Pricing your tour or activity is critical to attracting the right audience and ensuring you are profitable in a highly competitive landscape. But having the best price isn’t necessarily the lowest price, it’s about understanding the psychology of your customers. This workshop dives into pricing strategies and key pricing techniques that will help you develop the best pricing for your tour or activity taking into account the competition, customers, fixed and variable costs, marketing, and distribution.

1. T H E P S Y C H O L O G Y O F
P R I C I N G
I T ’ S A N U M B E R S G A M E
Stephen Joyce
CEO, Rezgo

2. M A R K E T I N G
P R I C I N G I S O N E O F T H E M O S T I N F L U E N T I A L A S P E C T S O F

3. V I R T U A L LY E V E RY P U R C H A S E
D E C I S I O N Y O U R C U S T O M E R S M A K E
I S B A S E D O N P R I C E

4. Pricing is not just a
factor of cost, but
psychology as well.

5. You need to price
your tours and
activities in order to
persuade your
customers to pay
more.

6. If your customers
don’t like your prices,
they won’t book with
you. No matter how
amazing your
experience is.

7. Commoditization
makes pricing more
difficult because it
removes “perceived
value” from the
equation.

8. Pricing’s 3 factors:
1. Cost
2. Profit
3. Market

9. A N C H O R P R I C I N G

10. How do you sell
a $2,000 watch?
Put it next to a
$10,000 watch.

11. Anchor pricing is
the tendency to
rely on the first
price (“anchor”)
when making a
purchasing
decision.

12. Offering a unique
experience
makes it easier to
use anchor
pricing on your
own tours or
activities.

13. If you are the
only submarine
tour in town, you
remove
competitive price
pressure from
the equation.

14. Premium Sub Tour
$189.00
Regular Sub Tour
$129.00

15. Suddenly, the
lower priced
regular sub
tour seems
like a bargain.

16. U S E H I G H E R
I N C I D E N TA L P R I C E S

17. I N C I D E N TA L
P R I C E S
Exposing customers to
higher numbers, even if
they are unrelated to your
experience sets a higher
anchor.

18. I N C I D E N TA L
P R I C E S
Show related experiences
that are more expensive

19. I N C I D E N TA L
P R I C E S
Show any
higher price!

20. C H A R M P R I C I N G

21. C H A R M
P R I C I N G
Pricing that
ends in
9,99,or 95.

22. C H A R M
P R I C I N G
Source: http://blog.gumroad.com/post/64417917582/a-penny-saved-psychological-pricing

23. C H A R M
P R I C I N G
It’s all about
the left
digit.

24. C H A R M
P R I C I N G
“…while evaluating “2.99,” the
magnitude encoding process
starts as soon as our eyes
encounter the digit “2.”
Consequently, the encoded
magnitude of $2.99 gets
anchored on the leftmost digit
(i.e., $2) and becomes
significantly lower than the
encoded magnitude of
$3.00” (pp. 55).
Source: https://files.nyu.edu/mt68/public/ThomasMorwitz2005.pdf

25. W H E N T O S H O W P R I C E

26. S H O W I N G
P R I C E
Showing product first
means consumers decide
based on product
qualities.

27. S H O W I N G
P R I C E
Showing price first means
consumers decide based
on economic value.
Source: Karmarkar, Shiv, and Knutson (2015)

28. S H O W I N G
P R I C E
When selling luxury or
emotional items (such as
travel), show aspects of the
experience first. De-
emphasize price.

29. S H O W I N G
P R I C E
Commoditization results in
decision making based on
economic value. eg. Airline
& hotel meta search and
price comparison.

30. S H O W I N G
P R I C E
Meta-search and price
comparison of unique
experiences de-values the
experience by forcing
decision making based on
economic value.

31. S O R T H I G H T O L O W

32. H I G H T O L O W
Sort items by default from
higher to lower price. This
sets the anchor price
higher.
Source:Suk, Lee, and Lichtenstein (2012)

33. H I G H T O L O W
Consumers view
descending items as losing
quality or value.

34. H I G H T O L O W
Consumers are more likely
to pay more as they are
unlikely to lose quality or
perceived value.

35. O F F E R A D E C O Y

36. O F F E R A
D E C O Y
Zip Only ($50)
Combo Zip & Park ($129)

37. O F F E R A
D E C O Y
Zip Only = 68% ($3400)
Zip & Park = 32% ($3840)
$7,528

38. O F F E R A
D E C O Y
Zip Only ($50)
Adventure Park Only ($120)
Combo Zip & Park ($129)

39. O F F E R A
D E C O Y
Zip Only = 16% ($800)
Park Only = 0%
Zip & Park = 84% ($10,836)
$11,636

40. O F F E R A
D E C O Y
54%
Increase in revenue due to
decoy

41. D I S C O U N T W I T H C A R E

42. D I S C O U N T S
Discounts
De-value
your Brand
Source: Wathieu, Muthukrishnan, & Bronnenberg, 2004

43. D I S C O U N T S
Don’t discounts if you
compete on quality.

44. D I S C O U N T S
Discounts only work when
you compete on price.

45. D I S C O U N T S
If you do discount, use
Steadily Decreasing
Discounts (SDD).

46. D I S C O U N T S
Offer early bird pricing to
encourage pre-purchase.
ie. prices increase after
June 1st.

47. D I S C O U N T S
Increase pricing on
channels that have a higher
cost (lower margin) to:
1. Shift revenue
2. Increase revenue

48. D I S C O U N T S
Higher revenue
Higher willingness to pay
Greater likelihood of
purchase

49. D I S C O U N T S
MAINTAIN PRICE
INTEGRITY
PREVENT retailers from
discounting your retail
prices without your
permission.

50. D I S C O U N T S
MAINTAIN PRICE
INTEGRITY
Do not allow resellers to
offer pricing that is lower
than pricing available
directly through your
website or point of sale.

51. R U L E O F 1 0 0

52. R U L E O F 1 0 0
% vs $

53. R U L E O F 1 0 0
Use % when
price is less
than $100
Source: Jonah Berger (2013)

54. R U L E O F 1 0 0
$50 $10 off
$50 20% off
Source: Jonah Berger (2013)

55. R U L E O F 1 0 0
Use absolute
values when
price is over
$100
Source: Jonah Berger (2013)

56. R U L E O F 1 0 0
$200 20% off
$200 $40 off
Source: Jonah Berger (2013)

57. R E D U C E
T H E PA I N O F PAY I N G

58. R E D U C E
PAY M E N T PA I N
Pain due to two factors:
When money leaves our
hands
Paying after we consume
Source:Prelec & Lowenstein, 1998

59. R E D U C E
PAY M E N T PA I N
27%
The increase in spend
when paying with credit
card vs cash

60. R E D U C E
PAY M E N T PA I N
Allow customers to pay
with a credit cards vs. cash.
Source:Prelec & Lowenstein, 1998

61. R E D U C E
PAY M E N T PA I N
Promote advance booking
rather than paying after the
experience.
Source:Prelec & Lowenstein, 1998

62. P R I C I N G
S U M M A RY
Anchor prices
Higher incidental prices
Charm pricing (rule of 9)
Control pricing display
Sort high to low
Use a decoy
Discount with care
Rule of 100
Reduce payment pain

63. QUESTIONS?
COMMENTS?

64. T H A N K Y O U
C O N N E C T W I T H M E
H T T P S : / / L I N K E D I N . C O M / I N / S T E P H E N J O Y C E