PRICING IN

TOURISM
Group 4
PRICE
Price is the amount that a
customer pays for the product;
the amount of money
exchanged for something of
value.
Key Concepts Relevant to Pricing
1. Sales - total amount that a company gets based on
quantity sold multiplied with selling price.

2. Revenue - total income/ profit that the company

keeps after all the expenses have been paid for.
Simply put: sales minus expense equals revenue.

3. Fixed Costs - costs incurred due to the operations

of the business and do not fluctuate with volume of
sales.
 Key Concepts Relevant to Pricing
4. Profit Margins - level of income that is desired by the company.
This usually comes out in percentage form as the amount of mark-up
placed on top of the fixed and variable cost of a product.

5. Variable Costs - costs that vary based on volume or quantity.

Bigger quantities of the same order will cost less than smaller
quantities of the same specifications. This concept is commonly
known as economies of scale.

6. Break-even Point - the point wherein total cost is equal total

revenue. A company incurs a loss if costs exceeds revenue and
generates an income when revenue exceeds costs.
 Factors to Consider When
Setting Price
The setting of prices should incorporate a

01.
calculation of how much it costs the
COST organization to produce the product or the
service. Both variable and fixed costs
should be included in the price.

Companies get into business for survival,

Organizational and
02 .
profit maximization, high rate of return of
investment, brand equity growth and an
Marketing Objectives
adequate share of the market.
 Price is affected by the

03.
Other Marketing Mix
interplay of the other variables
Variables
in the marketing mix.

Buyers have different perceptions of product

04.
quality and value based on branding and image.
Buyer Perceptions of
Price affects buyer perceptions. The higher the
Value and Price. price, the higher the buyer's expectations of
quality are.

Knowing what competition offers is an

05.
important factors in the success of a business.
Competition In highly price sensitive markets, companies try
to win customers by selling a lower price than
that of customers.
 Some government regulations and taxes can
Government

06.
either cause a company to maintain its low
Regulations and prices or increase its prices. There may be a
government regulation or ordinance that
Taxes prohibits a company from increasing its prices.

Tourism caters to a highly segmented

07.
marketplace. Pricing needs to address
Nature of the
the differences in the nature of such
Market and Demand markets as well as the differences in the
demand of each market segment.

Different markets have a different

Pricing in
08. Different Markets
levels of price sensitivity. Hence, a
one price fits all markets would
not be recommended.
 Price increases or decreases
09. Price Elasticity of
Demand
normally have an effect on the
level of sales of the product.

Other environmental factors that may be

beyond the company’s control can affect

10.
Other Environmental
pricing. These factors may include but
Factors not limited to political instability,
calamities, environmental issues, etc.
 General
Pricing
Approaches
 Cost-based Pricing
Is an approach that
aims to cover costs and
make a profit
 Break-even Analysis and
Target Profit Pricing
This kind of pricing
approach is when price is
determined using break-
even price and projecting a
target profit.
 Buyer-based Pricing
(Value-based)
Some companies base their
prices on the product's value
as perceived by the
consumers.
 Competition-based pricing
This approach looks at what
price competitors are
putting on their products
and services.
 Pricing
Strategies
Pricing strategies are ways by which tourism busineses offer products and
services at the "right" price. Some considerations in coming up with the
right price include the stage in the product life cycle, market demand,
competition, and company objectives.
1. Prestige Pricing
is used when the product or service is
positioned to be luxurious and elegant.

2. Market Skimming Pricing

is when the market is price insensitive.

3. Market Penetration Pricing

is used when setting a low initial price to penetrate the
market quickly and to attract many buyers for a large
market share.
4. Product Bundling Pricing
is a strategy used to attract buyers to purchase because of the reduced
rate of the bundle compared to the total cost of the items if purchased
individually

5. Volume Discounts
are rates given to frequent or high volume users to
attact them to purchase the products.

6. Discounts Based on Time of Purchase

This strategy addresses the seasonality aspect of the
tourism product.
7. Discriminatory Pricing
as the segmentation of the market and pricing differences based on
price elasticity characteristics of the segments.

8. Psychological Pricing
Psychological aspects like prestige references prices,
round figures, and ignoring end figures are used in pricing

9. Promotional Pricing
- offers discounts and shortterm incentives especially
during the introductory stage of the product or during
special activities such as anniversaries or festivals.
 Thank
you very
much!