+

SERVICES

MARKETINGCHAPTER 5

THE PRICING OF SERVICES

+HIGHLIGHTS

Perceptions on price

Segmentation

Differentiation premium model

+OUTCOME

Understand the difference between goods and services pricing

How to create services segmentation

Setting the right price

+WHAT IS PRICE?

Monetary price: actual dollar price paid by customers

With additions

1. Time costs

2. Energy costs

3. Psychic costs

4. Service value

5. Personnel value

6. Image value

+PERCEPTION OF VALUE:

CUSTOMERS’ PERPECTIVE ON

PRICE Total customer value that extends beyond monetary value

Price sensitivity

+CUSTOMERS’ PRICE

SENSITIVITY

Perceived substitute effect

Unique value effect

Switching costs effect

Difficult comparison effect

Price quality effect

Expenditure effect

End-benefit effect

Shared-cost effect

Fairness effect

Inventory effect (delaying cost)

+PRICING: SERVICE PROVIDERS’

PERSPECTIVE

1. Perfect price knowledge

2. Competition

3. Product/offering comparison

+SETTING THE RIGHT PRICE

Step 1: know costs

Step 2: know competitors’ costs

Step 3: Identifying fundamental pricing factors

Step 4: Identify market forces

Step 5: Pricing strategy

Step 6: Pricing decision

+PRICE SEGMENTATION

The use of different price brackets where different segments

are prepared to pay different prices

+EFFECTIVE PRICE

SEGMENTATION

1. Identifiable

2. Possible to price differently

3. Respond differently to different groupings

4. Customers should not be confused

5. Cost effective

+EMERGING PRICING

STRATEGIES

1. Price leadership

Skimming (not so common)

Penetration (very common)

2. Fixed Vs. Variable pricing

Yield management (mainstay)

Variable pricing (to obtain max return)

Overbooking policy (not common in Malaysia)

+EMERGING PRICING

STRATEGIES

3. Differentiation through price

Brand value: intangible amount that an organization places on

its brand name

Price bundling: several service offerings are combined &

offered at one price, often discounted

Cross-selling: trying to sell a second or ancillary product once

the first purchase has been made

Special event pricing: limited to the time span of a special event

+4. THE DIFFERENTIATION PREMIUM

MODEL

Ability to differentiate itself from competitors

“Pay more, you get more”

Usually, high price indicates a degree of “exclusivity”

Raising the general level of clientele

High levels of service quality

High level of tangible physical surrounding

‘snob’ value

+THANK YOU

Q&A