Question

Topic: Student Questions

Pricing Strategies For Virgin Blue

Posted by Anonymous on 5/8/2004 at 3:05 AM ET 125 Points
Key objectives in relation to the pricing of the product
Desired positioning for the product
Competitive situation relating to the product
What pricing strategy? Optional, captive etc
Internal and external pricing factors

Would appreciate any help on this, thanks
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  • Posted by Carl Crawford on 5/8/2004 at 7:06 AM Member
    hi, I am also currently doing a project on the pricing of virgin blue as well, but it is in the Trans-Tasman market (between flights Australia and New Zealand).

    in the trans-tasman market virgin blue has called it self "pacific blue".

    the trans-tasman market is very competitive with lots of new players entering the market at the same time. Brands like virgin, united emirates, Air Malaysia are all entering the market to compete against Qantas, Air New Zealand, and freedom air

    virgin has set it self up as a budget air line but with class. they have the cheapest fares in the market such as the "Blue saver" which is set about $139 from Christ Church (New Zealand) to Sydney (Australia). But the next level up is the Flexi saver which is $399. so if you cant get a flight on the cheap seats then you are going to have to pay big time.

    Virgin is setting it self up as a strong competitor to Air New Zealand. they are emphasizing the fact that they have to most leg room, the youngest fleet (adv age 2 years), comfort and quality at an affordable price.

    here are some useful links:

    www.virginblue.com.au

    www.smh.com.au/articles/2003/08/04/1059849337987.html

    www.airnz.co.nz

    hope this helps.

    Carl Crawford
  • Posted by Chris Blackman on 5/9/2004 at 3:11 AM Accepted
    Lucy

    As a frequent flyer between Melbourne and Sydney, I would encourage you to look not just at the corporate spin emanating from Qantas, Virgin Blue and Jetstar, but also to look at how the marketing translates to real world experiences.

    E.g. VB is taking a low-price leader approach to pricing. However they are now realising they cannot meet all demand at peak times and have added $30 to the price of some sectors (Melb-Syd absolute peak, fully flexible, was $199 now $229)

    They also use every opportunity to use optional pricing to leverage their revenue on the base product. If you want even a drink of water on the plane, it costs. You want to use their lounge, $5. Like the extra legroom in an exit row? Another $30 please... I've never heard of anyone else charging extra for the exit rows, but Virgin Blue does! meanwhile QF is still offering free meals, snacks and drinks, including wine and beer on mealtime flights - all free! So Virgin is squeezing the lemon as hard as possible - I believe they sold more beer than any other CUB outlet last year! I am sure, btw, Jetstar will operate the same way.

    Understand, too, Virgin makes plenty of money. They set up with a blank sheet of paper and, in an environment where the unios were scared about job losses, designed all their labour agreements for the lowest possible cost. QF is still saddled with all the Industral Relations baggage of the past and is committed to very generous staff benefits which it needs Jetstar to get out of.

    Virgin started out with the Southwest philosophy (If you don't know what that means, read "Nuts" by Kevin & Jackie Freiberg - available direct for $20 at https://www.freibergs.com/products.php) which simply stated means they said they would allow people to fly who otherwise could not afford to. That's really a bit of a hoax because as always the really low, bus-competitive fares are teribbly hard to access. Point is, they're generaly, but not always, cheaper than QF.

    There's more to the product than just price, however, and the whole of the product bears analysis in any comprehensive comparison.

    Hope this helps. Feek free to contact me via my website per my profile here, if you need further help - free critique of your presentation, etc... the whole airline area is a pet subject of mine from a professional perspective.


    Good Luck

    Chris
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