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Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

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 Chapter

Objectives for Chapter 15: Pricing of Services  Discuss three major ways that service prices are perceived differently from goods prices by customers.  Articulate the key ways that pricing of services differs from pricing of goods from a company’s perspective.  Demonstrate what value means to customers and the role that price plays in value.  Describe strategies that companies use to price services.  Give examples of pricing strategy in action. 15-3

Pricing Quiz  Which dentist would you choose for a filling in your tooth? DentistCost for Filling Distance to Dentist Wait Period for an Appointment Time in Waiting Room Anesthesia A$7515 miles3 Weeks1.5 hoursNone B$10015 miles1 Week0.5 hourNovocain C$1503 miles1 WeekNo waitNovocain D$2253 miles1 WeekNo waitNitrous Oxide & Novocain 15-4

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 Can price attract some customers? 15-7

Price as an Indicator of Service Quality Infers Low Quality Service Infers High Quality Service 15-8

Three Basic Marketing Price Structures and Challenges for Services 15-9

How Does Price Relate to Service Value?  What is service value?  Mental tradeoff of perceived quality and perceptions of sacrifice  Can include both monetary and non-monetary sources of sacrifice  But it may mean different things to different people! 15-10

Four Customer Definitions of Value 15-11

Pricing Strategies When the Customer Defines Value as Low Price 15-12

Pricing Strategies When the Customer Defines Value as Everything Wanted in a Service 15-13

Pricing Strategies When the Customer Defines Value as Quality for the Price Paid 15-14

Pricing Strategies When the Customer Defines Value as All that Is Received for All that Is Given 15-15

Summary of Service Pricing Strategies for Four Customer Definitions of Value 15-16