Sage Journals: Discover world-class research

Abstract

Setting the correct price for hospitality products is a crucial management task that has a major influence on a firm's profitability. In general, there has been a lack of academic interest in the area of pricing in services. The restaurant industry typically establishes prices by marking up a variable cost percentage and by intuition, or by trial-and-error methods. This study illustrates how restaurant managers can use price-sensitivity measurement to assess their guests' price sensitivity. By means of a relatively simple survey, restaurant managers can gain insights about their menu pricing directly from their customers. This study uses data collected from a Hong Kong buffet restaurant, but the technique could be applied in virtually any restaurant setting. The results reveal price ranges that represent real value for dinner buffet patrons.

Keywords

restaurant profitability price-sensitivity measurement price value

Get full access to this article

View all access options for this article.

References

Abbey, J. (1983). Is discounting the answer to declining occupancies ? International Journal of Hospitality Management, 2(2), 77-82.

Avlonities, G. , & Indounas, K. (2006). Pricing practices of service organizations. Journal of Services Marketing, 20(5), 346-356.

Daly, J. (2002). Pricing for profitability: Activity-based pricing for competitive advantage. New York: John Wiley.

Drucker, P. (1993, October 21). The five deadly business sins. Wall Street Journal, p. A20.

Gabor, A. , & Granger, C.W.J. (1966). Prices as an indicator of quality: Report on an enquiry. Economica, 33(129), 43-70.

Hoffman, K.D. , Turley, L.W. , & Kelley, S.W. (2002). Pricing retail services. Journal of Business Research, 55(12), 1015-1023.

Kotler, P. , Bowen, J. , & Makens, J. (2003). Marketing for hospitality and tourism (3rd ed.). Upper Saddle River, NJ: Prentice Hall.

Kotler, P. , Bowen, J. , & Makens, J. (2006). Marketing for hospitality and tourism (4th ed.). Upper Saddle River, NJ: Prentice Hall.

Lewis, R. , & Shoemaker, S. (1997). Price-sensitivity measurement: A tool for the hospitality industry. Cornell Hotel and Restaurant Administration Quarterly, 38(2), 44-54.

10.

O'Connor, P. (2003). On-line pricing: An analysis of hotel-company practices. Cornell Hotel and Restaurant Administration Quarterly , 44(1), 88-96.

11.

Parsa, H.G. , & Njite, D. (2004). Psychobiology of price presentation: An experimental analysis of restaurant menus. Journal of Hospitality and Tourism Research, 28(3), 263-280.

12.

Shoemaker, S. , Lewis, R. , & Yesawich, P. (2006). Marketing leadership in hospitality and tourism (4th ed.). Upper Saddle River, NJ: Prentice Hall.

13.

Travers, K. (1983). PSM: A new technique for determining consumer sensitivity to pricing. Los Angeles: Plog Research.

14.

Upchurch, R.S. , Ellis, T. , & Seo, J. (2004). Applying the hierarchical cluster analysis procedure upon the process of yield management-A comparative study. Journal of Travel and Tourism Marketing, 16(4), 47-58.

15.

Zeithaml, V. , Bitner, M. , & Gremler, D. (2006). Services marketing integrating customer focus across the firm (4th ed.). New York: McGraw-Hill.

Price-Sensitivity Measurement: a Tool for Restaurant Menu Pricing

Abstract

Keywords

Get full access to this article

References