Dual Pricing Strategy in Increasing the Income of Souvenir Traders

in Tomok Village Samosir Regency

Nicholas Marpaung and Onan Marakali Siregar

Department of Business Administration, Faculty of Social Science and Political Science,

Universitas Sumatera Utara, Jl. Prof. Dr. A. Sofyan No. 1 Kampus USU, Medan, Indonesia

Keywords: dual pricing, revenue increase, souvenirs, merchants.

Abstract: This study focuses on pricing strategies in the Samosir Regency area which is famous for its huge tourism

potential. Several types of industries in the Lake Toba area are trying to take advantage of opportunities,

especially after the stipulation of Lake Toba as a priority tourist destination for Indonesia. Business actors at

the lower middle level such as souvenir traders also have the opportunity to fill a niche market in the

development of Lake Toba. The application of price discrimination by souvenir traders in Samosir Regency,

especially Tomok Tourism Village is one strategy to increase the income of traders, which is adjusted to the

ability or purchasing power of visiting tourists. This study aims to analyze how the price discrimination

strategy is carried out by souvenir traders in the Samosir Regency area, especially the Tomok tourist village

towards tourists who visit and buy souvenirs at the souvenir market. The approach used in this study is a Mix

Method approach where a qualitative approach is used to analyze in depth the background of the

implementation of price discrimination strategies by traders, and a quantitative approach is intended to

determine the impact of price discrimination for visiting tourists. The results of this study indicate that the

practice of dual pricing is a strategy implemented by souvenir swords in Tomok Tourism Village to increase

their income. The practice of dual pricing is also well realized by tourists and thinks it is still at a reasonable

level. Although not regulated by the government, the self-pricing by traders is still a question of how the price

is set by traders and why tourists do not object to such unilateral determination. However, in the context of

economic development, profit is the main goal of traders to be able to preserve local products which are the

mainstay of regional income and the traders themselves.

1 INTRODUCTION

The role of the tourism sector in the Indonesian

economy is very important because of its large

contribution. As shown in Figure 1.1, the tourism

sector contributes a total of 15% to GDP income. In

addition to foreign exchange earnings, the tourism

sector also plays a role in regional income, regional

development, as well as in the absorption of

investment and labor as well as business development

spread across various regions in Indonesia. According

to the Pocket Book of the Ministry of Tourism (2019),

the contribution of the tourism sector to the national

Gross Domestic Product (GDP) in 2014 has reached

9% or Rp. 946.09 trillion. Meanwhile, foreign

exchange from the tourism sector in 2019 has reached

Rp 280 trillion and contributed to job opportunities of

13 million people and tourist visits of 16.3 times.

Therefore, the role of tourism in the economy is very

important and efforts need to be made to understand

all the factors that might influence tourist interest in

the Indonesian tourism industry, one of which is the

price factor.

Figure 1: Contribution of Tourism Industry in Indonesia.

Samosir Regency has a tourist village, namely the

Tomok Tourism Village or known as the Sigale-gale

tourist attraction and various Batak cultural sites in

the form of tombs and relics of megalithic and ancient

times. In addition, due to its strategic location, which

is right at the port entrance to enter Samosir Island,

Marpaung, N. and Siregar, O.

Dual Pricing Strategy in Increasing the Income of Souvenir Traders in Tomok Village Samosir Regency.

DOI: 10.5220/0011563100003460

In Proceedings of the 4th International Conference on Social and Political Development (ICOSOP 2022) - Human Secur ity and Agile Government, pages 161-166

ISBN: 978-989-758-618-7; ISSN: 2975-8300

 2023 by SCITEPRESS – Science and Technology Publications, Lda. Under CC license (CC BY-NC-ND 4.0)

161

Tomok Village is a Tourism Village that is very

synonymous with its tourism business practices. One

of the striking characteristics is the number of local

residents who sell souvenirs or souvenirs. Souvernir

shops in the tourist village of Tomok can be found at

almost all crossroads and in the tourism object/site

sector. Therefore, apart from the wealth of tourist

objects and historical sites, the tourist village of

Tomok is known for its Batak souvenir shopping

center. The tourism industry in this village has had an

overall positive economic impact on the surrounding

community.

In the business practice of a souvenir shop in the

tourist village of Tomok, a business practice is found

which is operationally not written or has regulations

but actually occurs in the field. The business practice

is the application of price discrimination given by

producers to tourist consumers based on the origin of

the tourists. This business practice is known as Dual

Pricing Discrimination. Tourist price discrimination

or Dual Pricing Discrimination refers to the practice

of charging foreign tourists or foreign tourists more

prices than local tourists. This practice is quite

common throughout the world, especially in tourist

areas. However, this practice is usually conspicuous

in developing countries where price differences are

very high.

The practice of double price discrimination has

indirectly caused tourists to have a negative

perspective on local products sold by local residents,

where tourists find it difficult to predict the amount of

budget or expenses they will spend in buying

souvenir products in the Tomok tourist village. In

addition, the practice of dual pricing or price

discrimination against tourists has created a fear in

tourists that the value of the goods they buy will not

match the price offered.

However, Dual Pricing or price discrimination is

not prohibited and is not considered a crime. Price

discrimination is a strategy in pricing where the seller

determines the selling price for the buyer with several

considerations such as purchasing power, buyer

background, which is not done solely to increase

income but maintains the sustainability of local

buyers. Lancaster and Withey (2006;153) on the

marketing dimension state that

segmented/differential pricing (price discrimination)

is a form where companies will often adjust their base

prices to allow for differences in customers, products,

locations, times/seasons and so on. Basically, the

company sells its product in two or more processes,

although the price difference is not always based on

the cost difference. Often known as price

discrimination, this price adjustment approach can be

very effective in maximizing a firm's demand and

revenue.

Price discrimination that occurs in Tomok

Tourism Village, Samosir Regency is by

differentiating the price of souvenir products sold to

local tourists and foreign or foreign tourists. In this

study, researchers will focus on price discrimination

strategies carried out by business actors in Tomok

Tourism Village, Samosir Regency. There is a

provisional assumption that traders in the Tomok

Tourism Village only apply a price discrimination

strategy without knowing the correct price

discrimination strategy, such as the fairness of price

discrimination, pricing techniques and their impact on

tourists' buying interest. Therefore, this research is

expected to make a major contribution to the

understanding of price discrimination by traders in

the Tomok Tourism Village, Samosir Regency to

increase their income with a reasonable price

tolerance.

2 LITERATURE REVIEW

2.1 Price Fixing

Pricing is a "marketing strategy that determines the

occurrence of transactions between sellers and buyers

(Triton, 2008: 181). Transactions will only occur if

the price set for a product or service is agreed upon

by the seller and the buyer. Therefore, if a business is

able to set the price correctly, it will earn a large

profit.

2.1.1 Pricing Goals

The purpose of pricing is as follows (Machfoedz,

2010: 67):

a. Achieving Maximum Profit

b. Promoting

c. Increasing Sells

d. Reaching the return-on-investment target

e. Increase competitiveness

f. Stability Price

g. Maintaining market share

h. Prestige

2.1.2 Pricing Strategy

Price strategies are classified into three orientations

(Ma'ruf, 2006:570).

a. Demand Oriented

b. Cost Oriented

c. Competitiveness Oriented

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2.2 Discrimination

The word discrimination comes from the Latin word

discriminatus, which means to divide or to

differentiate. Differentiating treatment against other

people based on certain groups is discrimination

described by Banton (In Sunarto, 2004:161).

According to Dayakisni & Hudaniah (2003:228)

discrimination is behavior directed at someone based

solely on group membership they have. Furthermore,

according to Theodorson and Theodorson, (in

Fulthoni, 2009: 3) discrimination is an unequal

treatment of individuals, or groups, based on

something, usually categorical, or distinctive

attributes, such as based on race, ethnicity, religion,

or membership social classes.

2.3 Dual Pricing

Bishop and Colwell (1989) state that price

discrimination is a form of behavior consistent with

profit maximization called price discrimination. Price

discrimination is the practice of charging buyers

different prices, according to how responsive various

consumers are to certain goods or services to price

changes. Lancaster and Withey (2006; 153) on the

marketing dimension state that

segmented/differential pricing (price discrimination)

is a form where companies will often adjust their base

prices to allow for differences in customers, products,

locations, times/seasons and so on. Basically, the

company sells its product in two or more processes,

although the price difference is not always based on

the cost difference. Often known as price

discrimination, this price adjustment approach can be

very effective in maximizing a firm's demand and

revenue.

2.3.1 Economic Value Dual pricing/Price

Discrimination

Price discrimination theory is used by economists

specifically to identify only the circumstances in

which different consumers show different responses

to prices: that is, where there are different price

elasticities. Price discrimination is the practice of

charging different prices for different units of a single

product when the price differences are not justified by

differences in production/supply costs. For price

discrimination to work, companies must be able to

control their own prices. There should be different

price elasticity of demand in different markets - they

may reflect different preferences, information and

perceptions about the product, as well as incomes and

tastes. No dot should be included after the section title

number.

2.3.2 Types of Dual Pricing/ Price

Discrimination

1. First-Degree Price Discrimination

In the Managerial Economics Module of the

UNINUS Faculty of Economics-2019 written by

Wahdi Suardi, it is stated that in the first-degree price

discrimination (FPD), the price is set differently for

each number of product units or for each consumer

and the price set is exactly the same as the maximum

price that consumers are willing to pay. to pay it

(willing to pay = WTP). So prices are set differently

for the purchase of 1 unit, 2 units, 3 units and so on,

or graphically the prices are set differently along the

demand curve facing the firm.

Figure 2: First-Degree Price Discrimination.

2. Second-Degree Price Discrimination

Monopoly firm/producer sells output to different

people at different prices. In this case each individual

who buys the same amount of goods pays the same

price. Thus, prices differ between units of goods, but

not across people (Varian, 1996). Second degree price

discrimination, also known as multiple-part pricing,

involves setting different prices for different

quantities or charging individuals different prices

according to the quantity purchased.

3. Third-Degree Price Discrimination

This type of price discrimination occurs when a

monopolist sells output for different prices to

different people, but each unit of output sold to a

particular person is sold at the same price. This is the

most common form of price discrimination.

Examples include: student discounts, senior citizens

discounts and so on (Varian, 1996).

Dual Pricing Strategy in Increasing the Income of Souvenir Traders in Tomok Village Samosir Regency

163

2.4 Fixing Dual Pricing

Pricing discrimination is a tactic of selling a product

or service at two or more prices, while the amount of

the price difference is not always proportional to the

amount of the cost difference.

2.5 Dual Pricing Impact

According to Maria Fouche & B. Com Honors (2005;

40) the specific effect of price discrimination depends

on the type of price discrimination practiced by the

organization/producer. This depends on what the

organization/producer can learn or know about the

price elasticity of buyers. It is possible for an

organization to engage in this practice, regardless of

the type of price discrimination. Price discrimination

has several effects, namely:

1. Effect on distribution and efficiency

2. Social effects

3. Effect on economic well-being

4. Effect on the efficiency of the economic system

5. Effects on sellers (producers) and buyers

3 RESEARCH METHODS

The research was conducted for 1 year, by choosing

the research location in Tomok Tourism Village,

Samosir Regency. Tomok Tourism Village is the

center of the souvenir trade area in Samosir Regency

and has become one of the icons of Samosir Regency.

In addition to these factors, the practice of price

discrimination that occurs in this area is the main

factor why choose this location as the object of

research. This research is a mix method using primary

data and secondary data. Primary data were obtained

by means of interviews, observations and

questionnaires. While secondary data obtained from

related agencies. The copyright form is located on the

authors’ reserved area.

4 RESULTS AND DISCUSSION

Tomok is a small village located on the east coast of

Samosir Island, Lake Toba, North Sumatra. From

Medan this place takes approximately 4-5 hours to

reach Parapat by chartered car or inter-city bus.

Another hour extra to cross from Ajibata to Tomok.

This village is very dependent on the lives of its

people in the fields of agriculture, trade and tourism.

The village, which is not too large in size, seems to

have had enough of the influence of modernity among

its people. This is evidenced by the comparison

between tombs, old churches, motorized rickshaws

and the lives of the people who quite master the use

of English when meeting foreign tourists.

4.1 Tomok Attractions

Tomok tourist village is divided into two rural areas,

namely Tomok Induk and Tomok Parsaoran. Tomok

Tourism Village is known for its megalithic heritage.

Based on the report from the Central Bureau of

Statistics of Toba Samosir – Simanindo District in

figures (2018), some of the popular tourist attractions

in Tomok are:

1. Grave On the rock

2. Sigale-gale statue

3. Grave of King Sidabutar

4. Museum Batak

5. Big tombs like the Tomb of King Sidabutar

and his family

6. Tomok Rock Chair

7. Elephant Statue

8. HKBP Church Resort Tomok

9. Lake Toba Tourism

10. Traditional Restaurant Tour

4.2 Dual Pricing Tourist Prices on

Souvenir Products at Tomok

Tourism Village

Although case studies both qualitative and

quantitative analysis of the practice of price

discrimination in the Tourism Industry are still very

limited, it can be said that the tourism industry is

closely related to price discrimination. In essence,

price discrimination is where the producer or business

actor charges different prices to various groups of

consumers for more or less the same goods or

services.

4.2.1 Souvenir Product Price Discrimination

in Tomok Tourism Village as

First-Degree Price Discrimination

By considering the characteristics or indicators of

First-Degree Price Discrimination, the author

concludes that the practice of price discrimination

carried out by souvenir traders in Tomok Tourism

Village is included in this group. When examined

more deeply, at first glance there is no significant

difference between whether the practice of price

discrimination in the Tomok Tourism Village is price

discrimination at the first level or price discrimination

ICOSOP 2022 - International Conference on Social and Political Development 4

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at the third level. Where, price discrimination of

degree 1 is carried out by applying different prices for

each consumer based on the reservation price

(Willingness To Pay / WTP). Each consumer is

distinguished by the purchasing power of each

consumer. While price discrimination of the 3rd

degree Price discrimination of the 3rd degree is

carried out by applying different prices for each group

of consumers based on the reservation price of each

group of consumers.

Table 1: Estimation of the difference in the price of

souvenir products offered to different groups of buyers in

the Tomok Tourism Village.

Grade 3 price discrimination is carried out

because the company/producer does not know the

reservation price of each consumer but knows the

reservation price for the consumer group. Consumer

groups can be distinguished by location, geography,

and consumer characteristics such as age, gender,

occupation, and others. In another sense, in the third

level of nutrient discrimination, consumers are

grouped based on certain attributes, such as social and

economic background.

4.2.2 Determination of Price Discrimination

for Souvenir Products in Tomok

Tourism Village

Pricing discrimination is a tactic of selling a product

or service at two or more prices, while the amount of

the price difference is not always proportional to the

amount of the cost difference. In determining the

price discrimination carried out by souvenir traders in

the Tomok Tourism Village, namely:

1. Determine the target market

2. Divide the target market into smaller consumer

segments,

3. Estimated demand from each consumer,

whether a consumer segment is willing to pay at a

certain price level or not

4. Identify the level consumers are willing to pay

5. Determine the price for each segment

4.3 Dual Pricing Tourist Prices on

Souvenir Products at Tomok Tourism

Village

The tendency of respondents' answers can be seen

from the form of descriptive statistics of each

variable. With descriptive analysis, it can be seen that

the respondents' views are low or high on each of the

variables being studied.

Table 2: Descriptive Analysis Scale

From the results of the calculation of descriptive

analysis found the average value of the variable X as

much as 3.75. From these results, it can be concluded

that respondents' perceptions of the practice of Dual

pricing in Tomok Tourism Village are quite high

(3.41 – 4.20 = high) or in other words the majority

agree on the practice of price discrimination applied

to tourists in Tomok Tourism Village.

Based on the results of the research and data

processing studies that have been described

previously, it can be concluded that the practice of

Dual pricing is a strategy implemented by souvenir

swords in Tomok Tourism Village to increase their

income. The practice of dual pricing is also well

realized by tourists and thinks it is still at a reasonable

level. Although not regulated by the government, the

self-pricing by traders is still a question of how the

price is set by traders and why tourists do not object

to such unilateral determination. However, in the

context of economic development, profit is the main

goal of traders to be able to preserve local products

which are the mainstay of regional income and the

traders themselves.

Product

Suggested

Price

(Rp.)

Domestic

tourist

Foreign

Tourist

T-Shirt

Lake

Toba

40.000 –

50.000

70.000 –

80.000

90.000 –

150.000

Shirt Batik

Toba

45.000 –

55.000

85.000 –

95.000

100.000 –

170.000

Wood

Bracelet

5.000

10.000 –

20.000

25.000 –

50.000

Bracelet

Plastic

4.000

8.000 –

15.000

20.000 –

30.000

Tiny Statue

60.000 –

80.000

90.000 –

140.000

150.000 –

240.000

Wood Bag

Lake Toba

50.000 –

70.000

75.000 –

110.000

110.000 –

210.000

Miniature

House Little

Bata

60.000 –

80.000

90.000 –

140.000

150.000 –

240.000

Gorga Batak

Rope

10.000 –

15.000

10.000 –

25.000

25.000 –

55.000

Scale

Data

Class Category

11,00

–

1,80 Ver

Low

21,81

–

2.60 Low

32,61

–

3,40 Mediu

43,41

–

4,20 Hi

5 4,21 – 5,00 Very High

Dual Pricing Strategy in Increasing the Income of Souvenir Traders in Tomok Village Samosir Regency

165

ACKNOWLEDGEMENTS

This research was funded and supported by the

Research Institute of the University of North Sumatra

through the Young Lecturer Scheme Research

Funding in 2021.

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