University:
Stanford University
Course:
ECON 1 | Principles of Economics
Academic year:

2023
Views:

366

Pages:

2
Author:

WSubuh

Analyzing Price Variances Pricing off-premise catered events involves the accurate estimation of actual costs to produce the event, and knowing the amounts to mark up these costs in "science" of pricing, and the amount of markup is often referred to as the "art" of pricing. Astute caterers not only accurately compute costs, they also know how much they can charge for their services. How much do off-premise caterers charge for their services? Amounts vary depending up such factors as the supply of caterers within a market area, and the demand for their services. A greater supply of caterers when demand is constant can result in lower prices. Of course, caterers who are in a market where there is little competition may charge more for their services. Supply and demand can be further identified by the levels of caterers within the market compared with the demand for various levels of service. For example, the few upscale caterers within markets where all other caterers are midscale or budget will have greater freedom in pricing events than those who have many competitors. Prices vary significantly from one area to another. In order to better understand these variances, the following summary of restaurant prices for major metropolitan areas will reveal major differences. Readers need to understand that restaurant and off-premise catering prices are not the same; however, the following illustration will show how selling prices for meals vary from city to city around the United States, and how prices have declined in many major markets over the past three years.' Restaurant Meal Prices: 1993 CITY AVE. PRICE AVE. OF MOST 20 AVE. OF 20 BEST VALUE EXPENSIVE New York $30.20 $63.59 $11.46 San Francisco 27.31 51.16 13.09 Miami 25.13 42.43 12.05 Cleveland 22.68 34.44 15.31 Chicago 20.97 44.97 10.64 Seattle 18.62 33.74 9.00 Although off-premise catering prices may vary significantly from restaurant prices, it is quite obvious that pricing varies significantly from city to city. Addi-tionally, most caterers report that catering prices are less in most rural areas than in nearby cities. Another interesting trend is that prices have actually decreased in a number of metropolitan areas because people are more budget conscious in the 1990s than they were in the 1980s. Caterers should carefully analyze clients and their needs. For example, a corporate client who, on a moment's notice, requires a very specialized service will not be very price sensitive, but a bride on a limited budget whose wedding is in two years has a year to shop. The bride has much less urgency than the corporate client, and most brides will shop for the best price. Many caterers effectively use pricing as a sales tool, since properly priced parties will create sales. These prices are fair both from the caterers' and clients' perspective. Effective pricing creates a win-win situation. Clients achieve their budget objectives, and caterers make satisfactory profits. Pricing policies should take the long-term view. A greedy off-premise caterer who overcharges a desperate client will more than likely never again caterer for this client, and this client might tell many others that the caterer charges too much. Fair prices, producing winners for caterers and clients alike, will produce long-term profits and satisfied clients.