Price change decisions can even be made
on a daily level, as is the case at American Airlines with their yield management systems.
P&G had to re-engineer their purchasing, engineering, manufacturing and
distribution functions for value pricing to succeed. Further, it required changes in product
development and the roles of both brand managers and the sales force had to be restructured. The
company had to change its incentives and compensation scheme to be in line with this new form
of pricing. The costs of communicating with, educating, and convincing customers were even
larger.
In April 1992, American Airlines launched "Value Pricing" -- a radical simplification of the complex pricing structure that had evolved over more than a decade following deregulation of the U.S. domestic airline industry. American expected that the new pricing structure would benefit consumers and restore profitability to both American and the industry as a whole. The critical issue raised is: Would American's bold initiative work?
issues encountered in exercising price leadership to switch industry practice from a complex structure of differential prices and promotions to a simplified, everyday-low-pricing structure.
American Airlines Marketing cases AMERICAN AIRLINES
1. Issues 2. American Airlines’ objectives 3. The airline industry 4. Market 5. Consumer needs 6. Brand image 7. Distribution system 8. Pricing 9. Marketing related strategies 10. Assumptions and risks
1- Issues The main issue of this case is the lack of profits of the airline industry, an industry that should be more than profitable due to the large amount of customers, the necessity of using airlines’ services and the high prices charged by most of these ...