AirMeds Rate Increase VS Consumer Demand

AirMed International is one of the state ‘s taking air ambulance services, offering alone air medical attention and transit on a world-wide footing. Headquartered in Birmingham, AL, AirMed owns and operates a fleet of fixed-wing aircraft located throughout bases in Hong Kong, Cleveland, OH, Rochester, MN, and Honolulu, HI. AirMed averages 2,000 air medical conveyances a twelvemonth and has flown over 15,000 entire missions and numbering. AirMed is trusted by the world-renowned Mayo Clinic, U.S. Department of Defense, and provides service to more than 1.2 million members in North America. AirMed has been recognized for their expertness in the air medical industry by being awarded the “ Air Ambulance of the Year ” in 2007 and 2008.

Hire a custom writer who has experience.
It's time for you to submit amazing papers!


order now

Situation Facing AirMed

The AirMed Traveler Membership ( AMT ) is a pre-paid rank plan offered by AirMed International to U.S. and Canadian occupants. This alone coverage brings patients to a infirmary of their pick, non to the “ nearest appropriate installation ” as is the instance of most travel insurance plans, wellness programs, and premium recognition card services. As an AMT member, if you are ill or injured while going, AirMed will convey you home to your household, your physicians, your local infirmary. AMT members can take short-run or one-year rank programs and the 2010 program types and monetary values are shown in Exhibit A. On January 1, 2010 AirMed increased its monetary values on the AMT rank offerings, which marked the first rate addition in over 4 A? old ages. The rate addition was implemented in an attempt to increase grosss for the company and to maintain up with industry tendencies. The old pricing from 2005-2009 is reflected in Exhibit B.

In order to account for what was taking topographic point in the market over the same 5 twelvemonth clip period I examined the rising prices rate over the clip period from 2005-2009 and found it averaged approximately 2.6 % a twelvemonth or 13 % cumulatively as shown in Exhibit J ( Inflationdata.com ) . I calculated in Exhibit C the single per centum additions for each program type every bit good as the norm for all programs which resulted in an 18 % addition in monetary value. I divided the entire addition by the 5 twelvemonth clip period to accurately compare the mean rising prices rate, and this resulted in a 3.6 % monetary value addition per twelvemonth for all program types sold. As a consequence, I found that AirMed ‘s monetary value addition on their two highest grossing program types, 1-year Solo and 1-year Family, did non to the full capture the overall rising prices costs over the 5 twelvemonth period. The 1-year Solo program merely increased by 6 % over the 5 twelvemonth span and the 1-year Family increased 10 % , both falling short of the mean 13 % rising prices. While it appeared AirMed may non hold accurately accounted for rising prices in its rate additions, the US had experienced a little period of deflation in 2009 and as a consequence consumers had cut back on disbursement and shown a higher sensitiveness to monetary value. Therefore, the timing of AirMed ‘s rate addition had to be sensitive to the market.

The monetary value addition that was implemented on January 1st merely affected the rates on new AMT registrations, and non renewal pricing and AirMed ‘s determination to merely increase pricing on the new AMT ranks sold was in an attempt to increase keeping and wages those members that were already enrolled in the plan. My focal point for this paper will be to turn to the effects the January rate addition had on new AMT registrations and how the rate addition affected the demand curve for AirMed ‘s rank gross revenues. I used the monetary value snap of the AMT rank programs and other computations to find my overall decisions. I have included both numerical informations and graphical charts to back up my paper.

Explanation of the Data Calculations

In order to find the consequence of the rate addition on AMT rank gross revenues I calculated the per centum addition in monetary value and those consequences can be found in Exhibit C. Furthermore I broke down the information into a per centum alteration for each program type offered and segmented/grouped program types that were similar in nature. I besides calculated norms for Multi-Year, Extended Stay, and Short-run programs in an effort to contrast the overall per centum alterations and single program alterations. Additionally, I broke the program types down into Solo and Family to compare the difference in the snap of clients willing to buy single coverage vs. household coverage. In order to derive a position for the AMT Solo and AMT Family markets as a whole I calculated the per centum alterations in monetary value as an norm for both and those consequences are reflected in Exhibit C. My computations in Exhibit C were performed by utilizing the expression for the per centum alteration in monetary value which states that: the monetary value from the current twelvemonth, Exhibit A, be subtracted from the old twelvemonth ‘s monetary value, Exhibit B, and so divided by the old twelvemonth ‘s monetary value. The per centum alterations in monetary values varied from 6 % on the 1-year Solo program to every bit much as 34 % on the 30-day Family program. The per centum alterations in programs sold were so calculated for the months of January, February, and March, and are detailed in Exhibits D, E, & A ; F. My consequences reflected how the monetary value alterations affected the monthly AMT rank gross revenues. This information was used in concurrence with the per centum alterations in monetary value that was calculated in Exhibit C to find the overall monetary value snap of the AMT rank plan.

Breakdown of January Data

The January information is reflected in Exhibit D and I calculated these Numberss by taking the AMT rank gross revenues informations from 2010, deducting that figure from the AMT rank gross revenues from 2009, and so spliting by the 2009 gross revenues figure. The consequence is the per centum alteration in AMT programs sold and it is shown in Column 4 of Exhibit D. In order to measure merely the relevant rank informations, the January per centum alteration computations for AMT rank programs sold excluded certain program types as their was non sufficient informations to accurately analyse. Based on the overall norms calculated for AMT Solo and Family plans I determined that January carried a negative per centum alteration in the figure of programs sold. I was non surprised by these consequences at first as I expected lower gross revenues Numberss as a consequence of the monetary value addition. While the overall per centum alterations were negative my consequences were skewed by certain program types and did non look to accurately reflect the “ existent ” alterations that took topographic point. The AMT 1-year Solo and 1-year Family programs had traditionally been the highest merchandising offerings for AirMed and the entire programs sold for each represented approximately 52 % ( solo ) and 71 % ( household ) of entire programs sold for the month of January. I Combined the AMT Solo and Family 1-year programs and they accounted for 61 % of the overall sum programs sold and carried a 0 % alteration in entire program gross revenues from 2009 to 2010. Given the assorted consequences I combined the % alteration in monetary value from Exhibit C, with the monetary value snap I calculated for each program type in Column 6 of Exhibit D and the consequences showed that Extended Stay Solo programs and 30-day Solo and Family programs had a negative per centum alteration while all other programs seemed to be unaffected by the AMT rank rate addition. Additionally I found that two programs benefited and resulted in an addition ( 14-day Solo and 14-day Family ) . These consequences could bespeak a displacement in purchaser demand as a consequence of the monetary value addition or thrown out all together as a consequence of the little sample size. I determined that given the sample size of the information at that place was non sufficient support for an premise, nevertheless this could be an country for AirMed to continuously supervise as a sustained increased in short-run programs sold may be a contemplation of a displacement in purchaser demand do to the higher monetary values. As a consequence of little samples sizes I determined that certain program types must be excluded from my rating in order to accurately measure the impact of monetary value addition. I eliminated “ outliers ” and focused on the higher grossing program types, the 1-year Solo and 1-year Family plans. My computations determined that there was in fact an inelastic demand for these two program types and I anticipated the inelastic demand would increase gross for AirMed in the month of January. My computations performed in Exhibit G solidified my theory and proved that the inelastic demand for AMT ranks in January correlated with higher gross. Furthermore, the mean monetary value paid for a 1-year Solo program increased from $ 237.19 in 2009 to $ 252.50 in 2010 which resulted in the entire gross for the 1-year Solo increasing by 6.5 % . This per centum addition was about indistinguishable to that of the per centum addition in monetary value on the 1-year Solo program, reenforcing the inelastic demand of purchasers. The 1-year Family program besides increased the mean monetary value paid per program from 2009 to 2010 and the entire gross for the program increased 5.7 % as shown in Exhibit G. While both AMT Solo and Family new registrations did non increase from a entire programs sold position AirMed was successful in geting more money from the same sum of programs and as a consequence proved that its AMT merchandise carried an inelastic demand from consumers. In decision the norms calculated in Exhibit G reflected that entire gross for the month of January increased 7 % , the mean monetary value paid per rank increased and the entire programs sold decreased by 6 % . By taking the little sample informations, outliers, the entire programs sold ( AMT 1-year Solo and 1-year Family ) were unaffected by the monetary value addition. My premise on this was that purchasers steered away from some of the program types as a consequence of the higher per centum additions in monetary value, but those programs that increased more proportionally with rising prices were unaffected.

Breakdown of February Data

I utilized the same methods for my computations for the month of February and found that the demand for AMT ranks remained inelastic on norm. February showed an addition of over 267 % in the figure of AMT 1-year Solo programs sold for the month and an extra 23 % addition in AMT 1-year Family plans sold. It should be noted that for the intent of my computations, a sum of 40 1-year Solo programs were sold at a monetary value of $ 225 as a consequence of a antecedently agreed upon contract and therefore were removed from my appraisal related to the demand and monetary value snap. After I removed those programs sold as outliers for the February 2010 study I found that the figure of 1-year Solo programs sold did non hold an addition or lessening and assumed the demand was inelastic. In order to solidify my theory I calculated the mean monetary value paid per program and found that the 1-year Solo monetary value increased from $ 239 in 2009 to $ 244.57 in 2010. While my computations reflected that the monetary value paid per program increased from 2009 to 2010 AirMed had in fact recovered less gross as a per centum of its retail monetary value. In 2009 AirMed received 95.6 % of its retail monetary value on the 1-year Solo, compared to 92.9 % in 2010. As a consequence, AirMed was able to capture the same sum of 1-year Solo programs sold, but it decreased the sum it was having as a per centum of its retail monetary values. The premise I made was that AirMed must hold discounted its programs to lure members to fall in therefore demoing a possible elastic demand from consumers for the 1-year Solo program at the new monetary value. AirMed increased its entire gross on the 1-year Solo program by approximately 3 % after taking the outlier group which solidified that the demand during the month of February for the 1-year Solo program was elastic since the addition in gross was non equal to or greater than the addition in monetary value ( 6 % ) .

In add-on to ciphering the demand for the 1-year Solo program I besides evaluated the 1-year Family program and found that the monetary value addition had the opposite consequence on demand. My computations indicated that the figure of 1-year Family programs sold in the month of February increased by 23 % and the mean monetary value paid per rank increased about 13 % . Both indexs that the demand for the 1-year Family program was non affected by the addition in monetary value of 10 % and hence proved to be inelastic. My concluding rating for the month of February took into history all programs sold including those outliers antecedently excluded and this computation resulted in an addition of entire programs sold of 21 % , entire gross generated of 42.07 % , and mean monetary value paid of 17.5 % . Based on my appraisal of the February information I compiled, I reached the decision that AirMed ‘s determination to increase its monetary values in 2010 did non hold a negative impact on its overall demand but could hold shifted the purchaser ‘s demand for certain program types. The 1-year Solo program consumers showed marks of holding a more elastic demand curve so the 1-year Family and overall consumer demand and this is an country AirMed should detect. If the figure of consumers demanding the 1-year Solo program is diminishing as a consequence of the monetary value addition, but the figure of purchasers demanding the 1-year Family plans is increasing it could intend that purchasers perceive more value in the Family program at a higher monetary value so the Solo program and hence AirMed should supervise this demand to maximise its grosss.

Breakdown of March Data

My computations for the month of March were similar to those of the old two months and the consequences are compiled in Exhibits F and I. My computations for March seem to back up my theory that AirMed ‘s determination to increase the rank monetary value was right. The March information I compiled showed that for the 2nd consecutive month entire programs sold increased every bit good as 1-year Family plans sold. As I did in the old two months I focused my computations and based my determinations on the 1-year Solo and 1-year Family plans disregarding many of the little informations samples on other program types as outliers. The consequences showed that the 1-year Solo plans sold increased by 13 % while the 1-year Family plans sold increased by 41 % severally. My computations in Exhibit I show that the mean monetary value paid per program for the 1-year Solo and 1-year Family programs increased every bit good. The addition for the 1-year Solo program was 8.72 % approximately 2 % higher than the monetary value addition itself and the addition for the 1-year Family program was 10.65 % a little spot higher than the 10 % monetary value addition. By uniting the per centum paid addition with the addition in entire programs sold I reached the decision that the snap for demand on the 1-year Solo and 1-year Family ranks during the month of March was inelastic. I besides calculated the overall gross revenues for the month of March and found that the entire figure of AMT programs sold increased by 37 % , the entire gross increased by 76.65 % , and the mean monetary value paid per rank increased by 27.58 % . All of these consequences indicate that the consumer demand for the AMT rank programs offered by AirMed increased as a consequence of the monetary value addition.

Decision

After measuring the consequences from the 3 month period ( Jan-Mar ) I came to the decision that the monetary value addition AirMed implemented for 2010 had a somewhat positive consequence on its overall demand curve, nevertheless it did negatively impact certain merchandise offerings. My computations in Exhibits D, E, and F show that while the per centum alteration in programs sold for the largest gross grossing programs ( AMT 1-year Solo and 1-year Family ) remained unaffected or positively affected from 2009-2010, other program types such as Extended Stay, Short-Term, and Multi-Year experienced reduced Numberss of programs sold. My decision is based on the per centum monetary value addition for these program types every bit compared to the per centum monetary value addition for the 1-year Solo and 1-Year Family plans. The 1-year Solo program was increased by 6 % , hardly higher than rising prices over the same clip period, whereas the per centum addition in monetary value for Multi-Year and Extended Stay Solo programs increased by 13 % and 25 % . As a consequence, the buyers of these programs most probably altered their purchasing behaviour and demanded a different program type or merely stopped buying. The same consequences were found in the AMT Family plans as the 1-year program monetary value increased 10 % while the Multi-Year and Drawn-out Stay increased 14 % and 21 % . Overall, AirMed saw its figure of programs sold addition for both the 1-year Solo and 1-year Family plans every bit good as its gross for these programs addition, taking me to believe that purchasers altered their demand for specific programs but on the whole were unaffected by the rate addition. My recommendation to AirMed would be to go on to supervise the gross revenues of each rank program and if they are looking to increase demand for specific program types they may be required to change monetary values in order to run into the equilibrium monetary value and determine the consumer demand. AirMed may besides desire to see if they are maximising their demand for the merchandise sing the monetary value addition did non negatively impact their overall gross revenues and as a consequence they could be losing out on possible gross from a higher AMT rank monetary value.

x

Hi!
I'm Heather

Would you like to get such a paper? How about receiving a customized one?

Check it out