W8/W9 - Tourism/Price

definition of tourism

the temporary movement of people to destinations outside their normal places or work and residence, the activities undertaken during their stay in those destinations and the faculties created to cater to these needs.

for not more than one consecutive year for leisure, business, and other purposes

what are parts of the tourism system

geographic region, macro-environment, tourists, travel and tourism industry and its sectors

what is a domestic tourist

an individual who travels within their country of residence

what is an inbound tourist

a non-resident visitor who travels to and within a country of reference (destination country) like hopping around japan

what is an outbound tourist

a resident visitor who travels outside of his usual country of residence

what is international tourism

combo of inbound and outbound tourism

why do individuals travel?

push factors - from a tourist GENERATING region (departing tourists)

pull factors - from a tourist DESTINATION region (returning tourists)

what are push factors?

person-specific motives

• escape

• relaxation

• novelty

• knowledge seeking

• socialization

what are pull factors?

destination inherent factors/attributes

• attractions

• activities

• climate

• culture

• safety & security

• entertainment etc.

what are allocentric tourists?

venturers - not afraid of the unknown, they love exploring 

what are mid-centric tourists?

they love adventure but also like the comfort of home. travel arrangements may combine pre-booked and self-organized activities

what are psychocentric tourists?

dependables - enjoy familiarity, give preference to known brands, package tours, regular stays/repeat visits to resorts

what is tourism marketing?

the co-creation and exchange of value for producers and consumers through the design and delivery of tourism experiences. 

what is the tourist journey

pre-trip (dreaming planning and booking)

on-trip (experiencing)

post-trip (sharing)

price

The amount of money charged for a product or service, or the sum of the values consumers exchange for the benefits of having or using the product or service.

customer value-based pricing

Setting the price based on buyers’ perceptions of value, rather than on the seller’s cost.

what is a price floor

no profits below this price

what is a price ceiling

no demand above this price

what is the process of cost-based pricing 

design a good product → determine product costs → set price based on cost → convince buyers of product’s value 

what is value based pricing

assess customer needs and value perceptions → set target price to match customer perceived value → determine costs that can be incurred → design product to deliver desired value at target price

good-value pricing

Offering just the right combination of quality and good service that customers want at a fair price.

value-added pricing

Rather than cutting prices to match competitors’ prices, marketers adopting this strategy attach value-added features and services to differentiate their offerings, and this supports higher prices.

cost-based pricing

Setting prices based on the costs for producing, distributing and selling the product, plus a fair rate of return for the company’s effort and risk.

fixed costs (overhead)

Costs that do not vary with production or sales level

variable costs

Costs that vary directly with the level of production

total costs

The sum of the fixed costs and variable costs for any given level of production

cost-plus pricing (markup pricing)

Adding a standard markup to the cost of the product.

breakeven pricing (target-return pricing

Setting the price to break even on the costs of making and marketing a product, or to make the desired profit

competition-based pricing

Setting prices based on competitors’ strategies, costs, prices and market offerings  

target costing

Starts with an ideal selling price based on customer-value considerations and then targets costs that will ensure the price is met

what are the four types of markets presenting a different pricing challenge?

pure

monopolistic

oligopolistic

pure monopoly

pure competition

market consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper or financial securities. No single buyer or seller has much effect on the going market price

Sellers in these markets DO NOT spend much time on marketing strat

monopolistic competition

the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. A range of prices occurs because sellers can differentiate their offers to buyers.

Because there are many competitors in such markets, each firm is less affected by competitors’ pricing strategies than in oligopolistic markets.

oligopolistic competition

the market consists of a few sellers who are highly sensitive to each other’s pricing and marketing strategies. There are few sellers because it is difficult for new sellers to enter the market.

a pure monopoly

the market consists of one seller.

• government monopoly (as Australia Post was when it began service in the early 1800s),

• private regulated monopoly (a power company)

• private non-regulated monopoly (Argyle Mine for pink diamonds).

demand curve

A curve that shows the number of units the market will buy in a given time period at different prices

what is the normal price demand relationship

the higher the price, the lower the demand.

price elasticity

A measure of the sensitivity of demand to changes in price

what is creating/capturing value?

product, promotion, place = create marketplace value

price = captures value via products

what are the 5 c’s of pricing?

Company objectives

Competition

Costs

Customers

Channel Members

what is price competition

emphasising price and matching or beating competitors’ prices

to compete effectively = be a low cost seller 

what is non-price competition 

emphasizing factors other than price to distinguish a product from competing brands 

• features 

• quality 

• promo

• packaging 

what are factors that affect pricing decisions 

costs 

demand 

customer interpretations of price 

customer perceptions of the product 

organizational and marketing objectives 

types of pricing objectives 

what are external considerations affecting price decisions

the economy

• boom, recession, inflation, interest rates etc. 

resellers 

government 

societal considerations 

what are the steps for establishing prices

1. developing pricing objectives

2. assessment of target markets evaluation price

3. evaluation of competitors prices

4. selection of a basis for pricing

5. selecting of a pricing strat

6. determination of a specific price

what is the first step for establishing prices

development of pricing objectives

whats the second step for establishing prices

assessment of target market’s evaluation of price

whats the third step for establishing prices

evaluation of competitors prices

whats the fourth step for establishing prices

selection of a basis for pricing 

whats the fifth step for establishing prices

selection of a pricing strategy 

whats the sixth step for establishing prices

determination of a specific price

what is step 1 - developing pricing objectives?

describe what a company wants to achieve through pricing (SMART) 

what are examples of pricing objectives?

sales/cash flow/survival 

market share 

profit/ROI

competitive effect/status quo

customer satisfaction 

image enhancement/product quality

position  

what is step 2 - assessment of the target market’s evaluation 

the importance of price depends on the type of product, the type of TM and the purchase situation - price elasticity

what is step 3 - evaluation of competitors prices

in competitive situations, marketers must keep prices the same as or lower than competitors prices

what is price above called

HARVEST - strong brand/better quality

what is price to match called

HOLD - common in oligopolies

what is price below called

BUILD - lower quality product or new entrant or lower costs

what is step 4 - selection of a basis of pricing

cost base pricing

customer value based pricing 

competition based pricing 

what are the types of pricing strategies?

differential pricing

new product pricing

product line pricing

psychological pricing

promotional pricing

what is differential pricing

negotiated pricing

secondary market pricing

period discounting

random discounting

what is new product pricing

price skimming

penetration pricing

what is product line pricing 

captive pricing 

premium pricing 

bait pricing 

price lining (segmented prices)

what is psychological pricing strat

reference pricing

bundle pricing

multiple unit pricing

everyday low prices

odd-even pricing

customary pricing

prestige pricing

what is promotional pricing strat

price leaders

comparison discounting

what is differential pricing strat 

changing different prices to different buyers for the same quality and quantity of product 

negotiated pricing

establishing a final price through bargaining

secondary market pricing

setting one price for the primary target market and a different price for another market

price skimming 

charging the highest possible price that buyers who most desire the product will pay

penetration pricing

setting prices low to penetrate a market and gain a significant market share quickly

captive pricing

pricing products that must be sold with the main product

optional product pricing

pricing optional or accessory products sold with the main product

bundle pricing 

packaging together two or more complementary products and selling them for a single price 

price lining

setting prices across an entire product line

reference pricing

pricing a product at a moderate level and displaying it next to a more expensive model or brand

bundle pricing

packaging together two or more complementary products and selling them for a single price

multiple unit pricing

packaging together two or more identical products and selling them for a single price

everyday low prices

setting a low price for products on a consistent basis

odd-even pricing

ending the price with certain numbers to influence buyers’ perceptions of the price/product

customary pricing

pricing based on tradition or perceived expectations of customers

prestige pricing

setting prices at a high level to convey prestige or a quality image

what are price adjustment approaches

discount and allowance pricing

what is a discount

a straight reduction in price on purchase during a stated period of time or when purchasing larger quantities

• cash discount

• quantity discount

• functional discount

• seasonal discount

what is an allowance 

promotional monies paid by suppliers to retailers in return for an agreement to feature the supplier’s products in some way 

• trade-in allowances 

• promotional allowances 

discount and allowance pricing description

reducing prices to reward customers responses such as volume purchases, paying early, or promoting the product

segmented pricing

adjusting prices to allow for differences in customers, products, or locations 

psychological pricing

adjusting prices for psychological effect

promotional pricing

temporarily reduces pricing to increase short term sales

geographical pricing 

adjusting prices to account for the geographic location of customers 

dynamic pricing

adjusting prices continually to meet the characteristics and needs of individual customers and situations

international pricing

adjusting prices for international markets