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Pricing & Price Elasticity Under a Conjoint Study.

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Presentation on theme: "Pricing & Price Elasticity Under a Conjoint Study."— Presentation transcript:

1 Pricing & Price Elasticity Under a Conjoint Study

2 Content Industry Competition Methodology Survey Results

3 Industry The Crises Economic Downturn ( second half 2000) Sep 11 What might be the best strategy ? Follow the actions of the low cost carriers Try something different

4 Competition Domestic Aeromexico ( 72 Airplanes ) ( Domestic & International ) Mexicana (64 Airplanes ) ( Domestic & International ) Aviacsa ( 21 Airplanes ) (Domestic & Some International) Aerocalifornia ( 22 Airplanes ) (Domestic & Very few International) Aerolineas Aztecas ( 6 Airplanes ) Others regional and Charters Airlines. International All ( AA, CO, DL, UA, LH, IB, BA…….)

5 Competition (Cost) Cost advantage of the competition Labor (33%) Capital Cost ( In the most of cases Old and cheaper airplanes ) Sales & Reservation ( small ) Ground Handling (small) Similar Cost Landing Fees Maintenance ( Advantage Labor )

6 Competition ( Cost ) Estimated Cost of the Airlines in México AeromexicoAviacsa 727Aviacsa 737AerocaliforniaAztecas Cvs-USD/Kms Operational VariablePassenger VariableDirect Fix CostIndirect Cost

7 Methodology So we need to determine if something can be done to improve pricing or just mach the competition. We need to know if the brand has a value We need to know if the passenger are service sensitive or price sensitive and which is the point of inflexion. What is the elasticity for the markets and segments

8 Methodology We know that our effort to position the brand has a value. How Much ? All the markets are the same ?

9 Methodology Choice Based Conjoint Conjoint uncover the “ value system behind the costumer decisions, reveling willingness to pay and sensitivity to price. It’s a quantitative approach. It’s uses direct surveys that force customer to make trade – off ( as they would have to in the market place ). Products and services are treated as bundles of features and price that customer consider jointly.

10 Survey ( Markets ) ÍNDICE>>Nacionales MonterreyMonterrey GuadalajaraGuadalajara CancúnCancún TijuanaTijuana MéridaMérida Guadalajara-TijuanaGuadalajara-Tijuana USA DallasDallas Los ÁngelesLos Ángeles MiamiMiami New YorkNew York Europa MadridMadrid Sudamérica ChileChile Sao PauloSao Paulo * In every route there were at list 300 surveys

11 Survey ( Questions ) The interview has some questions that help us know the demographic data (age, sex) an others like, if the passenger belongs to a specific frequent flier program and the costumer’s drivers ( business, Pleasure or VFR ). In the conjoint we looked at 6 variables: Brand, Price, On time performance, Frequent flier program, frequencies and comfort.

12 Survey ( Conjoint e.g. ) Aeromexico Always ( Punctuality > 94%) $ 2,400 km – Accumulation More than 8 Frequencies every day Same seat space Aviacsa Almost Always ( %) $ 1,900 1 Free Flight for every 5 4 – to 8 Frequencies every day Same seat space Aerocalifornia Some Times ( 50% –79%) $ 1,700 km – Accumulation From 1 to 3 Frequencies every day Same seat space Mexicana Always ( Punctuality > 94%) $ 2,400 Km. – Accumulation More than 8 Frequencies every Day Same seat space

13 Results ( Costumer Demographic Profile ) ÍNDICE>> 75%25% 69%31% 63%37% 74%26% 16%38%35%7%4% 13%44%30%9%5% 37%30%18%11%5% 15%48%19%15%4% SexAge 59%38%4% 66%31%3% 60%37%4% 33%63%4% Civil Stage Total

14 Results ( Drivers ) ÍNDICE>> 18%82% 13%87% 7%93% 100% 75%10%7%8% 62%15%14%9% 44%23%16%18% 26%44%22%7% Ticket TypeDrivers Total

15 Results ( Brand ) ÍNDICE>> 59%23%10%8% 28%51%13%8% 24%25%39%12% 25%31%17%27% Total

16 Results ( Price ) ÍNDICE>> 34%28%20%18% 36%29%21%14% 53%22%14%12% 50%23%16%11% Total

17 Results ( On Time Performance ) ÍNDICE>> 40%36%24% 40%35%25% 33%34%33% 29%37%34% Total

18 Results ( Part-Worth ) Airline ÍNDICE>> AeroMéxico Mexicana Aviacsa California Margen1.5 Price $1, $1, $2, $2, Margen 1.08 Punctuality Siempre a tiempo Casi siempre a tiempo Algunas veces a tiempo Margen FFP 1 vuelo gratis Acumulación de Kilómetros0.029 Sin programa Margen 0.27 Frequencies Más de 8 vuelos a 8 vuelos a 5 vuelos ó 2 vuelos Margen Comfort Mayor espacio entre asientos0.062 Mismo espacio entre asientos Margen 0.124

19 Results ( Attribute Values )

20 Results ( Perception Share )

21 Results ( Elasticity and Revenue )

22 Results ( Other Applications ) Pricing Structures Through market studies we know the basic customer behavior ( habit & Custom )for every segment so we can define the restriction by each segment. Frequent Flier Program To know the value and effectiveness of the communication again the others Over all we know our customer.

23 ¿ Questions ?


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