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Effective Pricing Strategy

Product and service prices all around the world will dramatically increase or decrease depending on the economic status of each country and region in the next few years (The Global Business Alliance, 2021). The implementation of a right pricing strategy would have an impact on the consumer’s decision in purchasing any product or service. Therefore, companies should be aware of the most effective pricing strategy in their industry to remain competitive. This article focuses on the types of pricing strategy and the explanation for each strategy as well as successful examples of these strategies in terms of the travel, hospitality, entertainment, automotive and retail sector.

Types of Pricing Strategy

Dynamic Pricing

Companies would be able to set flexible prices for its services based on the current demand besides increasing its revenue through dynamic pricing. Usually, this pricing strategy is used by hotels to adjust the cost of rooms and packages based on the supply and demand needs at a particular moment to find the highest price that consumers are willing to pay. In fact, the price increases when demand is high and the price decreases to stimulate demand when it is low. Airlines, concerts, cinemas and musical theatres use the dynamic pricing strategy in their respective industries. Successful companies that use dynamic pricing strategy are Amazon and Grab. Amazon makes profits on less popular products while offering biggest discounts on its most popular products creating a perception that it has the best overall prices (Boomerang Commerce, 2020). On the other hand, Grab measures supply, the drivers and demand, the passengers hailing rides by the use of smart phones and prices fares accordingly by dynamically adjusting prices for its service.

Premium Pricing

If a company is known globally for its unique world class business platforms, then premium pricing strategy would be a suitable strategy. This strategy could be used where substantial competitive advantage exists and the company is safe in the knowledge that they can charge a relatively higher price. For example, high prices are charged for luxury services which offers a wide range of luxury deals such as resort entertainment and cruises. Besides that, airlines do use premium pricing strategy in their first-class air travel. Successful companies that adopt premium pricing strategy include Savoy Hotel in London and Cunard Cruise. Savoy Hotel charges relatively a higher price due to their credibility of offering high quality standard hotel service, entertainment and elegant dining whereby rich and powerful guests including royalty are their main consumers. On the other hand, Cunard Cruise is the only shipping company that operates a scheduled passenger service between Europe and North America as of 2019 (World Travel Report, 2019).

Mark Up Pricing

In order to ensure profit on each sale, companies should set the prices of their products and services by using the mark up pricing strategy. The time spent developing and promoting a product or service as well as all the costs associated with running the business should be identified. In the automotive industry, mark up on new cars is limited to 10 percent but there is a mark-up of 25 percent for sports vehicle (Murphy, 2019). Successful companies that use mark-up pricing strategy include Porshe and Lamborghini.

Mark Down Pricing

Companies would need to mark down their prices during slower months to remain competitive and earn some profit besides keeping the business afloat. This strategy is different from promotion as the company would change the list price to a permanently lowered price. This strategy may prove to be effective as companies could eventually end up earning more income (Forrest, 2018). Successful companies that adopt mark down pricing strategy include clothing and fashion industries such as Zara, Uniqlo and H&M.


Packages usually caters for consumer’s need where they get good deals for their hotels, airfares, tours as well as activities all-inclusive for one price making their holiday and travel a wonderful experience. Travel agencies could add value and stimulate demand without discounts by developing packages with complementary tourism partners. In fact, each company has their respective niche markets and could use packages pricing strategy to effectively target their food, beverage and relaxation industry. The companies could further give consumers the flexibility to select their preferred package components according to their travel preferences and budget through disguised pricing. This method hides the discounts and exact cost provided which would allow the company to earn huge profits. Successful companies that use packages pricing strategies are Classic Journeys and Wild Frontiers Adventure Travel (World’s Best Awards, 2019).

Rack Rate

Companies should consider rack rate pricing strategy before giving away any discounts. The rack rate includes brochure prices printed in advance of the coming season. During a peak holiday season, the rack rate would remain the same for attraction activities as compared to hotels whereby the rack rate would change almost daily to reach capacity. Usually, this strategy is applicable when consumers book a room directly with the hotel. Hotels go through travel agents and websites during times of the year when they are not so busy by offering cheaper discounted rates for the rooms. In fact, hotels keep a rack rate so that consumers have the perception that the best possible deals are through travel agents and websites. However, in reality the business plan does not depend on the rack rate but it is more of a tactic and strategy to maximise profits. Successful companies that adopt rack rate pricing strategy are mainly 5 star hotel chains such as Hilton Group and Ritz-Carlton (Forrester Research, 2018).

Seasonal Pricing

Companies should use seasonal pricing strategy as it is effective to cover low and high seasons with different price levels throughout the year. For example, school holidays and public holidays are usually the same date periods each year. This pricing strategy maximises revenue with higher prices when demand is strong besides ensuring a smooth demand by enticing consumers with low prices during the slow period. The low demand and sales during the slow season could be compensated through the profits achieved during the peak season (Sarah, 2016). Successful companies that use seasonal pricing strategies are Walt Disney World and Universal Studios theme park.

Last Minute Pricing

Companies would benefit tremendously through last minute pricing strategy to fill in any last-minute gaps. This strategy increases the likelihood of receiving a booking in the immediate short term. In fact, last minute discounts would not contribute below a minimum price. Successful company adopting last minute pricing includes TravelZoo whereby many deals on last minute flights, hotel bookings and packages are offered to the consumers (Stuart, 2016).


During offseason, discounting pricing strategy is often used. However, companies should be careful as discounted prices could devalue the company’s service as it may be hard to change back to normal rates. Each company could perhaps be selective by adding conditions of a minimum stay or number of travellers in their bookings. Groupon is one successful company known for offering discounted restaurant meals, beauty services and spas, fitness programmes as well as hotel and resort stays (Matei, 2017).

Common Pricing Types

Companies should implement more common pricing type’s strategy deal which is basically a set of prices per person. This strategy is often used by transport operators and accommodation providers. The options available through this pricing skim would be adult, child and senior citizen price. Successful company that adopts common pricing type strategy include Great Eastern Railway in the UK (Fortanier, 2017).

In short, several pricing strategies to choose from should be effective for companies instead of just one set price or a fixed price all the year round. The pricing strategies would depend on situations such as time and the nature of the activities. The company should maximise profit by adjusting its price depending on the demand as the law of supply and demand is a crucial aspect in determining the success of the company in the long run.


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