Section B – TWO questions ONLY to be attempted
For 11 years, Marco was a senior salesman at AQT, a company specialising in IT certification courses. During that time, AQT became the most successful and dominant training provider in the market.
Marco has now left AQT and established his own training company, iTTrain, aimed at the same IT certification market as his former employers. He wishes to offer premium quality courses in a high quality environment with high quality teaching. He has selected a number of self-employed lecturers and he has agreed a daily lecturing fee of $450 per day with them. He has also selected the prestigious CityCentre training centre as his course venue. It has a number of training rooms which hold up to nine delegates. Each training room costs $250 per day to hire. There is also a $10 per day per delegate charge for lunch and other refreshments. Although not a lecturer, Marco is an IT expert and he has already produced the relevant documentation for the courses iTTrain will run. He sees this as a sunk cost and is not concerned about recovering it. However, printing costs mean that there is also a $20 cost for the course manual which is given to every course delegate.
Marco has scheduled 40 courses next year, as he is limited by the availability of lecturers. Each course will have a maximum of nine delegates (determined by the room size) and a minimum of three delegates. Each course is three days long.
iTTrain has been set up with $70,000 of Marco’s own money. He currently estimates that fixed annual costs will be $65,000 (which includes his own salary) and he would like the company to return a modest profit in its first year of operation as it establishes itself in the market.
Marco is currently considering the price he wishes to charge for his courses. AQT charges $900 per delegate for a three-day course, but he knows that it discounts this by up to 10% and a similar discount is also offered to training brokers or intermediaries who advertise AQT courses on their own websites. Some of these intermediaries have already been in touch with Marco to ask if he would be prepared to offer them similar discounts in return for iTTrain courses being advertised on their websites. There are also a number of cheaper training providers who offer the same courses for as little as $550 per delegate. However, these tend to focus on self-financing candidates for whom price is an issue. These courses are often given in poor quality training premises by poorly motivated lecturers. Marco is not really interested in this market. He wants to target the corporate business market, where quality is as important as price and the course fee is paid by the delegate’s employer. He is currently considering a price of $750 per delegate.
During his employment at AQT, Marco collected statistics about courses and delegates. Figure 1 shows the data he collected showing the attendance pattern over 1,000 courses.
Figure 1: Analysis of attendance at 1,000 AQT courses
Required:
(a) Suggest a pricing strategy for iTTrain, including an evaluation of the initial price of $750 per delegate suggested by Marco. Your strategy should include both financial and non-financial considerations. (16 marks)
(b) Physical evidence, people and process are three important elements of the marketing mix for services.
Analyse the contribution each of these three elements could make to the success of iTTrain’s entry into the IT certification market. (9 marks)