1. Chapter 17
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
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Objectives for Chapter 17: 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.

3. Wait Period for an Appointment
Pricing Quiz
Which dentist would you choose for a filling in your tooth?
Dentist
Cost for Filling
Distance to Dentist
Wait Period for an Appointment
Time in Waiting Room
Anesthesia A
$50
15 miles
3 Weeks
1.5 hour
None B
$75
1 Week
.5 hour
Novocain C
$125
3 miles
1 hour D
$200
No wait
Nitrous Oxide
& Novocain

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

5. The Role of Non-monetary Price
Time costs
Search costs
Convenience costs
Psychological costs
Do you trade time for money?

6. Price as an Indicator of Service Quality
Can price attract some customers?

7. Price as an Indicator of Service Quality
Infers High Quality Service
Infers Low Quality Service

8. Three Basic Marketing Price Structures and Challenges for Services

9. A Customer-Focused Approach to The Pricing Process
Understand Customer Value
Determine Demand based on Competition and Offering
Estimate Cost, Revenues and LTV
Establish a Pricing Structure and Level
Set Final Price

10. Four Customer Definitions of Value

11. Pricing Strategies When the Customer Defines Value as Low Price

12. Pricing Strategies When the Customer Defines Value as Everything Wanted in a Service

13. Pricing Strategies When the Customer Defines Value as Quality for the Price Paid

14. Pricing Strategies When the Customer Defines Value as All that Is Received for All that Is Given

15. Summary of Service Pricing Strategies for Four Customer Definitions of Value