Universal Studio Revenue Management Term Paper

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pricing strategies that Universal Studio can adopt in order to maximize its revenues. First of all, its pricing strategies need to be judged in comparison with its main competitors on the market, Disney. One can argue that the two big studios compete for virtually the same potential consumers and on a market that is, more or less, an oligopoly. As a consequence, the first strategy that can be mentioned is that of the price leadership. Universal has been in a competition with Disney about which entity would have the highest entry fee. Both started at $82, moved to $85 and, subsequently, Disney increased to $88 and Universal to $89. Disney immediately adjusted the price to $89 as well.

The idea of price leadership is that this maximizes your revenue without taking away from your customers. If the two prices (Universal vs. Disney) are similar, the price sensitivity is low, and, as a consequence, it is not likely that consumers will migrate from Universal to Disney. As such, it is important for the company to have the highest fee, because it will increase revenues, with consumer numbers stable.

However, this leads to a second strategy that needs to be considered: psychological pricing. It is arguable that $100 represents an important boundary for Universal consumers, because it would mark going into the three digit territory. Consumers may become more aware of how high prices actually are and may react accordingly by lowering the number of visits they make. Universal prices are also always kept in a format that usually includes a 9 ($89).

Two more pricing strategies that Universal employs need to be discussed as well. The first is premium pricing.

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Pricing the entry to almost $100 is, by any means, a high price. If one also considers that the prices for things inside are significantly high as well, the overall conclusion is that this is a premium package for the family. The rationale behind this type of premium strategy is multifold.

First, families are likely to pay this money, because of several incentives: the children wanting to live the experience, the parents having to come along with them and not wanting to have just part of the family going in etc. One needs thus to consider that, with premium pricing, the revenues are maximized, with everybody going into the Universal park.

Second, this is usually a vacation activity and people are more willing to pay more money for different activities when they are on vacation. It makes sense to have premium pricing for a seasonal activity such as the one that Universal has.

Universal's pricing strategy is, however, more complex than this and includes bundling and a highly customized pricing strategy. Starting with the latter, high levels of customization translate into giving the consumer a choice of when and how he wants to pay his visit. Depending on his choices of when and how, a certain pricing level that is more advantageous is fixed. A good example in this sense is the company's strategy to offer better prices for several days passes, allowing the client to go into Universal on different days. If the price for one day is $89, the price for four days is $135, which is not so much higher. Someone will be likely to….....

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