Setting the Price
Learning Outcomes
Pricing is a pivotal element of the marketing mix, serving as the only component that directly generates revenue.
In this chapter, we learn about the complexities of pricing, exploring its role as a strategic tool that influences profitability, market share, and consumer perceptions. Setting the “right price” involves balancing internal factors such as costs and marketing objectives with external considerations like market demand, competition, and economic conditions. Through this lens, we examine various pricing strategies and their applications across industries, with a particular focus on the tourism, hospitality, and leisure sectors.
After reading this chapter, you should be able to:
- Define price and explain its significance in the marketing mix.
- Identify and analyze internal and external factors influencing pricing decisions.
- Compare and contrast different pricing approaches and strategies.
- Evaluate the psychological aspects of pricing and their impact on consumer behavior.
- Assess the legal and ethical considerations in pricing practices.
- Apply pricing concepts to real-world scenarios.
Opening Thoughts
“Price is what you pay. Value is what you get.” — Warren Buffett
The $25,000 Taco: A Lesson in Value Perception
In 2017, the Grand Velas Los Cabos resort in Mexico introduced what became known as the world’s most expensive taco[1]. Priced at $25,000, this extraordinary creation featured premium ingredients including Kobe beef, Almas Beluga caviar, and black truffle brie cheese, served on a gold-flaked corn tortilla. The taco was served in the resort’s Frida restaurant, accompanied by an exotic salsa made with Morita chili peppers and Ley 925 ultra-premium tequila.
While few customers actually purchase this ultra-luxury item, its mere existence serves a strategic purpose. The $25,000 taco creates a powerful anchor price that makes the resort’s other premium offerings seem remarkably reasonable by comparison. This case illustrates how pricing strategies extend far beyond simple cost calculations to influence customer perceptions and behaviors.
Through this chapter, we will explore the complex art and science of pricing, examining how businesses across the hospitality and tourism sector use various pricing strategies to create value, drive revenue, and shape customer perceptions.
“I Ate The World’s Most Expensive Taco” [9:36 min] by Nick DiGiovanni[2]
Chapter Topics
- What is Price?
- Factors Influencing Pricing Decisions
- Pricing Approaches and Strategies
- Pricing Strategy Analysis
- Montag, A. (2017) This $25,000 taco is the most expensive in the world. CNBC Make It. https://www.cnbc.com/2017/10/10/this-25000-taco-is-the-most-expensive-in-the-world.html ↵
- Nick DiGiovanni. (2022). I ate the world's most expensive taco [Video]. YouTube. https://youtu.be/BDgi4UuMzmI?si=QBNW1HfvuttCzzQT ↵
