[Music] [Music] [Music] hello students i'm dr sandeep valya today we are going to discuss about the various components of pricing strategies for tourism products and services after the completion of this module we shall be able to understand about the concept of pricing strategies we shall also be able to understand about the terms and process of price fixation this module will also emphasize on the pricing strategies related to tourism products and services so now let us discuss about these all things one by one tourism protect pricing is the monetary value of tourism services and facilities that help in fixing of this value right is crucial for the successful running of a business firm in any of the market pricing of tourism products generally depends on the factors such as cost demand supply and the environment these factors influence the prices of tourism products and are analyzed with the help of proper pricing procedures and methods once the level of pricing is set strategies of pricing are being utilized to respond to the environment which is changing continuously the seasonality of tourism product and services makes discount prices a very common practice throughout the globe tourism being a service is sold to the customers or the consumers on very reasonable prices experience of tourists is a product that is intangible in nature and hence cannot be stored the pricing of tourism products must be designed and highlighted in such a way that it satisfies the needs and wants of the tourists as a customer if the pricing of a tourism product is reasonably fixed the tourists find it more authentic and satisfactory while deciding the prices of tourism products and services the following key factors are required to be taken into consideration the first one is operating cost these involve both fixed and varied cost the fixed cost usually remains same regardless of the sales involving building insurance and equipment costs while varied costs involve cost of veggies gas food raw material electricity other materials machinery bank fees mud getting research expenses and so on the second one is the profit margins it is decided by comparing the offers of the market which are set by the competitors and by the own offers profit margins are set keeping in view of competitive advantages of the market the third one is the commission of intermediaries commissions are incurred while working with the intermediaries and such commissions include the fees paid to the intermediaries to sell and distribute the tourism product let us now discuss about the concept of pricing strategies students sitting and deciding the prices for a tourism product or a service is a mixture of strong marketing strategies and financial analysis to the products and services are really similar often because to locations and also because of people and the components associated with them to make up the quality tourism experience this can be especially diverse and product pricing strategies can evolve as a tourism business which develops its brand and the market share even the star rating given to a product of accommodation or a hotel room you know it only provides general information to the tourist that what the price will be and there are no set criterias about this also the tools of product rising may be made up of the following components and these components includes the first one is rack rates every tourism business should have a rack rate and is considered as your full rate before any kind of a discount is applied and provided to the customers for around a peak season for activity and attraction tourist operators operates their full rate and is more likely to be changed all the time without any day and today discounting however accommodation operators they particularly have those in the middle of the market will be changing prices almost every day almost daily for around the month or the two months i had to fill the gaps the next is the seasonal pricing using a mixture of rising throughout the year to cover low high and shoulder seasons is a standard way of tourism business to cater for differing levels of demand because of the time and the season of the year the third one is the last minute pricing a common method for accommodation suppliers to fill those last minute gaps in inventory is always available the last minute pricing is generally the discounts given on tourism products and services and prices on daily basis in accordance with the forward bookings and promotion on the last minute booking websites let us now discuss about the pricing strategies for tourism products and services dear students as we know that a number of strategies are involved in pricing tourism products and services which are discussed as follows the first one is the discount pricing [Music] in tourism discount pricing process is the temporary reduction of prices just to encourage and enhance the sales of a business firm this type of pricing and this style of product pricing is utilized to provide positive impetus and boost to the sales it is a short-term process to encourage and motivate tourists to take benefits of the product and services for which the prices are being reduced and such a form of tourism product pricing is not to be utilized over a longer period of time as it may lead tourists to perceive that the reduced rates or the reduced prices and attraction of other lower prices may be lost discounts on tourism products and services can be offered by a business firm in a number of ways such as we may talk seasonal discounts quality discounts price discounts time discounts cash back ends and other redeem coupon options like this let us discuss about package pricing being a most common form of pricing in tourism package pricing is also characterized as bundle pricing where a product is being assembled and sold as a package tour [Music] let us quote an example for example some of the components of a tour package are food transportation accommodation and destination sightseeing which are integrated and combined to make a package tour and its overall price is coated and fixed in accordance to that such kind of package cost less to the tourists as compared to the individually purchased elements of a tour the next one is the differential pricing students when a different price is fixed for the same tourism product in different markets and services is known as difference differential pricing to fix such kind of prizes for a tourism product a flexible approach is followed in balancing a tourism products demand and capacity and in revenue maximization all this is done by selling the same tourism product and services at differential pricing to different tourists the next in this category is the psychological pricing [Music] so my dear students to psychologically attract and appeal to this towards a particular tourism product and service a systematic pricing is done usage of certain digits for pricing a tourism product may enhance the buying experience such kind of usage of price digits like triple line may provide the false representation of prices and to encourage tourists to consider such options it is also believed that such kind of fuses of digits positively impacts at the influences of tourists the next one is the promotional pricing such form of tourism products and pricing are used to encourage sales and to attract more tourists to visit a particular destination a number of specialized products and special prizes special offers are being provided to best boost the sales such offers may be for a limited period of time and also maybe have in terms and condition attached to them however such offers encourage tourists to plan buying of tourism products and reduced prices and the services which are associated to them the next is geographical pricing this type of tourism productizing is based on the locations selected for the proper delivery of tourism production services geographical pricing provides special considerations to the cost of physical movement of tourists and determines who will foot the bill let us now discuss about budget pricing so students this kind of these kinds of tourism product pricing gives considerations that the prices are fixed on lower basis and is also linked and integrated with the lower quality of tourism products the next is buyer-based pricing a tourism product pricing style in which the perceptions and attitudes of the tourists are taken into consideration to violate at that time we are going to fix and determine the price for a particular tourism product or the service the next is competition based pricing it is a kind of pricing style in which the prices of a product of competitors are taken into account and researched and are also given special reference while designing our own product prices next is cost based pricing a form of tourism product pricing where the cost of a product is taken as the basis for the fix of the prices in this form of pricing a margin of profit is added to the cost of goods and services to get the final price of that particular tourism product the next type of pricing is the premium pricing such form of product pricing is utilized to fix the higher prices and to establish an image of a higher quality of a tourism product the quality of altruism product is also kept high to support the prices and to boost the sale of the services let us now discuss about tourism product price fixation pricing of tourism products involves fixing of the prices of destinations hotels package tours services attractions and so on an impressive and expensive destination is having all the facilities with a premium image and quality suiting the image of that destination and the prices of a tourism product at that destination tourism productizing provides a greater flexibility to tourists so they can choose a product according to their purchasing capacity and capability and it is significantly more important to have such kind of pricing decisions in tourism which involves in revenue management price structure and payment mechanism let us now discuss about the revenue management so dear students the demand of tourism products and services varies from market to market and it also varies with the time and with the place the management of revenue takes into consideration the variations of demands and supply and also helps in revenue maximization by deciding the price of a product in accordance with the predicted levels of demand among different segments of the market the management of revenue in a tourism production is successfully on the basis of the following circumstances let us discuss these circumstances one by one the prediction of demand in a given slot is made available with a reasonable accuracy people of the target slot do not jump to the another slot if high paying customers shift to advanced booking at low fares capacity in high fares will remain unsold and will lead to the losses then comes the price structure a business firm may have a large project mix with a number of product lines and offers its prices must have internal consistency that is the differences between various lines and items shall be justifiable on the basis of certain criteria an effective structure of prices will lead to higher sales and better customer satisfaction in the longer run [Music] the next is the payment mechanism the mechanism in tourism deals with the collection of payments and modes of collecting payments tourism products and services are frequently sold both on online platforms and on the offline platforms by the intermediaries the centers for collecting payments are to be provided to the tourists so that they can pay their money for the services they consumed tourists are classified on geographical basis thus the proximity and easy use of collection center is considered as a crucial as this provides support in achieving the pricing objectives as well [Music] mode of payment is equally significant as differential modes of payment results in different receipts at seller points going to differential middle layer service provider charges students the markets of different business firms have to determine how to get the payments and this can be done through either through cash credit cards debit cards checks travel agent vouchers online accounts payment gateways payment wallets transfers and so on each of these have its liquidity value and risk and a balancing between all these has to be established properly hence we can say that tourism as an industry has some special characteristics and components that influences the decision of pricing and differentiate this from pricing of other goods and services which are there in the other domains let us now discuss about tourism pricing strategies students pricing strategies in tourism product pricing are decided by business firms to enhance the prices in accordance to achieve their objectives earn profits and changing environment and rest of the marketing mix such strategies can be formulated by taking into consideration both the long-term and the short-term objectives of the business firms a number of tourism production strategies can be utilized accordingly to focus on multiple objectives of the business firms [Music] and some of the significantly important tourism products pricing strategies are discussed as follows the first one is the market coverage pricing so what do we understand by the market coverage pricing it is a business firm may if allow a strategy and technique that targets the whole market or only one particular segment of the market depending upon this it adopts pricing strategy which yields maximum requisite results such forms of market coverage pricings are discussed as follows the first to discuss is market skimming so what do we understand by market skimming such form of a strategy is considered as high value low volume strategy the offering is priced high to maximize profits and recovering costs in case of products with a shorter life cycle or a shorter lifespan such kind of strategies are always effective a shorter life cycle of a tourism product can lessen competition as the competitors cannot copy products easily in a timely manner another case where such kind of pricing can be taken into consideration is when the offer has no other substitutes and customers are determined in paying higher prices with such style of tourism product pricing in place the number of tourists traveling to a destination will be lower but the margins of profit per tourist is sufficient to make it more attractive such pricing decisions can be very productive as few destinations imply environmental and its allied damages that emanate from it let us just discuss this with the help of an example for example kerala tourism has adopted such form of pricing strategy in a successful manner for its holistic health and wellness tourism [Music] the next is market penetration such form of a statute is considered as low value high volume strategy a lower price is fixed for tourism product offers to attract more customers and earn higher prices maximizing the coverage of tourism markets with a margin of lower profits from every customer is the focus of such pricing strategies such kind of strategies can be utilized if the price size of a sensitive market is very large and product or a service can be copied easily or a product is not unique in justifying its higher price such pricing strategies may not be useful for the perspective of environment as mass tourism invokes problems such as pollution for example go air and indigo utilizes such kind of pricing strategies and also domestic tour operators in india also depend heavily on such strategies the next to discuss in this module is pricing mixed strategies [Music] so students a number of such tourism pricing strategies can be obtained by incorporating price and quality of a product or service surprising strategies are discussed as follows the first one is the premium so a higher quality or a quality of high tourism experience is provided at a higher price all tours of luxurious quality fall under such pricing strategies for example a luxury hotel luxurious trains such as palace on wheels and they can odyssey the golden chariot such prizing approaches succeeded when an excellent or a quality image of the tour is built and tourists perceived quality to be higher enough to justify the prices second is budget quality of a tourism product is compromised by reducing the prices of a product and keeping tourism services to its basic quality and prices of the tourism products and services are kept low for example budget airlines budget hotels no frill tours utilize such kind of tourism pricing strategies tourists who are sensitive about the pricing of a product prefers such pricing strategies and avail the services at the lower prices the next is the rip-off sometimes higher prices are charged for a poor quality tourist experience price of a product is not justified but tourists purchase such services on the basis of their perceptions and whims and fences of good quality such approaches can be utilized when the tourists are not aware of the quality and pay the prices out of ignorance such strategies are utilized mostly in asian countries where the system of bargaining is very common the next is high value a higher quality tourist experience is offered at a lower prices it gives a very good value to the tourist such pricing in a highly competitive market is only possible where sellers try to outdo each and other competitors to gain maximum profits and share of the market an example of such pricing strategies is medical tourism in developing countries with benefits such as no waiting time the best doctors and highly personalized nursing and health care facilities let us now discuss about the components of tourism product pricing strategies pricing decisions are crucial because ultimately the price that will be charged for the product will determine the profit or the loss that is made by the company on the selling of the product or services price tells the consumer about the product and should give an indication of the quality of the product further it also plays a important and significant part in creating the company's corporate identity it is therefore of utmost importance that companies should regard pricing decisions as part of their marketing strategies the price charge should not be simply be the result of the analyzing the cost involved and adding on a fixed percentage of a profit to the margins rather it should be the parity with the value that product gives to its buyer being competitive is not always price driven it is product value driven does the strategy is so involved in pricing the tourism products are intricate in their nature and are case specific the various components of the tourism productizing strategies are discussed as follow the first is the product quality the quality of a product really determines the price value relationship and it is logical that product which offers greater utility and fills the consumer needs more effectively than a competitive product can command a bigger price the second one is the product distinctiveness a standard or stable product with no distinctive features offers little or no opportunity for price control but a normal and different product may be able to command higher prices the third one is the extent of competition a product that is comparable to the products of the competitors must be priced taking the prices of competitors into consideration to some extent the products price determines its position in the market third one is the method of distribution or the distribution channel so the price of the product must include adequate margins for tour operators travel agents or the company owns sale force the next is cost of product and service the price of the product must be higher than production cost over the long run or the business will not be able to survive both production cost and market conditions should serve as guides to the pricing strategies [Music] then it comes the cost of distribution students distribution cost must also be included in the pricing equation they are much more difficult to estimate than the other costs the next is margin of profit desired the profit margin build into the products price must be higher than the returns realized on more conventional investments in order to compensate for the risk involved in the enterprise the next is the seasonality as we know that the most tourism products are affected by seasonality because of the school year and the holiday patterns and consequently the seasonal aspects they should also be taken into consideration they must also be considered when developing prices for tourism products and services so my dear students let us summarize this chapter or this module the pricing of tourism products must be designed and highlighted in such a way that it satisfies the needs and wants of tourists [Music] students let us now summarize this module the pricing of tourism products must be designed and highlighted in such a way that it satisfies the needs and wants of the customers the needs and wants of the tourists and if the pricing of a tourism product or a tourism service is reasonably fixed then the tourists find it more authentic and satisfactory a number of types and styles of tourism product pricing are involved in the process of pricing techniques in tourism pricing process is to encourage and enhance sales of a business firm pricing of tourism products and services involves fixing of prices of destinations hotels package tours and attractions an impressive and expensive destination is having all the facilities with the premium image and quality suiting the image and prices of the tourism product this tourism product pricing provides a greater flexibility to tourists so they can choose a product according to their purchasing capacity and their capability [Music] this is all from this module thank you very much