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17-1

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

ChapterChapter

1717

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

17-2

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.

17-3

Pricing Quiz

Which dentist would you choose for a filling in your tooth?Dentist Cost for

FillingDistance 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 knowledgeProviders are unwilling to estimate prices Individual customer needs varyCollection 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?

17-7

Price as an Indicator of Service Quality

Infers Low Quality Service

Infers High Quality Service

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Three Basic Marketing Price Structures and Challenges for Services

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A Customer-Focused Approach to The Pricing Process

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Four Customer Definitions of Value

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Pricing Strategies When the Customer Defines Value as Low Price

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

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

17-14

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

17-15

Summary of Service Pricing Strategies forFour Customer Definitions of Value