, and in essence, it is enhanced. People are still able to buy original foods at the original prices, buy are likely to add something else which is of a little bit higher price and status. This may be a pace setter for other items after analyzing that customers can, indeed, afford foods of higher prices.
Conclusion
In managing a business, the biggest focus is on creating value for customers. The customers must have an experience that is long lasting, and management of any business has to focus on giving customers a good attribution. This is the case when managing a restaurant, where the big focus should be on attracting the customers to buy foods from the restaurant, and giving them a reason why they do not have to go to the competitors. The pricing of goods and services is very important in retaining customers in a business. In this discussion, the focus has been on creating a value for customers in a food restaurant by giving them quality foods at a low price. The strategy is to make them stick with the business for the purposes of getting value and profits from the restaurant.
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