Pricing, Segmentation, and Promotion of Tourism

Pricing, Segmentation, and Promotion of Tourism Presentation Pricing Strategy Price Adjustment Outline Tourism Segmentation Tourism Promotion Pricing Strategy Price Adjustment Outline Tourism Segmentation Tourism Promotion CONCEPTS of Value, Benefit, and Price Value: the perception of an item at a particular place and time. Utility: the attributes of goods to satisfy needs. Price: value expressed in terms of a particular currency. DEFINITION of Price Price is the amount of money needed to obtain a certain amount of goods or services. The price of tourism is the amount of money spent to get satisfaction with tourist services Factors Affecting the Price of Tourism 1. State of the Economy 2. Travel supply and demand 3. Travel demand elasticity 4. Competition for tourism services 5. Cost 6. Destination Company or tour operator 7. Government Oversight pricing objectives Profit oriented • determination Pricing with greatest profit • profit target is the percentage return on investment Sales oriented • focus on the number of sales of tourism products and services, not profit. • market leadership (e.g. low cost carriers) Status quo oriented • focus on the main target of tourism services • competitive pricing with competitors (e.g. vehicle rental in tourist attractions & Burger King may follow McDonald's price changes) Pricing PROCEDURE 1. 2. 3. 4. 5. 6. Selecting a Pricing Objective Determine demand Estimating costs Analyze competitors' prices and offers Choosing a pricing method Determine the final price Pricing STRATEGY Very low Very high price price---unattractive to sellers --- not attractive to buyers Basis for pricing: 1. Product Cost 2. Competitive Price 3. Price Perception Pricing Based on Product Cost 1. Cost Plus Pricing Method 2. Mark Up Pricing Method 3. Break even analysis Competitive Pricing 1. Pricing is the same as competitors' pricing --product quality and perception are equivalent 1. Pricing below competitors' prices --- new entrants, elastic products 1. Pricing above competitors' prices --- better quality, targeting high-end market segments. Pricing Based on Perceived Price of Tourism Services 1) Pricing based on value received 🡺 based on the perceived value of tourists not on the basis of costs incurred. For example: The price of a cup of coffee at stalls, restaurants, and hotels differs according to the perceived value of tourists. 2) Psychological pricing 🡺 based on the psychological aspect of travelers. Psychologically --- usually consumers assume price is synonymous with quality. For example: Price/rate of a room in a well-known hotel vs. an unrecognized hotel with the same facilities. Fruit price in Mekarsari vs traditional market Pricing Strategy Price Adjustment Outline Tourism Segmentation Tourism Promotion Price Adjustment Strategy 1. 2. 3. 4. 5. Geographic Pricing Price with discount Promotion Price Price Discrimination Pricing of New Products and Services GEOGRAPHICAL Pricing 1. 2. 3. 4. 5. FOB (free on board) pricing Uniform pricing Pricing by Zone Base Point Pricing Pricing without freight Pricing with COST 1. 2. 3. 4. 5. Cash deductions Quantity deducted Functional pieces Seasonal deductions Price breaks. Price breaks with certain methods PROMOTION Pricing 1. Loss Leader Lowering the price of certain products, hoping to buy other existing products 2. Special event pricing 3. Rebates during the promotion period 4. Psychological discount The price seems to be lowered / cheap (for example: air asia airfare). Pricing DISCRIMINATION 1. 2. 3. 4. 5. By consumer type (student vs. public) According to tourism products and services According to place According to time Combination A combination of different price discriminations. For example: a combination of consumer and time, place and time NEW PRODUCT Pricing 1. Market skimming price. New products/attractions are set with a very high starting price. (co. ice world ancol entrance ticket when it was newly opened) 2. Market penetration price. New product prices are set at a lower price to gain a large market share (co. The Jungle Bogor). Pricing STRATEGY with MARKETING CHANGES Low High PRICE Medium Low PRODUCT QUALITY Medium Hit and Run Low growth Cheap goods Max price. Average quality Low price High Premium Penetration Super cheap price Example of Pricing Methods 1. Hubbart Formula Method - set hotel room price 🡺 profit max - orientation based on costs incurred for investment, operation and maintenance. 2. Break-even Analysis - Relationship between cost (fixed and variable cost), quantity demanded, profit - discount pricing application 3. Yield Management - profit orientation, application of price discrimination, yield management and ordering curves (Vanhove, N. 2005. P:91) - focus on 1. Capacity allocation on type suitable consumers 2. Demand at the correct price for maximum profit Pricing Strategy Price Adjustment Outline Tourism Supply in the Tourism System Tourism Segmentation Tourism Promotion MARKET Segmentation Market Segmentation: the activity of dividing the heterogeneous market of a product into homogeneous market units (segments). BASICS of Market Segmentation: 1. Geographical 2. Demographics 3. Psychographic 4. Behavior 1. Geographic Segmentation Divide the market by geographical units: (tourist) market for middle eastern travelers 2. Demographic Segmentation Categorize the market based on Demographic variables: - Age - Gender - Family size - Family life cycle - Income - Jobs - Education - Religion - Nationality/Ethnicity/Religion 3. Psychographic Segmentation ⦿ Social Class ⦿ Lifestyle ⦿ Personality Note: People in the same demographic group may exhibit different Psychographic performances. 4. Behavioral Segmentation ⮚ Knowledge level ⮚ Attitude ⮚ Usage ⮚ Response Market Targeting 1. Undifferentiated marketing 2. Differentiated marketing 3. Concentrated marketing Undifferentiated Marketing Mass marketing: A seller mass-produces, distributes, and promotes a product to all buyers. --- ALL THE SAME --Objective: lowest cost and price, largest potential market. Differentiated Marketing Variety marketing ◻ Sellers produce two or more products that exhibit different characteristics, styles, qualities, or sizes. --- MISCELLANEOUS --Objective: offering different types of products to buyers is easier than reaching out to all the different market segments. Concentrated Marketing Sellers distinguish market segments, select one or more of these segments, and develop a marketing mix tailored to the characteristics of each segment. --- SINGLE SEGMENT --- Target Market Evaluation and Selection Target market considerations: 1. Segment evaluation 2. Segment selection (1) Segment Evaluation a. Segment size and growth b. Segment structural attractiveness c. Destination and Source company resources a. Segment Size and Growth • Segment size • Segment growth b. Segment Structural Attractiveness Influenced by: 1. Competition in the segment 2. Newcomers 3. Substitute product 4. Buyer bargaining 5. Bargaining suppliers c. Company Objectives and Resources ⮚ Objective long term longterm goals of the company ⮚ Capabilities resources company (2) Segment Selection Criteria or method: 1. Measurable: the size and purchasing power of the segment can be measured to a certain degree 2. Achievable: how far the segment can be reached and served effectively 3. Size: segment is large enough and profitable 4. Implementable: how far effective programs can be structured to appeal to segments Pricing Strategy Price Adjustment Outline Tourism Segmentation Tourism Promotion Promotion Concept The Core of Promotion is Communication 5 Things for Effective Communication: 1. What will be delivered? Message Content 2. To whom will it be delivered? Communicator 3. Who will deliver? Communicator 4. How to deliver? Media 5. When will it be delivered? Time MESSAGE CONTENT • Message Content: Information, Persuasive, Reminder • Message Structure: - One-sided message - Two-party message • Message Format: flashy, media-appropriate • Message Source: highly trusted source: persuasive Communicators • Can be individuals, groups, specific audiences, large audiences • Target communicants influence what, when, who, how to say • After communicator target identified, the marketing communicator determines the desired response. • 6 state readiness buyer: awareness, knowledge, liking, preference, belief, purchase Choosing Media • Personal channel: two or more people communicating directly with each other Condition: 1. Expensive, risky, rarely purchased buyers need information. 2. Product has significant social properties • Nonpersonal channels: media that broadcast messages without personal contact and feedback Promotion Time Promotion is delivered when the product is approximately needed, based on consumer sensitivity (product life cycle) so that the promotion is right on target 4 Promotion delivery time patterns: 1. Continuous. Example: Pepsodent, rinso 2. Decrease. Example: seasoning (morning) 3. Ascending. Example: Saturday entertainment 4. Concentrated. Example: school equipment during the new school year Thank You! 44