Pricing of services
Three Key Ways that Service Prices Are Different for Consumers Approaches to Pricing Services Pricing Strategies that Link to the Four Value Definitions 1-2
Three Key Ways that Service Prices Are Different for Consumers Customer knowledge of service prices The role of non-monetary costs Price as an indicator of service quality
Pricing Quiz What do you know about the prices of these services? A Life Insurance Policy One year subscription in a gym An ayurvedic spa A regular dental check-up A hotel room in Nainital (Lake view, AC room) An airline ticket from Delhi-Mumbai in December, 2014
Customer Often Lack of Knowledge of Service Prices Customers often lack reference prices for service Service variability limits knowledge Providers are unwilling to estimate prices Individual customer needs vary Collection of price information by customers is difficult Prices are not visible 15-5
The Role of Nonmonetary Costs Time costs Search costs Convenience costs Psychological costs Do you trade time for money? 15-6
Price as an Indicator of Service Quality Infers High Quality Service Infers Low Quality Service 15-7
Approaches to Pricing Services Cost-based a company determines expenses from raw materials and labour, adds amounts or percentages for overhead and profit, and thereby arrives at the price Competition-based Focuses on prices charged by other firms in the same industry Demand-based Involves setting prices consistent with customer perceptions of value
Three Basic Marketing Price Structures and Challenges for Services 15-9
Four Customer Definitions of Value 15-10
Pricing Strategies When the Customer Defines Value as Low Price 15-11
Pricing Strategies When the Customer Defines Value as Everything Wanted in a Service 15-12
Pricing Strategies When the Customer Defines Value as Quality for the Price Paid 15-13
Pricing Strategies When the Customer Defines Value as All that Is Received for All that Is Given 15-14
Summary of Service Pricing Strategies for Four Customer Definitions of Value 15-15