igtc 9 services pricing

8/3/2019 IGTC 9 Services Pricing

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Pricing of Services



Effort

=Time

or or

Psychic Costs

Customers Will Trade Money forOther Service Costs

Rs



Basic Price Structures & Difficulties Associated with Usage for Services

D e m a

n d - B a s e d

C o s t - B

a s e d

C o m p e

t i t i o n -

B a s e

d

PROBLEMS:1. Costs difficult to trace

2. Labor more difficult to

price than materials

3. Costs may not equal value

PROBLEMS:1. Small firms may charge too

little to be viable

2. Heterogeneity of services

limits comparability3. Prices may not

reflect customer

value

PROBLEMS:1. Monetary price must be adjusted to reflect

the value of non-monetary costs

2. Information on service costs less available to

customers, hence price may not be a central factor



Value is low price.Value is everything

I want in a service.

Value is thequality I get for

the price I pay.

Value is all

that

I get for all

that I give.

Customer Definitions of Value

i 6 8



Value is low price. Value is everything

I want in a service.

Value is the quality

I get for the price I pay.Value is all that I get

for all that I give.

• Discounting• Odd pricing• Synchro-pricing

• Penetration Pricing

• Prestige pricing• Skimming pricing

• Value pricing• Market segmentation

pricing

• Price framing• Price bundling• Complementary pricing• Results-based pricing

Figure 16.8

Summary of Service Pricing Strategies for FourCustomer Definitions of Value



THE FINANCIAL AND

ECONOMIC IMPACT OF

SERVICE QUALITY



The Direct Relationship betweenService and Profits

Profits?ServiceQuality



Offensive Marketing Effects of Service on Profits

ProfitsMarketShare

Reputation Sales

PricePremium

ServiceQuality



Defensive Marketing Effects of Service on Profit

Margins

Profits

Customer Retention

Costs

PricePremium

Word of Mouth

Volume of PurchasesService

Quality



Perceptions of Service, BehavioralIntentions and Profits

Customer Retention

Costs

PricePremium

Word of

Mouth

Margins

Profits

Volume of Purchases

Service BehavioralIntentions

Sales



Service Quality Spells Profits

ServiceQuality

Customer Retention

Costs

PricePremium

Word of Mouth

Margins

Profits

DefensiveMarketing

Volume of Purchases

Market

Share

Reputation

Sales

Price

Premium

OffensiveMarketing



The “80/20” Customer Pyramid

Most Profitable

Customers

Least Profitable

Customers

What segment spends more withus over time, costs less to maintain,

spreads positive word of mouth?

What segment costs us intime, effort and money yet

does not provide the returnwe want? What segment is

difficult to do business with?

Other

Customers

Best

Customers



The Expanded Customer Pyramid

Most Profitable

Customers

Least Profitable

Customers

What segment spends more withus over time, costs less to maintain,

spreads positive word of mouth?

What segment costs us intime, effort and money yet

does not provide the returnwe want? What segment is

difficult to do business with?

Gold

Iron

Lead

Platinum



Sample Measurements for the

Balanced Scorecard

Innovation andLearning Perspective

Customer

Perspective

Service Perceptions

Service Expectations

Perceived Value

Behavioral Intentions:

OperationalPerspective:

Right first time (% hits)

Right on time (% hits)

Responsiveness (% on

time)

Transaction time (hours,

days)Throughput time

Reduction in waste

Process quality

Financial Measures

Price Premium

Volume Increases

Value of Customer

Referrals

Value of Cross Sales

Long-term Value of

Customer

% Loyalty

% Intent to Switch# Customer

Referrals# Cross Sales# of Defections

Number of new products

Return on innovation

Employee skills

Time to market

Time spent talking to

customers

igtc 9 services pricing

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