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Pricing strategies

10 minute read • Last published: 25 February 2025

Setting a price for your product is one of the most important things you’ll do for your business. It’s helpful to fully understand the options for setting your product price, before factoring in the additional costs and commission of selling via a travel distribution partner.

Conduct research to look at your customers and your competitors and consider the uniqueness of your product and how that will impact how much you can charge. Review the pricing strategies and what might work best for your business. Calculate all of your fixed and variable costs for selling your product directly and for selling via a travel distribution partner.

In this article:

  • The basics of pricing
  • Pricing strategies
  • Discounts and offers
  • Calculate your costs

The basics of pricing

It might be tempting to set a low price to encourage customers, but you shouldn’t undervalue what you have to offer. Visitors are looking for an authentic and immersive experience and certain markets are willing to pay for quality and value.

Not sure yet if a travel distribution partner is right for you? Check out the benefits of selling via a partner, including reaching new audiences and creating a bigger shop window for your business. You could also see more direct bookings and get a higher return or value per customer.

Read more about the benefits and considerations of selling with a partner.

4 steps to setting your pricing

  • Look at your customers, your competition and the market.
  • Consider what pricing strategy would suit your business.
  • Calculate your fixed and variable costs.
  • Work out how much to charge to cover your costs and make a profit.

Research

When looking at market research for tourism and events businesses and a competitor review, consider:

  • Your product

    • Uniqueness – how interesting and exclusive your product is will affect how much someone is willing to pay
    • Reflective of Scottish culture – is your product something someone can only do in Scotland? Or something that reflects our history, culture or people?
    • Market appeal – is your product likely to appeal to a local audience, international visitors or both?
    • Location – Are there a lot of other businesses in the area either offering a similar experience, or just competing for people’s time generally?

  • Your customers

    • Value - how much money are your customers willing to pay?
    • Frequency – how many of and how often will they buy your product?
    • Special features – is there any added value customers would like or pay more for?
    • Level of demand – if there is high demand, you can charge more. If you put the price down, could demand increase?

  • Your competitors

    • Level of competition – the less competition, the more demand there is for your product. The more competition, the less demand there is.
    • Prices - how much are your competitors charging for a similar product or service?
    • Positioning – do you offer a high-end or budget-level product or service? Will you try to compete with other businesses on price?

  • The overall market

    • How in demand is this product/service right now, and is demand likely to slow, stay the same or grow over time?

Top tips on competitor research

Select around 3-5 competitors to get a good picture of the market.

Be realistic when selecting your competitors – choose a business on the same scale as yourself, with access to the same size and type of market, offering a similar product or service.

It’s not as simple as price matching your competitors – they could have different costs to you. Think about their business as a whole – special features, quality, customer service, location, and what third parties they sell through. Consider how their costs might be different, and how their product compares to yours, and if that is why their price is different.

Pricing strategies

Pricing strategy is the process of setting a price for a product or service.

  • Competition-based pricing strategies

    Cost-plus pricing – the cost of the business with a margin or mark-up added on to get a price which makes a profit.

    Going-rate or Competition pricing – you price your products and services close to your competition, eg charge the same or slightly lower.

  • Value-based pricing strategies

    Value-based – what customers think a product or service is worth, more than the actual costs. Customers might be willing to pay more for something that saves them time, because there are limited alternatives available, or as it’s the only time they’ll have that experience.

    Premium – charge a higher price to reflect the quality or exclusivity of a product.

  • Product-based

    Bundling – offering a discount when customers purchase more than one product can help drive sales and promote customer loyalty.   Examples of this include when selling through an Online Travel Agent (OTA), you might bundle together two experiences, or you may offer a higher price for combining your standard product with additional experiences.

Discounts and offers

If you’re a new business or launching a new product, you could consider a special deal to start with rather than a temporary low price. You want customers to purchase and recommend you but understand this is not your normal price. This is clearer than selling at a lower price for a few months and then raising the price.

If you’re looking to increase the number of customers to your business, you might consider using a discount or offer. However, it can be difficult to ask a customer to return to paying full price once they have enjoyed the discount or offer. Consider whether you are likely to get repeat business from customers and if a discount or offer is right for you.

If you have quiet periods throughout the day, week or season, you might want to consider working with a travel distribution partner to sell that capacity. Not only will this mean more customers, but it could also mean more valuable customers depending on the experience you offer.

Different types of discounts:

  • special offers or pricing deals
  • packages or bundles
  • quantity or group discounts
  • value-add offers
  • seasonal or periodic discounts

Calculate your costs

Woman working at computer in reception area

Lothianbridge Caravan Park

Take time to work out how much all of your costs add up to.

Fixed costs could include rent, insurance, vehicle costs, staff wages and VAT. Your fixed costs are the same whether you make 1 sale or 1,000 sales. Remember to factor in the value and reliability of some of these items which may change over time – eg vehicles may need to be replaced.

Variable costs could include supplies and materials. An example of this would be food produce, where the price will change over time. Your variable costs change depending on whether you make 1 sale or 1,000 sales.

You also need to consider:

  • What are your operating times? Do you open every day, week or month?
  • How many sales are you likely to make for every day, week or month you are open?
  • What is the breakdown of your costs per day, week or month so you can compare them to likely sales?
  • What profit margin are you looking to make?

Work out how much to charge

Customers can take a price to indicate quality.

If you set your price too high, your customer might think you are too expensive and won’t buy your product.

If you set your price too low, you might not cover your costs and make a profit. The customer may also assume your product is of a low quality and that’s why the price is so low.

Cost calculation

Fixed costs + Variable costs = Direct cost of sales

Direct cost of sales / Number of sales predicted = The cost of each sale to break-even

The cost of each sale to break-even + Your profit margin = The cost of your product for the customer

Top tip: If you have more than one product or service, examine whether your variable costs are different for each product. You might want to consider attributing your fixed costs evenly to both products but having different variable costs – this would give you different break-even costs for each product or service.

You might also want to look at:

Money made from sales – Direct cost of sales = Gross profit

(Gross profit / Money made from sales) x 100 = Gross profit margin as a percentage

More information

Looking for more support on setting prices and understanding costs?

Take a look at these resources from Business Gateway:

8 tips on identifying the main costs when starting a business

How to cut your operating costs

Understanding cashflow

A quick guide to pricing products and services

How to work with a travel trade partner

Now you’ve decided to work with a travel trade partner, how do you make it happen?

There are three key steps to working with a travel trade partner - pitching, preparation and developing a relationship.

Selling through travel distribution partners

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