Chapter 7 Product Pricing (Tourism and Hospitality Marketing)

1. Product Pricing

2. Presented By:
Md. Shaifullar Rabbi
Professional Experiences
Lecturer- Dept. of Tourism & Hospitality Management,
DIIT-NU
Industry Assessor at Bangladesh Technical Education
Board (Ticketing and Reservation- Tourism &
Hospitality Sector)
Former Coordinator & Lecturer- DBA, IBAIS University
Guest Lecturer – BTHM,IBAIS University
Resource Person & Trainer- Sheikh Hasina National
Institute of Youth Development
Resource Person & Trainer - ATAB Tourism Training
Institute
Resource person & Trainer- Bangladesh Hotel
Management Tourism Training Institute
Educational Qualifications
MBA & BBA-Major in Tourism & Hospitality
Management, University of Dhaka.
Certified NTVQF Level -4/Assessor Part
(Ticketing And Reservation)
Completed Diploma Course in Travel Agency
& Tour Operation Management
Certified NTVQF Level 2 Course entitled
Ticketing & Reservation
Certified NTVQF Level 1 Course
entitled Tour Guiding

3. Considerations Involved in Formulating the
Pricing Policy
The following considerations involve in formulating the
pricing policy:
(i) Competitive Situation
(ii) Goal of Profit and Sales
(iii) Long Range Welfare of the Firm
(iv) Flexibility
(v) Government Policy
(vi) Overall Goals of Business
(vii) Price Sensitivity

4. Competitive Situation
Pricing policy is to be set in
the light of competitive
situation in the market. We
have to know whether the
firm is facing perfect
competition or imperfect
competition. In perfect
competition, the producers
have no control over the
price. Pricing policy has

5. Goal of Profit and Sales
The businessmen use
the pricing device for
the purpose of
maximizing profits.
They should also
stimulate profitable
combination sales. In
any case, the sales
should bring more

6. Long Range Welfare of the Firm
Generally, businessmen
are reluctant to charge a
high price for the
product because this
might result in bringing
more producers into the
industry. In real life,
firms want to prevent
the entry of rivals.
Pricing should take care
of the long run welfare

7. Flexibility
Pricing policies should be
flexible enough to meet
changes in economic condi-
tions of various customer
industries. If a firm is selling
its product in a highly
competitive market, it will
have little scope for pricing
discretion. Prices should
also be flexible to take care

8. Government Policy
The government may
prevent the firms in
forming combinations to
set a high price. Often the
government prefers to
control the prices of
essential commodities
with a view to prevent the
exploitation of the
consumers. The entry of
the government into the

9. Overall Goals of Business
Pricing is not an end in itself but
a means to an end. The
fundamental guides to pricing,
therefore, are the firms overall
goals. The broadest of them is
survival. On a more specific
level, objectives relate to rate of
growth, market share,
maintenance of control and
finally profit. The various
objectives may not always be
compatible. A pricing policy
should never be established
without consideration as to its
impact on the other policies

10. Price Sensitivity
The various factors which may
generate insensitivity to price
changes are variability in
consumer behavior, variation in
the effectiveness of marketing
effort, nature of the product.
Importance of service after
sales, etc. Businessmen often
tend to exaggerate the
importance of price sensitivity
and ignore many identifiable
factors which tend to minimize

11. Reutilization of Pricing
A firm may have to take
many pricing decisions. If
the data on demand and
cost are highly conjectural,
the firm has to rely on some
mechanical formula. If a
firm is selling its product in
a highly competitive
market, it will have little
scope for price discretion.
This will have the way for

12. Objectives of Pricing Policy
While setting the price, the firm may aim at the following objectives:
(i) Price-Profit Satisfaction: The firms are interested in keeping their prices
stable within certain period of time irrespective of changes in demand and costs,
so that they may get the expected profit.
(ii) Sales Maximization and Growth: A firm has to set a price which assures
maximum sales of the product. Firms set a price which would enhance the sale
of the entire product line. It is only then, it can achieve growth.
(iii) Making Money: Some firms want to use their special position in the industry
by selling product at a premium and make quick profit as much as possible.
(iv) Preventing Competition: Unrestricted competition and lack of planning can
result in wasteful duplication of resources. The price system in a competitive
economy might not reflect societies real needs. By adopting a suitable price
policy the firm can restrict the entry of rivals.

13. (v) Market Share: The firm wants to secure a large share in the market by following a suitable
price policy. It wants to acquire a dominating leadership position in the market. Many
managers believe that revenue maximization will lead to long run profit maximization and
market share growth.
(vi) Survival: In these days of severe competition and business uncertainties, the firm must set
a price which would safeguard the welfare of the firm. A firm is always in its survival stage. For
the sake of its continued existence, it must tolerate all kinds of obstacles and challenges from
the rivals.
(vii) Market Penetration: Some companies want to maximize unit sales. They believe that a
higher sales volume will lead to lower unit costs and higher long run profit. They set the lowest
price, assuming the market is price sensitive. This is called market penetration pricing.
(viii) Marketing Skimming: Many companies favor setting high prices to ‘skim’ the market.
DuPont is a prime practitioner of market skimming pricing. With each innovation, it estimates
the highest price it can charge given the comparative benefits of its new product versus the
available substitutes.
(ix) Early Cash Recovery: Some firms set a price which will create a mad rush for the product
and recover cash early. They may also set a low price as a caution against uncertainty of the
future.

14. Factors involved in pricing Policy
(i) Cost Data
(ii) Demand Factor
(iii) Consumer Psychology
(iv) Competition
(v) Profit
(vi) Government Policy

16. Factors to consider when pricing products
or services
Costs: First and foremost you need to be financially informed. Before
you set your pricing, work out the costs involved with running your
business.
Customers: Know what your customers want from your products and
services. Are they driven by the cheapest price or by the value they
receive? What part does price play in their purchase decision?
Positioning: Once you understand your customer, you need to look at
your positioning. Where do you want to be in the marketplace?
Competitors: This is one of the key times you can give yourself
permission to do a little competitor snooping. What are they charging
for different products and services?

17. Factors affecting pricing policy
❑Internal factors
i) Marketing objectives: the marketing
objective of the product must be kept in
mind before setting the price of the
product, the product is for high class,
middle class or lower class.
ii) Marketing mix: one of the key
elements of marketing mix is price. Other
elements of marketing mix also affect the
pricing decision. So the marketer must
keep in mind the marketing mix while
setting the price.
iii) Cost: A company must keep in mind
both fixed as well as variable cost while
setting the price.
iv) Organizational set up: price of the
product is decided by organizational set
❑ External factors
i) Market and demand: cost of the product is the lower
limit of the price. While the market and demand set the
upper limit of the product. So the marketer must keep in
mind the relationship between cost price and market &
demand of the product.
ii) Competition: competition affects the pricing decision of
the product. The marketer must have knowledge about the
activities of the competitor. For this sometime the
companies go for price leadership, while other goes for low
pricing decision to wipe off the competition from the
market.
iii) Other environmental factors: the other environmental
factors also affect the pricing decisions like:
 a) Economic conditions of the country like inflation,
deflation, boom, recession etc. affect the pricing policy.
 b) Consumer thinking about the product.
 c) Distribution channel also affects the pricing policy.
 d) Government policies also have an effect on the price

18. Pricing Strategy
A pricing strategy is a model or
method used to establish the best
price for a product or service. It
helps you choose prices to
maximize profits and shareholder
value while considering consumer
and market demand. If only pricing
was a simple as its definition.
However, there’s a lot that goes into
the process. Pricing strategies take
into account many of your business
factors, like revenue goals,
marketing objectives, target
audience, brand positioning, and
product attributes. They’re also
influenced by external factors like

19. Types of Pricing Strategies
 Competition-Based
Pricing
 Cost-Plus Pricing
 Dynamic Pricing
 Freemium Pricing
 High-Low Pricing
 Hourly Pricing
 Skimming Pricing
 Penetration Pricing
 Premium Pricing
 Project-Based Pricing
 Value-Based Pricing

20. Competition-Based Pricing Strategy
Competition-based
pricing is also known
as competitive pricing
or competitor-based
pricing. This pricing
strategy focuses on
the existing market
rate (or going rate) for
a company’s product
or service; it doesn’t
take into account the
cost of their product
or consumer demand.

21. Cost-Plus Pricing Strategy
A cost-plus pricing
strategy focuses solely
on the cost of
producing your product
or service. It’s also
known as markup
pricing since businesses
who use this strategy
“mark up” their

22. Dynamic Pricing Strategy
Dynamic pricing is also
known as surge pricing,
demand pricing, or time-
based pricing. It’s a flexible
pricing strategy where
prices fluctuate based on
market and customer
demand. Hotels, airlines,
event venues, and utility
companies use dynamic
pricing by applying

23. Freemium Pricing Strategy
A combination of the
words “free” and
“premium,” freemium
pricing is when
companies offer a basic
version of their product
hoping that users will
eventually pay to
upgrade or access more
features. Unlike cost-
plus, freemium is a
pricing strategy
commonly used by

24. High-Low Pricing Strategy
A high-low pricing
strategy is when a
company initially sells
a product at a high
price but lowers that
price when the
product drops in
novelty or relevance.
Discounts, clearance
sections, and year-
end sales are
examples of high-low

25. Hourly Pricing Strategy
Hourly pricing, also known
as rate-based pricing, is
commonly used by
consultants, freelancers,
contractors, and other
individuals or laborers who
provide business services.
Hourly pricing is essentially
trading time for money.
Some clients are hesitant to
honor this pricing strategy

26. Skimming Pricing Strategy
A skimming pricing
strategy is when
companies charge
the highest possible
price for a new
product and then
lower the price over
time as the product
becomes less and
less popular.
Skimming is different
than high-low pricing
in that prices are

27. Penetration Pricing Strategy
Contrasted with
skimming pricing,
a penetration pricing
strategy is when
companies enter the
market with an
extremely low price,
effectively drawing
attention (and revenue)
away from higher-
priced competitors.
Penetration pricing isn’t

28. Premium Pricing Strategy
Also known as premium
pricing and luxury pricing,
a prestige pricing strategy is
when companies price their
products high to present
the image that their
products are high-value,
luxury, or premium.
Prestige pricing focuses on
the perceived value of a
product rather than the
actual value or production

29. Project-Based Pricing Strategy
A project-based pricing
strategy is the opposite
of hourly pricing — this
approach charges a flat
fee per project instead of
a direct exchange of
money for time. It is also
used by consultants,
freelancers, contractors,
and other individuals or

30. Value-Based Pricing Strategy
A value-based pricing
strategy is when
companies price their
products or services
based on what the
customer is willing to
pay. Even if
they can charge more
for a product, they
decide to set their

31. Strategies for Successful Tourism and Hospitality
Marketing Plan
Companies in the hospitality industry use various methods to develop and maintain an
effective marketing plan. The following are some of the general strategies that marketers
use for brand success.
Research: Customers choose hotels and other hospitality services for a variety of reasons.
From location to facilities and perks, companies have to be sure that they’re providing
what buyers are looking for.
Awareness: If potential customers don’t know about a service, they can’t purchase it.
That’s where brand awareness comes in. Marketers make sure information on hotels,
resorts and restaurants is easy to find and up-to-date.
Promotion: Another smart strategy for attracting customers is to run promotions during
certain times of the year, usually when business is slower.
Relationships: To ensure high levels of repeat business, good customer relationships are
vital. Not only do repeat customers usually promote a service through word-of-mouth and
social media, but they also create a stable revenue base.

32. Purposes of a Marketing Plan
A marketing plan is an operational document that outlines an advertising strategy that an
organization will implement to generate leads and reach its target market. Metrics that
measure the results of marketing efforts and their reporting timelines.
Target Markets: A marketing plan helps you analyze which markets are accessible to your
company and define target markets. Accessible markets are made up of people your company
can reach with its sales efforts. Geographic, social, community and cultural factors limit
accessible markets.
Segmentation: Segmenting your market divides your target market into groups of potential
customers with similar needs and characteristics. The purpose of segmentation is to
customize your sales approach to match the characteristics of each market segment.
Promotion: Your marketing plan makes sure you get good value for the money you spend on
promoting your products. The purpose of this part of the strategy is to guide you in using
media that is most likely to be effective for each market segment and product.
Channel: Once your marketing plan has guided you to identify your potential customers and
inform them about your products through targeted promotions, it helps you decide how to

34. Steps to developing a marketing plan
Define Your Business Goals: A sound marketing strategy aligned with your
highest-level business goals and objectives helps you create awareness for your
company and its products and services, drive website traffic and leads, and
generate new sales opportunities that meet your company’s target audience
profile.
Conduct a Marketing SWOT and Set Goals & Budget: Ultimately, you want
marketing that provides a consistent flow of high-quality leads to help fuel new
sales opportunities and drive growth..
Define Your Target Person: You probably know the profile of your most valuable
prospects and the sales process your company uses to convert them from leads
to opportunities to customers.
Create Your Execution Plan: Now that you’ve created your marketing goals and
have a budget, you are ready to develop your activity plan, also known as a
marketing communications plan.