Pricing Analysis

1. Cameron Poulter & Jack Quainton Pricing Analysis

2. Agenda • Pricing Strategies • With definitions and recommendations • Explanation of how our insurance work • Example of research • Public Liability • Employee Liability • Property Insurance • Cancellation Insurance • Re-insurance • How we gained our figures • Graphs and figures • Summary

3. The Pricing Strategies • Penetration Pricing • Skimming Pricing • Competition Pricing • Product Line Pricing • Bundle Pricing • Psychological Pricing • Premium Pricing • Optional Pricing • Cost Based Pricing • Cost Plus Pricing

4. Penetration Pricing • Here the organisation sets a low price to increase sales and market share. Once market share has been captured the firm may well then increase their price.

5. Skimming Pricing • The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.

6. Competition Pricing • Setting a price in comparison with competitors. Really a firm has three options and these are to price lower, price the same or price higher

7. Product Line Pricing • Pricing different products within the same product range at different price points.

8. Bundle Pricing • The organisation bundles a group of products at a reduced price. Common methods are buy one and get one free promotions or BOGOF's as they are now known. Within the UK some firms are now moving into the realms of buy one get two free can we call this BOGTF i wonder?

9. Psychological Pricing • The seller here will consider the psychology of price and the positioning of price within the market place

10. Premium Pricing • The price set is high to reflect the exclusiveness of the product.

11. Optional Pricing • The organisation sells optional extras along with the product to maximise its turnover.

12. Cost Based Pricing • The firms takes into account the cost of production and distribution, they then decide on a mark up which they would like for profit to come to their final pricing decision.

13. Cost Plus Pricing • Here the firm add a percentage to costs as profit margin to come to their final pricing decisions.

14. Pricing Strategies – Recommendations • Our main recommendation is Penetration Pricing. • Secondary recommendations are Psychological and Competition Pricing. • Elastic?

15. The Way Our Pricing Will Work • We will set minimum and maximum limits for each item. • The customer decides how much they want to insure each item for. • We then calculate the total cost based on the amount of excess they want each item insured for and how likely the item is to need covering. • We will set a premiumon each item, based on these parameters.

16. Example of Research • Insurance companies we have researched: • Hayward Aviation • Events Insurance Services • Shannon and Luchs • Aon • Lloyds • JLT Group • Global Aero

17. The Products • Public Liability • Employees Liability • Property Liability • Cancellation • Re-insurance

18. Pricing – Public Liability • Mandatory insurance • Customers of the air show: • Suggested cover rate per person is £30,000 • Maximum cover rate per person is £50,000 • This can be negotiated dependent on size of the air-show • Businesses operating: • Generally we will not insure the businesses, although we will negotiate on price as stipulated in the Tailor Made package dependent on factors such as what the business does and how big the plot is.

19. Pricing – Public Liability cont. These figures are from Events Insurance Services PLC. We have used this to estimate prices, taking in to account the higher risk of our event then many others.

20. Pricing - Employee’s Liability • Mandatory insurance • The amount employees are insured for is often very similar to the amount a customer is covered by. • Suggested cover rate per employee is £30,000 • Maximum cover rate per employee is £50,000 • This includes pilots, although they may well have own insurance policy

21. Pricing – Property Insurance • This includes both premises and property. • Planes – • £500,000 is the minimum level a plane can be insured for (take off weight of less than 500kg and does not perform aerobatics). • £1,500,000 is the minimum level a plane can be insured for (that performs acrobatics displays at over 250km per hour). • £3,000,000 is the minimum level a plane can be insured for (that has jet engines and performs acrobatics at over 250km per hour/that has a take off weight of 6 metric tonnes or more). • EU Regulation 785/2004/EC and a European Council regulation of April 2004

22. Pricing – Property Insurance cont. • Premises Insurance • Competitors Pricing • Shannon & Luchs set a maximum of $25,000,000 for the main premises an Air Show takes place at. • Risk calculation for airplanes: • Prepared by AEA Technology When: r = amount of crashes, T = time period, a = probability, l = land covered.

23. Pricing – Property Insurance cont. • Our minimum limit for each plane is based on the EU guidelines previously mentioned. • Our maximum limit for each plane is an umbrella price of £20,000,000. (Spitfire’s are valued at between £1,000,000 - £3,000,000, Eurofighters are valued at around £70,000,000). • For the premised, we will not set a minimum, but a maximum of £15,000,000 (based on Shannon & Luchs).

24. Pricing – Cancellation Insurance • Cancellation and abandonment cover will help protect the financial investment you have made in the event in two main areas: • If a problem arises and you incur additional expenses to keep your event running – for example if you need to source an alternative venue at short notice • If you’re forced to abandon the event half-way through, our policy can refund an appropriate proportion of your expenses. • However, we should see weather as an uncontrollable factor and therefore we would not cover cancellation due to extreme weather.

25. Costs?- Reinsurance • Sharing the risk by insurance companies; part or all of the insurer's risk is assumed by other companies in return for part of the premium paid by the insured; "reinsurance enables a client to get coverage that would be too great for any one company to assume"

26. Costs? - Reinsurance contd. • Insurance companies often purchase reinsurance to protect themselves against the risk of a loss above a certain threshold; the cost of reinsurance (reinsurance premiums) is deducted from gross premiums written to arrive at net premiums written. Net premiums written is the sum of all types of insurance premiums which a company may collect throughout the whole duration of existing insurance policies minus the costs like agent`s commissions or payments made for reinsurance. • The net premium written would be the sum of all the insurance premiums collect in one insurance policy (each event). Minus costs of agents and reinsurance.

27. How We Gain Our Figures • http://www.tricoraviation.com/pdf/airmeetliabilityapp.pdf

28. Graphs and Figures… There are 110 airshows scheduled for the UK in 2014. In 2013, 10 serious crashes occurred at air shows worldwide, 2 of which happened in the UK.

29. Summary • Based on our research and findings it is difficult to state/estimate exact prices for each product. This is due to the fact that our quoted prices are dependant on many different varying factors as well as specific consumer needs, as each air show is different. • Although we have provided an outline of our pricing methods and how we would calculate each price, it is impossible to show this without a real scenario to implement the strategy on.

30. Thanks… • Any Questions?