MKT 5207 Service Marketing

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MKT 5207Service Marketing

• Afjal Hossain
• Assistant Professor
• Department of Marketing

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Chapter 17Pricing of Services
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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 15 miles 1 Week .5 hour Novocain
C 125 3 miles 1 Week 1 hour Novocain
D 200 3 miles 1 Week No wait Nitrous Oxide Novocain
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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

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The Role of Non-monetary Price

• Time costs
• Search costs
• Convenience costs
• Psychological costs

Do you trade time for money?
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Price as an Indicator of Service Quality
Can price attract somecustomers?
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Price as an Indicator of Service Quality
Infers High Quality Service
Infers Low Quality Service
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Three Basic Marketing Price Structures and
Challenges for Services
Challenges 1. Costs difficult to trace. 2.
Labor is more difficult to price than
materials. 3. Costs may not equal the value
that customers perceive the services are worth.
Challenges 1. Small firms may charge too
little to be viable. 2. Heterogeneity of
services limits comparability. 3. Prices
may not reflect customer value.
Cost-based
Competition- based
Demand-based
Challenges 1. Monetary price must be adjusted
to reflect the value of non-monetary
costs. 2. Information on service costs is
less available to customers hence, price
may not be a central factor.
Figure 17.1
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A Customer-Focused Approach to The Pricing
Process
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Four Customer Definitions of Value
Value is low price.
Value is everything I want in a service.
Value is all that I get for all that I give.
Value is the quality I get for the price I pay.
Figure 17.2
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Pricing Strategies When the Customer Defines
Value as Low Price

• Value is low price
• Discounting
• Odd pricing
• Synchro-pricing
• Penetration pricing

Figure 17.3
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Pricing Strategies When the Customer Defines
Value as Everything Wanted in a Service

• Value is everything
• I want in a service
• Prestige pricing
• Skimming pricing

Figure 17.4
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Pricing Strategies When the Customer Defines
Value as Quality for the Price Paid

• Value is the quality
• I get for the price I pay
• Value pricing
• Market segmentation pricing

Figure 17.5
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Pricing Strategies When the Customer Defines
Value as All that Is Received for All that Is
Given

• Value is all that
• I get for all that I give
• Price framing
• Price bundling
• Complementary pricing
• Results-based pricing

Figure 17.6
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Summary of Service Pricing Strategies forFour
Customer Definitions of Value

• Value is everything
• I want in a service
• Prestige pricing
• Skimming pricing

• Value is low price
• Discounting
• Odd pricing
• Synchro-pricing
• Penetration pricing

• Value is the quality
• I get for the price I pay
• Value pricing
• Market segmentation pricing

• Value is all that I get
• for all that I give
• Price framing
• Price bundling
• Complementary pricing
• Results-based pricing

Figure 17.7