Tourism Marketing - Tourism: Principles, Practices, Philosophies - page 425

competition and made it a necessary for the marketing manager to deliver value. The Internet has
made pricing strategy one of the most vulnerable parts of the marketing mix.
2. Product quality. The quality of the product really determines the price-value relationship. It is

common sense that a product that offers greater utility and fills more consumer needs than a
competitive product can command a higher price.
3. Product distinctiveness. A staple or standard product with no distinctive features offers little or

no opportunity for price control. However, a novel and different product may be able to
command higher prices. The Hyatt Corporation, for example, features lobby atriums; this
attractive novelty combined with excellent service and facilities makes it possible for the Hyatt
Hotels to command higher prices.
4. Extent of the competition. A product that is comparable to competitors ' products must be

priced with the competitors ' prices in mind. The product ' s price to some extent determines its

position in the market.
5. Method of distribution.

The price of the product must include adequate margins for tour
operators, travel agents, or the company ' s own sales force.

6. Character of the market. It is necessary to consider the type and number of possible consumers.

If there is a small number of consumers, then the price must be high enough to compensate for a
limited market. However, one must also consider the ability of consumers to buy and their buying
habits.
7. Cost of the product and service. It should be obvious that price must exceed cost over the long

run or else the business will not survive. Both cost and market conditions should serve as guides
to pricing.
8. Cost of distribution. Distribution costs must also be included in the pricing equation.

Unfortunately, in many cases they are much more dif cult to estimate than other costs.
9. Margin of pro t desired.

The pro t margin built into the price of the product must be more than
returns realized on more conventional investments in order to compensate for the risk involved in
the enterprise.
10. Seasonality. Most tourism products are affected by seasonality because of school-year

patterns and vacation habits; consequently, the seasonal aspects must be considered in
developing prices.
11. Special promotional prices. Many times it is good strategy to offer introductory prices and

special one-time price offers to acquaint consumers with your product. However, these must be
carefully planned so that they fill the proper intent and do not become a regular discount price. In
today

s tourismmarket we are seeing a number of flash sales that offer special prices that must be
booked instantly or for short periods of time such as 2 hours, 6 hours, and 12 hours. The Internet
and e-mail marketing are ideally suited to flash sales.

'

Price Skimming

When a new product or service is introduced, two pricing philosophies prevail: price skimming

and . A price-skimming strategy sets the price as high as possible. No attempt is

made to appeal to the entire market. The price is set to appeal only to the top of the market;
consequently, this approach is frequently called skimming the cream. The strategy is to sell the
product to as many consumers as possible at this price level, then, as either buyer resistance or
direct competition develops, the seller will lower prices step by step. This approach typically results in
higher pro ts and more rapid repayment of development and promotion costs. It also tends to invite
competition. Skimming is appropriate when the product or service has the following characteristics:
(1) price inelasticity, (2) no close substitutes, (3) high promotion elasticity, and (4) distinct
market segments based on price. When space tourism is launched,

penetration pricing

it will use a price skimming

approach.