“Good pricing starts with an understanding of how customers’ perceptions of value affect the prices they are willing to pay.” (Kotler and Armstrong, 2013, p. 302) In the case of Virgin Galactic, the price is clearly set to cater to the millionaires and billionaires of the world. Sir Richard Branson understands the psychology of the market and understands the relationship between the price and the demand for the flight to space. It’s not about going on a trip, it’s about spending, at a premium of $250,000 no less, to be part of something bigger. Clearly this is an example of “elastic demand” because this is an expensive trip that most of us can live without. In addition, Branson understands the monopoly and trade-offs between the life-changing experience and the price of the “Human SpaceLift” (product characteristics) the millionaires and billionaires are willing to pay. (Kotler and Armstrong, 2013, p. 305)
On the other hand, I would not burn $250,000 to fly to space to experience:
“As SpaceShipTwo coasts up into space, our astronauts will leave their seats and experience true, unencumbered weightlessness. The pilots will maneuver the spaceship in order to give the astronauts the best possible view of Earth and the blackness of space from the vehicle’s twelve large cabin windows.”
Mr. Branson targets the rich and positioned his product to offer a “life changing experience,” a different brand with a large price tag.
What do you think of this article? How effective does he pricing strategy have to be when offering premium services for the wealthy to spend their money on it? Please use valid research.