CU-BSC.TTM-SEM-IV-Destination marketing-Second Draft

leisure facilities and disclose the part of regional tourist product expanding as a means of evening up the seasonal and local non regularity of arrivals in tourists. There are seven phases in New Tourism Product Development. They are  Conducting a Market Research  Coordinate the Product with the Market  Evaluate the Destination  Understanding the Role of the Stakeholders  Developing the Product  Marketing and Promotion  Offering Human and Technical Support a. Conducting a Market Research In this first step, the tourism marketing team should do a complete research on the current market to identify any opportunity to develop new products. It includes economic, examination of various sectors of the market and the changes in the needs, previous data on the market changes and present tourism trends. b. Coordinate the Product with the Market By studying the various sectors in the market and environment for tourism development, unique packages could be prepared by including these regional tourist attractions for various market groups with the outcome that they can satisfy the needs of the tourists. E.g., Including nearby temples for elderly groups of tourists and adding trekking to the regional forest to the adventurous youth tourists. c. Evaluate the Destination As destinations are the prerequisite for the assertion of product development, the product up gradation process monitors the approaching tourism aim to assess its tourism prospect and its capability to meet and offer the tourists, highlights of the aims, and its shortages. It is assessed to see if the plan is meeting the needs of lodging, sightseeing, facilities and recreation. It is moreover assessed on ease of accessibility. d. Understanding the Role of the Stakeholders Tourism product development is the end result of the common attempts of various groups of people. It consists of identifying every individual or group in private and public, DMOs, tourism-based organizations and all other stakeholders who will be part of creating and developing a tourism product. A get together of all the stakeholders is conducted to help 201 CU IDOL SELF LEARNING MATERIAL (SLM)

design the product. The main aims are allotted to address long term vision, short term goals and further developments. e. Developing the Product In this step, the product is finally built using the necessary resources and the permissions of various authorities for road use and other services. It consists of enhancement of the objectives and also for exceptional recreation and experience for the tourists visiting that destination. f. Marketing and Promotion The operational and psychological benefits of tourism at a destination are offered to the potential tourists. The promotion is done through preparation of brochures, giving out ads in various media, and spreading it through social media could develop the required results and pull the tourists to the destination. g. Offering Human and Technical Support It includes offering experienced employees and modern technology to meet the needs of tourists expertly, to do business with every tourism operation at the destination and to engage them positively. 13.5.4 Challenges in New Product Development in Regional Tourism Developing a product in the tourism industry means offering opportunities for every person who is a part of the entire process of developing, launching and finally consuming the product.  Connection between tourism and economic development is not simultaneous. It depends a lot on if the tourism products are able to provide job opportunities, makes linkages especially in developing regional tourism with agriculture and other service providing segments – and prompts the construction of some primary infrastructure like roads, airports, banking services, ports etc. through which the entire community could take advantage.  Another challenge is of inviting and sustaining the tourist flow is always faced by the newly developed regional tourism product. Promoters of the destination are faced with a much more complicated challenge of developing a drive for the destination to be kept lively and provide exciting additions to tourists.  This could be connected with many other challenges the tourism industry is like  Limited number of tourism products  Absence of efficient marketing plans  Scarcity of human resources 202 CU IDOL SELF LEARNING MATERIAL (SLM)

 Less research being conducted in tourism field  Feeble or ineffective legislatures  Poor quality of standards in some regions  Inadequate tourism infrastructure in regional tourism places  Unconnected and segmented tourism planning  Limited development in regional, national and international degrees.  Marketing is given utmost significance in order to make best use of resources of a regional tourism destination and new product development. Making the product available and beautiful cannot be enough though. 13.6 SUMMARY  Tourism products can be anything which will pull a tourist to a destination to experience the product.  Tourism products could be nature based, man-made, culture, community services, religious events etc.  Some examples of tourism products include beaches, hill stations, forest treks, resorts, Holi festival, temples, museums, Kathakali dance performances, volunteering activities, trying out new food, Kumbh mela etc.  Components that are a focus in a tourism product are: attractions, amenities, accessibility, image and price.  New product development involves offering new experiences to the consumers, maybe in the form of changes to existing products, developing an entire new range of products, or a new brand.  In tourism new product development will include developing new activity in a region, new regions nearby an already popular destination, building special resorts, folk shows of the locality etc.  The stakeholders in tourism are everybody who will be part of the new product development project including government, tourists, local communities, NGOs, transport facilities etc.  There are a number of steps which should be followed to successfully develop a new regional tourism project.  The steps include market research, matching the demands with the offerings of the region, ensuring every facility is available for tourists, then developing the products, marketing it and employing human resources. 203 CU IDOL SELF LEARNING MATERIAL (SLM)

 Challenges faced are in maintaining the developed destination and marketing continuously to keep bringing in tourists.  Other challenges include legal disparities, regional issues, accessibility etc. 13.7 KEYWORDS  Attractions: Anything which will make a tourist come and visit a destination. The main pull factor.  Amenities: All the facilities that are available at a destination to meet the needs of tourists.  Accessibility: Ease of commuting to and within the destination  Stakeholders: Everybody who are part of the tourism industry  Regional Tourism: Tourism to a particular region of a country 13.8 LEARNING ACTIVITIES 1. Study a case on any famous new product development in a region near your hometown and analyse the challenges faced during development stage in the regional tourism destination ___________________________________________________________________________ ___________________________________________________________________________ 2. Imagine you are going to develop a new tourism product for Kashmir. Analyse the phases of new product development. ___________________________________________________________________________ ___________________________________________________________________________ 13.9 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Define tourism products. 2. Give the meaning of new product development. 3. List all the stakeholders involved in the process of tourism new product development. 4. Give the meaning of product strategy. 204 CU IDOL SELF LEARNING MATERIAL (SLM)

5. Describe the importance of local communities in new product development. Long Questions 1. Identify a potential attraction and prepare a New Product Development for a Regional Tourism Project. 2. Describe the components of the tourism product with examples. 3. Explain in detail the roles stakeholders play in the development process. 4. Outline the components of tourism products that has to be taken into consideration in new product development. 5. Elucidate the Phases in Regional Tourism Product Development. B. Multiple Choice Questions 1. ____________ of the following is not a required amenity for a tourism destination. a. Hotels b. Railway Stations c. Tailoring Shops d. Travel Desk 2. ____________ is a natural attraction a. Caves b. Temples c. Ashram d. Railway Station 3. __________ is a stakeholder of a tourism product development project. a. Travel agency b. School c. Apartment d. Factories 4. A pull strategy is directed towards _________ 205 a. Spliers CU IDOL SELF LEARNING MATERIAL (SLM)

b. Tourists c. Government d. NGO’s 5. DMO stand for _________ a. Destination Management Organization b. Destination Marketing Organization c. Destination Management Office d. Destination Marketing Office 6. Identify the cultural attraction. a. Resort b. Beaches c. Shopping Mall d. Museum 7. The three components of a Tourism destination are __________ a. Attractions, Accommodation, Accessibilities b. Attractions, Affordability, Accommodation c. Affordability, Accessibilities, Accommodation d. Accessibilities, Attractions, Affordability 8. _________ of the following is not an infrastructure in Tourism a. Factories b. Cable Cars c. Picnic Spots d. Restaurants 9. ______________ is the development of some unique product, modifying an existing product to fit in new features and a new brand through their own research. 206 CU IDOL SELF LEARNING MATERIAL (SLM)

a. New Product Development b. Idea Formation c. Marketing d. PEST Analysis 10. Generally, new product development in tourism consists __________ steps a. 5 Steps b. 7 Steps c. 6 Steps d. 4 Steps 11. All the descriptions specify the reasons for failure of new tourism product except ______ a. Lack of amenities b. Insufficient marketing c. Community involvement d. Unfavourable government policies 12. ________ is systematic research to get new product ideas a. Marketing and promotion b. Employing human resources c. Evaluating a destination d. Conducting market research 13. _______________ is/are a challenge in new product development a. Negative marketing only b. Scarcity of human resource only c. Both Negative marketing and Scarcity of human resource d. Neither Negative marketing nor Scarcity of human resource 207 CU IDOL SELF LEARNING MATERIAL (SLM)

Answers 1-c, 2-a, 3-a, 4-b, 5-a, 6-, 7-a, 8-a, 9-a, 10-b, 11-c, 11-d, 13-c 13.10 REFERENCES Reference book  Cleverdon, R., MacNulty, P. (2011). Handbook on Tourism Product Development. Belgium: World Tourism Organization. Textbook reference  Luo, Y., Jiang, J., Bi, D. (2020). Tourism Product Development in China, Asian and European Countries. Singapore: Springer Singapore.  Zigern-Korn, Nataliya. (2018). DIVERSIFICATION OF TOURISM PRODUCT AS THE PROPER WAY FOR REGIONAL TOURISM DEVELOPMENT STRATEGIES. 10.5593/sgemsocial2018/4.1/S15.003.  Karakuş, Yusuf. (2017). New product development model for tourism destinations. 10.13140/RG.2.2.25969.84328.  Romão, João & Rodrigues, Paulo. (2012). Regional tourism development: Culture, nature, life cycle and attractiveness. Current Issues in Tourism. 16. 1-18. 10.1080/13683500.2012.699950. Websites  UNWTO Official Website https://www.unwto.org/  https://www.e-unwto.org/doi/book/10.18111/9789284413959 208 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 14:PRICING STRATEGIES IN TOURISM STRUCTURE 14.0Learning Objectives 14.1Introduction 14.2Pricing a Tourism Product 14.2.1 Meaning of Price 14.2.2 Price V/S Cost 14.2.3 Importance of Pricing a Product 14.2.4 Pricing for a Tourism Product 14.2.5 Tourists Perception of Price 14.2.6 Types of Pricing in Tourism Sector 14.3Pricing Strategies 14.3.1 Pricing Strategies in Different Market Conditions 14.3.2 Role of Government in Pricing Strategies 14.3.3 Factors that Impact Pricing Strategies 14.3.4 Challenges in Pricing 14.4Summary 14.5Keywords 14.6Learning Activity 14.7Unit End Questions 14.8References 14.0 LEARNING OBJECTIVES After completing this unit, you will be able to:  Explain pricing concept and itself significance to a business  Describe different ways of pricing a tourism product

 Reflect on the strategies to price a product  Contemplate on the perception of tourists regarding the price of tourism products  Outline the challenges faced in pricing a tourism product 14.1 INTRODUCTION You don’t sell through price. You sell the price! This chapter will focus on pricing strategies for products in the tourism industry. We will be able to see the best type of pricing which can be used for different products in the tourism industry and how together we will be able to create a package. Challenges faced in the process of pricing of the product will be seen in this unit. We will also discuss the perception of the tourists regarding the pricing of the tourist products and how their decision will change depending on the prices of the products. 14.2 PRICING A TOURSIM PRODUCT One of the significant elements for a successful outcome in the tourism industry is in the way the product is priced. To make sure that the customer buys the product and the middleman to market it, the price should be compatible, precise and competitive. No matter if the product is sold in the domestic or international market, it is significant to accurately ascertain and learn the singular component which consists of the entire price, and the effect on the product. 14.2.1 Meaning of Price According to the International Monetary Fund, price is the sum total of money which a purchaser provides to the vendor in the process of trading goods and service. For instance, apparel might cost a sum of money. Or a travel agency will ask for a fee for booking your tickets. Price will always be only about money. Barter system where there is interchanging of products and services. Example for this is one person might teach one subject to a person and in return they might learn a new skill from them. 14.2.2 Price V/S Cost Price and cost are words which are always utilized and specified in the topics of anything related to revenue; in other words, sales. Although they are utilized interchangeably in our everyday discussions, in academics of business or economics, every word will have a unique meaning and hence should not be confused with each other. 210 CU IDOL SELF LEARNING MATERIAL (SLM)

Price Cost Basic Definition Money a consumer is ready to give for Expenses as a result of selling a service/ product any product/ service by the business Ranking Price are determined after all the costs Cost comes first are calculated Ascertainment We can determine it from consumer’s We can determine it from the business’s view point perspective Table 14.1 Key differences between price and cost Although the question is: How much? Could also be said as How much will it cost? Price and cost are entirely different concepts. In the case of the price of a product, the consumer should offer money to attain it. But the cost is what the manufacturer has to pay to make the product. When you enquire about the cost of a product, you are actually wanting to know the amount you have to pay to obtain it. 14.2.3 Importance of Pricing a Product  Once the product is produced, pricing becomes the most significant decision the seller has to take.  Price ascertain the prospectus of the product; will the consumer be able to accept the product and the return on investment for the product.  It is an element for competition.  Price is significant to the marketing team as it showcases the marketer's analysis of the worth of the product or service the customers see and are ready to offer money for the product and service.  Decisions of pricing could have a huge impact on the company. 211 CU IDOL SELF LEARNING MATERIAL (SLM)

 It decides the profits obtained through the product and also price is what a customer considers first to buy the product. Some other importance includes,  Flexibility: Price is the one which is most adaptable in the marketing mix. Price could be modified quickly in comparison to all the other components such as product, place and promotion.  First Impression: Usually, price is the first element a buyer will observe in a product. Even though the consumer might form their final decision to purchase on the complete advantages received in the product, they will first try to compare the price and their quality offered for the price.  Helps in Sales Promotion: As price is the most adaptable element of the marketing mix, the price is a highly significant factor of sales promotion. To promote higher sales, the marketing team might decrease the price of the product. In case products which are in high demand are sensitive to price, i.e., even slight variation in the price might increase the sales volume of the product.  Brand Positioning: The price which is fixed gives out a message to the customers regarding the brand, and product, which further helps the customer to perceive a value for the product. This impacts the brand’s position and image in the market. For instance, when the prices are high, customers presume that it has better quality. Any fault in the pricing decision could lead to deterioration of the company’s image. It is highly important to set prices at the correct level after adequate time given to research the market and analyse the elements like the pricing policies used by the competitors, conditions in the market, production cost etc. 14.2.4 Pricing for a Tourism Product In the tourism sector, price is usually called the rate. Ascertaining the price of the service necessitates reflection of 3 key elements. They are  Operating Costs  Profit Margins  Commissions to Intermediaries Other factors include  Competition 212 CU IDOL SELF LEARNING MATERIAL (SLM)

 Demand  Target Markets  Seasonality Operating Costs – Operating costs consist of both variable costs and fixed costs. Variable costs consist of salaries, current line, LPG & petrol, maintenance and laundry, stationary purchase, food, repair works, raw materials, assets like machines, uniforms for labours, promotional activities like printing brochures, advertisements, events etc., research and development and banking. Fixed costs are those which will not change as per the sales volume i.e., buildings and equipment, insurance policies etc. Profit Margins − this is ascertained through comparison of the price offered by the competition and the price the organization is able to offer. Profit margins are fixed with no compromise in the competitive advantage of the product. Commissions to Intermediaries − Tourism industry always works with a middleman. This will result in commissions. Commissions are the price which is offered to the intermediary in order to sell the product produced by the company. Other factors to consider when pricing the product are: Competition: Know at what rate the competition is selling the product. This will decide the highest rate in which the company can sell the product to beat the competitor’s price. Demand: Demand for the service is usually created by the current and future clients. It is important to study the market demands and the effect on the rate of the product. The buyer should contemplate on what additional service to provide to increase sales without compromising on the profit. Target Markets: Buyer should decide on which sector of the market to target like domestic i.e., regional or interstate, international markets etc. Studying the targeted market in comparison to demands in products, sensitivity to price, income level of potential customers and duration of stay at the destination. Seasonality: Study the shifts in the level of tourist flows during the peak and off seasons. 14.2.5 Tourists Perception of Price “Perceptions of the tourists is the one which is highly influencing the decisions they make – regarding to selection of destination, utilization of services on the tour, and the duration of their stay. The tourist’s perceptions are mostly instinctive. However, perception is significant as the modern tourists have become highly selective” - Stevens In order to stay competitive in this environment, the tourism service should be regarded with quality same to or higher than those of the rivalries, and the rate set for the service should be appealing. Therefore, the study on the perceptions of tourists regarding quality and price and 213 CU IDOL SELF LEARNING MATERIAL (SLM)

the effect price has on the purchase behaviour of the tourists are very significant. The estimation of the tourist’s quality and price perceptions are the cue to ascertaining a destination’s or the travel sector’s competitiveness. The reason for this is that competitive edge develops from the standards the destination is capable of creating for its tourists which goes beyond the cost incurred in its creation. Therefore, information on price, quality and standards offers an idea regarding the tourism products of the destination and their competitive advantage. In a territorial factor, there are complete rates of lodging amenities, labor cost, cost of time spends and the emotional costs, for instance, the chances of a prospective tourist visiting the destination could be on the basis of:  The real price of the amenities in the destination  The time taken to travel to the destination  In case the facilities are not known to the tourists, their experience at the destination could be debatable Customers are always of the opinion that price is the sign of a good quality product. When the differences in the price of various tourism services are less, tourists would not base their purchase decision on the price of the product. Tourists have a tendency to rely on the price especially when they are unsure of the decision they are taking. Therefore, the relationship of price with quality must be considered by the businesses when they are setting prices for their tourism products and services. When a business is fixing the price of the products, the psychology of the rates is highly significant in understanding the tourist’s perception of the price-value relationship. The outlooks of tourists to the price are in total relation to the tourist’s willingness to take risk while purchasing the product. 14.2.6 Types of Pricing in Tourism Sector Types Meaning and Significance Mark-Up Pricing  In this the business will fix the rate of their tours and holidays in such a way that they get profit in every sale.  The business will recognize every cost involved in doing the business including time invested in preparing, promoting and creating experience for the clients.  They also include the fixed costs and variable costs in determining the price for their services. 214 CU IDOL SELF LEARNING MATERIAL (SLM)

Mark-Down Pricing  In mark down pricing the tourism businesses will reduce their rates so as to stay competitive in the market. Seasonal Pricing Last Minute Pricing  This type of pricing is most suitable during the off Penetration Pricing season. Skimming Pricing  For example, during the normal season, if a business is charging 2000 INR for a service per person, then during the off season, it would reduce the rate to 1500 INR per person to maybe be able to attain some profit in their sales, and also to remain competitive and stay put in the market. Sometimes this will also lead to generation of more quantity of purchases and hence more earning for the business.  Seasonal pricing is about pricing the products depending on the different seasons in the tourism annual cycle.  They are generally months every year and seasonality happen because of weather, school leaves, government holidays, festivals etc.  This is a very common type of pricing especially for hotels and resorts to fill in the vacancies to avoid losses.  It consists of reducing the prices at the last minute to promote more booking. This is used especially in online portals and websites.  These two strategies used in pricing new products.  Penetration pricing is relatively used in the introductory stage of a new product‘s life cycle. It involves accepting a lower profit margin and pricing relatively low.  This strategy generates greater sales and establishes the new products in the market.  Price skimming involves setting the price relatively high to generate a high profit margin.  Here the sales are limited to those buyers who are interested to buy a new product. 215 CU IDOL SELF LEARNING MATERIAL (SLM)

Packages: Tourists are continuously looking for package tours while going on a holiday as it includes – accommodation, flight, transfers, sightseeing and other activities at a single price. Preparing tour packages in partnership with other tourism businesses is an effective way to increase demand and offer valuable services to the clients. Packages could also be utilized to target specific segments like golfers, food enthusiasts, old age travellers, adventure travellers etc. Sometimes the businesses use something known as “disguised pricing” in which the real cost of every single segment will not be disclosed to the clients and at the same time they also practice “visible pricing” which gives detailed pricing to the clients so that they can modify the package as per their budget and preferences. Rack Rate: Every business in the tourism industry has a rack rate, which is the formal rate before offering discounts to the product. They are also known as the rates which are given in the brochures for the upcoming season. The rack rate for sightseeing and other activities usually stays the same in all seasons. But the rack rates for the accommodation and airlines sector will be dynamic and might change every other day as per the demand. 14.3 PRICING STRATEGIES Selecting the correct rate to charge for the product and service is one of the significant issues that tourism companies face. As the market is always fluctuating, deciding on a price will always have some amount of risk. To accomplish the best pricing strategy, there needs to be exact information available with the tourism businesses regarding customer demand, suppliers’ rates and competitors’ prices. Price has 2 major purposes: 1. Every business must be aware that price is the source of revenue for the company. Calculations of price and the quantity sold will ascertain the complete income earned by the business, and considering the costs of production, eventually the business success. 2. Price displays the available services to the tourists based on the capability and readiness to pay for the service. Therefore, in an industry where competition is high, price is ascertained by the economies of demand and supply. Price is also determined by the goals of the business. Eventually it is these that will make the organization decide on which pricing strategy to use. 14.3.1 Pricing Strategies in Different Market Conditions The condition of the market when the product is being sold will also have a higher degree of effect on the pricing strategy used. Markets could be easily separated into 4 major types: Perfect Competition, Monopoly, Monopolistic Competition and Oligopoly. The correct way to price in each of these is:  Pricing in Perfect Competition Market 216 CU IDOL SELF LEARNING MATERIAL (SLM)

 Product Pricing in Monopoly Market  Pricing in Monopolistic Competition Market  Pricing in Oligopoly Market Pricing in Perfect Competition Market: The supplier does not have any influence on price because all organization’s products are unique and are not available with any other competitive companies. Product Pricing in Monopoly Market: The tourism business sets its own price. When the competition in the market reduces, and suppliers have more caution is fixing prices. Price increase will bring down the market demand but it will not be totally stopped. Pricing in Monopolistic Competition Market: A huge competitive company sells services which could be substituted to the products sold by another company in a manner that an effort to accomplish product differentiation is a superior element. This monopolistic competition refers to when companies still have an influence over their outcomes. Therefore, they attempt to segment their customers and hence decreasing competition. Pricing in Oligopoly Market: A particular company’s activities can very much a serious competition. It is essential to be aware of the way the competitive companies would retaliate to changes in prices. Different competitive policies are contemplated where the price might not be a significant element. 14.3.2 Role of Government in Pricing Strategies  Every market in every industry will have influence from the government in their pricing because of taxes and subsidies.  Direct involvement comes from policies for prices and income, monopoly legislature, prohibitions and also in obtaining licenses and other regulations. 14.3.3 Factors that Impact Pricing Strategies Quality of Product/Service: The quality of the service offered will ascertain the value for the product in comparison to price. It is practical that a service which provides better benefits and meets the demands of the tourists effectively in comparison to the competitor’s product can have a higher rate. Product Uniqueness: A standard service without any uniqueness allows no chance for any control in price. But a unique and distinctive service might be able to sell at better rates. For example, a unique 217 CU IDOL SELF LEARNING MATERIAL (SLM)

themed park such as Disneyland can sell at higher prices when it is compared to normal theme parks with the usual rides and adventure activities. Level of Competition: A service which in comparison to the service of the competitors should be priced while considering the prices set by the competitor. To an extent the service’s rate ascertains the company’s market positioning. Channels of Distribution: The rate of the service should also consist of sufficient margins to be given as commissions to the middle men like tour operators, travel companies etc. Characteristics of the Market: If for a product the expected number of customers is less, then the rate should be set higher so as to recompense for the expenses in delivering the products. At the same time, the seller should keep in mind the customer’s capability and tendency to purchase the product. Cost of Service: The rate set should be more than the cost incurred in order for the business to survive in the market. Cost of Distribution. Cost of distribution should also be calculated while pricing a product. This is the most complicated cost to determine. Profit Margin: The margin of profit set while pricing the product should be sufficient enough to match the risk involved in getting return on investment. Seasonality: Almost all of the products in the tourism industry have been impacted by the seasonality factor. Therefore, while pricing tourism products this needs to be taken into account. Special Promotional Rates: It is usually a common strategy used to provide special rates to products once in a while or while introducing new products. These however need to be monitored and done only to accomplish the goal at present. Psychological Elements: In every industry psychological pricing methods are used. For example, many stores display their rates in odd numbers like INR 999. This is because customers respond well to such unique displays of numbers and they end up purchasing it. 14.3.4 Challenges in Pricing 218 CU IDOL SELF LEARNING MATERIAL (SLM)

 Majority of tourists are value-based consumers. Some tourists value sight seeing more than accommodation and vice-versa. Hence it is important to understand customer need and fix the price accordingly.  It is always good to discuss the package details first and then discuss the price with the customers to avoid unhealthy perception.  It is vital to get the price chart from the service provider before discussing with the customer.  It is important to customize the prices based on the customer needs and demands. Hence the challenging factor is to understand the customer.  The challenge is to focus on the quality service to gain revenue. Then the quantity may increase during the course of time. Hence the pricing can be done accordingly.  The competition in the market has to be monitored frequently and then pricing has to be done.  The costs and inbuilt factors like investments, expenses should be considered before pricing a tourism product.  The seasonality is important challenging factor and it has to be handled well. Based on off season and peak season, the product has to be priced. 14.4 SUMMARY  Price is the amount a customer will pay to obtain a product or service  Cost is the amount the business will have to incur in order to obtain the product/ service for selling to customer  Although price and cost are used interchangeably, they are both completely different phrases.  Price is the element in marketing which could be changed rapidly in order to promote higher sales compared to other elements of the marketing mix.  Price is the first consideration of comparison with competitors for a customer while deciding to buy a product.  Customers perceive the quality of the product by the price of it. Therefore, price is the element which helps the company's brand positioning in the market.  There are three key elements to consider in tourism pricing: Operating costs, profit margins, and commissions to the intermediaries.  Seasonality plays a vital role in pricing of the product in the tourism industry. 219 CU IDOL SELF LEARNING MATERIAL (SLM)

 When there is high demand in the market, reducing the price slightly will also help in increasing sales in the short term.  Perception of the tourists regarding the destination is what influences them to purchase the product.  Tourist’s perception of price-quality relationship and price-value relationship should be pre-requisite for the business in fixing the price of the product.  The perceptions of tourists to the price are in total relation to the tourist’s willingness to take risk while purchasing the product.  Mark up pricing is the price after adding all the costs involved and profit margin. Mark down pricing is the discounted price in order to sell more services. Rack rates are original rates before any discounts have been done. Seasonal rates are those that change with each high and low season. Last minute pricing is done in hotels to book empty rooms at lower prices.  To accomplish the best pricing strategy, there needs to be exact information available with the tourism businesses regarding customer demand, suppliers’ rates and competitors’ prices.  Pricing strategies differ based on the different market characteristics like monopoly, oligopoly, monopolistic competition, and perfect competition.  Government has an influence in the pricing policies in the form of taxation, subsidies and other regulations it sets to control prices.  There are numerous other factors which will influence the pricing of the product like seasonality, quality, distribution channels, levels of competition, psychological elements etc. 14.5 KEYWORDS  Price: Sum total of money which a purchaser provides to the vendor in the process of trading goods and service  Cost: Expenses as a result of selling a service/ product by the business  Profit Margin: Percentage of profit the organization is able to achieve  Package: It a pre-paid tour containing variety of travel components  Seasonality: Shifts in the demand for tourism products 220 CU IDOL SELF LEARNING MATERIAL (SLM)

14.6 LEARNING ACTIVITIES 1. Develop a tour package during a peak season for your favourite destination along with detailed pricing. ___________________________________________________________________________ ___________________________________________________________________________ 2. Remember the factors that impact the pricing strategies and devise the pricing for pilgrimage tour package for Rishikesh. ___________________________________________________________________________ ___________________________________________________________________________ 14.7 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Define Package. 2. Write a note on role of government in pricing strategies. 3. List the types of pricing used in tourism. 4. Differentiate between cost and price. 5. Describe the importance of profit margin. Long Questions 1. Explain in detail what type pricing is best used to sell a product during off season with examples. 2. Describe the pricing strategies used in peak season in tourism. 3. Elucidate the factors that impact a pricing strategy for tourism. 4. Outline the pricing strategies based on different market conditions. 5. Discuss the perception of tourists on price. B. Multiple Choice Questions 1. Business must focus on ______________ while set price to increase market share a. Increase volume of sales b. Improve poor quality of the product c. Reduce quality of the product 221 CU IDOL SELF LEARNING MATERIAL (SLM)

d. Decrease volume of sales 2. While fixing the price of a product/ service, businesses will _____________ a. not decide on the objectives of pricing b. Calculate demand c. not look at competitors’ price only d. not decide objectives 3. A product can achieve quality leadership if it offers _________ a. High quality and low price b. High quality and high price c. Low quality and high price d. Low quality and low price 4. Mark-Down pricing is best during _________ a. Peak Season b. Off Season c. Festival d. School Holidays 5. ____________ Tourist is a person who travels within the country. a. International b. Domestic c. Inbound d. Outbound Answers 1-a, 2-b, 3-b, 4-b, 5-b 222 CU IDOL SELF LEARNING MATERIAL (SLM)

14.8 REFERENCES Reference book  Ray, N. (2015). Emerging Innovative Marketing Strategies in the Tourism Industry. United States: IGI Global. Textbook reference  Raju, J., Zhang, Z. (2010). Smart Pricing: How Google, Priceline, and Leading Businesses Use Pricing Innovation for Profitability (paperback). United States: Pearson Education.  Forsyth, Peter & Dwyer, Larry. (2009). Tourism Price Competitiveness. The Travel & Tourism Competitiveness Report.  N L E Armoni, e., (2008). Preferred Pricing Technique Used in Tourism Small and Medium Enterprises in Badung, Bali, Indonesia. Journal of Physics: Conference Series, 953(012110), pp.1-8. Websites  https://www.imf.org  https://www.tourism.australia.com/en/events-and-tools/industry-resources/resources- for-industry/tourism-export-toolkit.html  https://www.up.ac.za/media/shared/74/ZP_Files/2019/bcom-hons-tourism- management-a5-brochure.zp169305.pdf  https://courses.lumenlearning.com/boundless-business/chapter/pricing-strategies/  https://www.travellifemedia.com/12-tourism-pricing-problems-how-to-avoid/ 223 CU IDOL SELF LEARNING MATERIAL (SLM)