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Price strategy of Vietravel Group, Schemes and Mind Maps of Marketing

Ho Chi Minh City Open University (HCMOU)Marketing

4.2. Pricing strategy • In business in general and marketing-mix strategy in particular, price is always an important factor because it is what generates revenue for the company. Not to mention, price is also the top consideration by customers before making a purchase decision and Vietravel understands this. With a cost-based pricing strategy, Vietravel brings low prices with corresponding products and services, in order to diversify their services and still ensure their revenue and number of c

Typology: Schemes and Mind Maps

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4.2. Pricing strategy
In business in general and marketing-mix strategy in particular, price is always an
important factor because it is what generates revenue for the company. Not to
mention, price is also the top consideration by customers before making a purchase
decision and Vietravel understands this. With a cost-based pricing strategy,
Vietravel brings low prices with corresponding products and services, in order to
diversify their services and still ensure their revenue and number of customers.
In addition to calculating the cost, Vietravel also builds a way to determine the
price of the tour program on cost-based pricing, creates transparency and increases
trust for customers, categorizes and groups all costs to carry out the tour program
in two types:
Variable costs (calculated for a tourist): Are costs directly associated with separate
consumption and can be calculated separately for each guest, including: hotel
costs, food costs, sightseeing tickets , train tickets…
Fixed costs (calculated for the whole group): is the total cost of services that all
members of the tour group share, not separate for each individual guest such as:
tour guide costs, transportation costs, other outsourcing costs.
Optimizing all kinds of costs to have economical products in the context of today's
market competition when competitors are always looking for ways to offer low-
priced service packages to attract customers. Vietravel also offers products with
economical prices aimed at customer segments who want to optimize their trip.
5. Evaluation and recommendation
Price
Strengths: With the complicated and prolonged developments of the COVID-19
epidemic that will have a strong impact on customer spending at the moment, economical
tour packages help Vietravel retain customers. existing customers and attract new
customers through price competition with competitors in the market.
Weaknesses: Tourism was heavily affected after the epidemic, but continuing to
keep the same price form is still a difficult problem for customers in spending plans.
Recommendations for improvement: There should be a newer policy of cooperation
with price partners, taking advantage of incentives in the state's industry, thereby
minimizing costs to promote the sale of goods and services, to be able to lower the cost of
products, in order to attract and attract more people. customers during and after the
epidemic.
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4.2. Pricing strategy

 In business in general and marketing-mix strategy in particular, price is always an

important factor because it is what generates revenue for the company. Not to

mention, price is also the top consideration by customers before making a purchase

decision and Vietravel understands this. With a cost-based pricing strategy,

Vietravel brings low prices with corresponding products and services, in order to

diversify their services and still ensure their revenue and number of customers.

 In addition to calculating the cost, Vietravel also builds a way to determine the

price of the tour program on cost-based pricing, creates transparency and increases

trust for customers, categorizes and groups all costs to carry out the tour program

in two types:

 Variable costs (calculated for a tourist): Are costs directly associated with separate

consumption and can be calculated separately for each guest, including: hotel

costs, food costs, sightseeing tickets , train tickets…

 Fixed costs (calculated for the whole group): is the total cost of services that all

members of the tour group share, not separate for each individual guest such as:

tour guide costs, transportation costs, other outsourcing costs.

 Optimizing all kinds of costs to have economical products in the context of today's

market competition when competitors are always looking for ways to offer low-

priced service packages to attract customers. Vietravel also offers products with

economical prices aimed at customer segments who want to optimize their trip.

5. Evaluation and recommendation

Price

Strengths: With the complicated and prolonged developments of the COVID-

epidemic that will have a strong impact on customer spending at the moment, economical

tour packages help Vietravel retain customers. existing customers and attract new

customers through price competition with competitors in the market.

Weaknesses: Tourism was heavily affected after the epidemic, but continuing to

keep the same price form is still a difficult problem for customers in spending plans.

Recommendations for improvement: There should be a newer policy of cooperation

with price partners, taking advantage of incentives in the state's industry, thereby

minimizing costs to promote the sale of goods and services, to be able to lower the cost of

products, in order to attract and attract more people. customers during and after the

epidemic.

1. Objectives for Pricing of Services Effective pricing is central to the financial success of Vietravel. The key objectives forestablishing prices:

  1. Gain profits and cover costs.
  2. Build demand and develop a user base.
  3. Support the firm’s positioning strategy. 2. Pricing Strategy by the Pricing Tripod Cost-Based Pricing: Vietravel pricing tour saving program on cost-based pricing, creates transparency and increases trust for customers.
  4. Fixed costs These are costs that occur and remain unchanged regardless of the number of tours or activities Vietravel run. This could be firm's rent, administrative costs, annual costs or cost of storing Vietravel's equipment.
  5. Variable costs This refers to the costs Vietravel incur according to the number of tours or activities firm run. It includes wages for firm's guides, cost of fuel, meals during tours or a commission Vietravel pay re-sellers. After calculating their costs, Vietravel will have an idea of how much is needed to cover the costs of running their trips, and more importantly, start making profit.This helps Vietravel to calculate the minimum number of bookings they need per tour or activity, to ensure that they do not make a loss. => Optimizing all kinds of costs to have economical products in the context of today's market competition when competitors are always looking for ways to offer low-priced service packages to attract customers. Vietravel also offers products with economical prices aimed at customer segments who want to optimize their trip.
  6. Profit margin Decide how much profit Vietravel would like to make on each tour. The most common way to figure out your profit margin is by using the cost- plus pricing method.
  7. Breakeven analysis To cover variables cost, a manager of a firm uses cost oriented pricing that changes with every single unit of products produced and sold. It will also produce money to cover firms fixed costs that are fixed regardless the number of product produced or sold. Break-even analysis costs versus

All tourism businesses should have a rack rate – this is your “full rate” before any discounts are applied and typically is what is provided to wholesalers and printed on brochures for the season ahead. For activity and attraction operators their full rate is more likely to be charged all the time without any day to day discounting, however accommodation operators – particularly those in the middle of the market will be changing pricing almost daily for the month or 2 months ahead to fill gaps.

  1. Seasonal Pricing Using a mix of pricing throughout the year to cover low, high, and shoulder seasons is a standard way for tourism businesses to cater for differing levels of demand due to the time of year. Typically these will be the same date periods each year but may also apply for school holiday dates and for local events where the dates vary each year.
  2. Common Pricing Types Per Person pricing: A set price per person e.g Adult and Children prices. Options may include an adult, child and senior citizen price. Per Unit pricing: – A set price for 1 unit of the product e.g. Price per night.
  3. Discounting In a competitive market such as tourism, discounting Vietravel's prices to stimulate demand – it can become a rocky road to reducing profitability. Consider adding conditions to a discounted price like a minimum stay or number of travellers in the booking. While a booking is better than no booking at all, customers do become used to a certain price level and Vietravel therefore run the risk of not only making it hard for they to charge their normal rack rates, but it will also devalue their product.
  4. Package Deals Developing packages with complimentary tourism partners in Vietravel's area or with value added components is a good way to stimulate demand without having to discount. Strike up deals with local businesses to provide a full package and share business with each other – Vietravel should be able to set tours at a “net” rate so the package pricing is better than if we had purchased each component separately. 4. Revenue Management: The role of pricing and revenue management systems is to optimize the product for different kinds of customers. Pricing and revenue managers use data-driven, yield management systems to allocate adequate and sufficient capacity to profitable customers. At the same time, they also meet the needs of price-sensitive customers. Hence,

customer-centric, yield management systems forecast demand and availability, to maximize revenue by using differentiated prices, at the right time. The following is a number of basic characteristics of the tourist industry that affects pricing:

  • Perishability. The tourism product cannot be stored for future use. This means that an unsold service is lost revenue, which cannot be recouped later. The profitability of vietravel will be influenced, especially when the high fixed costs incurred by the industry are considered.
  • Intensive capital investment. In most investments in tourism facilities up to 90% of the capital is invested in fixed assets. Thus the level of fixed costs is very high in relation to other industries and will affect pricing decisions.
  • The costs of intensive staff employed. To a large extent the quality of the product of the tourism industry depends on the number and quality of staff employed. Special and professional skills are needed to deal with gues/staff relationships.
  • Customer characteristics. Different tourist destinations will appeal differently to various income groups and social classes. They will have different spending patterns and lengths of stay, and also different sensitivities.
  • Competition. Fluctuating demand and overall business conditions also affect tourism pricing. Designing Rate Fences Vietrevel has ensured that a properly designed exchange rate barrier allows customers to self-segment based on service characteristics and willingness to pay and helps companies limit lower prices to customers who are willing to pay. willing to accept some restrictions on their purchasing and consumption experience. Fences are designed to be physical and non- physical. Physical barriers refer to tangible product differences associated with different prices. In contrast, non-physical barriers refer to consumer, transaction, or buyer characteristics, but otherwise they actually refer to the same underlying service. RATE FENCES DESCRIBE Physical (product-related) fences

Buyer Characteristics Frequency of volume of consumption

  • VietravelPlus is a loyalty program, benefits by card class are also upgraded with many incentives such as: plus bonus points from 20% to 100%; giving gifts or bonus points on birthdays, holidays and Tet. Gold and Platinum members will be welcomed at Vietravel's private area and receive special offers at the airport lounge, etc. Group membership
  • Free for children under 5 years old, 50% discount for children from 5 to 12 years old At the physical fences, for budget tours, customers will be staying at 3-star hotels instead of more high-end hotels (4 to 5 stars as in standard tours). Fences are set up to ensure that the customer cannot expect the benefit of a higher price limit (the services of the economy tour offer less value than other premium tours). Next, the non-physical fence shows that there is no price difference between 100% payment and 50% deposit in advance, booking tours through online or offline channels. However, for the saving tours price, customers still receive the same amenities and discount programs as above.