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Presented by Haseok Lim
To examine the pricing objectives pursued along with the pricing methods adopted by service organizations. To investigate whether the pricing objectives pursued are associated with the pricing methods adopted.
◦ Pricing Objectives and Pricing Methods . No previous research has investigated the extent to which the pricing objectives pursued are associated with the pricing methods.
Payne. Bonnici. 1991. 1997. Ansari. Woodruff. 1995. 1993. 1995. Langeard. Bateson. Table 1 Summarizes the fundamental pricing objectives – Channon. Cannon and Morgan. Palmer. 1996. Drake and Llewellyn. 1994. 1995. . 2000. 1986. Hoffman and Bateson. 1990.
competition based and demand based. ◦ Pricing of services falls into three catagories: costbased method. . Oxenfeldt (1983) defined pricing methods as the explicit steps or procedures by which firms arrive at pricing decisions.
1996) ◦ Contribution analysis (Schlissel and Chasin. Cost Based Methods: ◦ Cost plus method (Schlissel. Bateson. 1995. Ward. Zeithaml. Lovelock. 1989. 1986. Bateson. 1991. Zeithaml and Bitner. . ◦ Target return pricing (McIver and Naylor. Goetz. Meidan. ◦ Break-even analysis (Channon. 1985. Payne. 1994. Palmer. ◦ Marginal pricing (Palmer. 1996). 1986. 1996). 1977. 1993. 1995). 1994). 1985.
1986. 1993. Mitra and Capalla. Palmer. 1997. ◦ Pricing above competitors (Bonnici. 1996). Meidan. Woodruff. Palmer. 2000). Payne. . ◦ Pricing below competitors (Payne. 1993. 1996. 1994. 1994. ◦ Pricing according to the dominant price in the market (Kurtz and Clow. Zeithaml and Bitner. 1995. 1998). Competition Based Methods ◦ Pricing similar to competitors or according to the market’s average prices (Channon. 1991. 1996). 1996. Zeithaml and Bitner. Zeithaml and Bitner. Langeard.
Ratza. 1993). 1997). 1991. . Hoffman and Bateson. 1996. 1986. ◦ Value Pricing (Cahill. 1994) ◦ Pricing according to the customer needs (Bonnici. Lovelock. Demand Based Pricing ◦ Perceived Value Pricing prices (Channon. 1996. Zeithaml and Bitner.
The sample was reduced to 558 companies. insurance companies. the original sample was reduced to 464 companies. information technology companies. Service sectors were investigated in Greece ◦ Banks. . ◦ These service sectors represents B2B. the number of companies in the sectors in question was 1. B2C ◦ In 2000. and due to change in address or the closedown. transportation and shipping companies. and medical services.495. airline companies. according to ICAP’s Directory.
The companies were notified by a letter saying the objectives of the study and a week later. a telephone call was made to each company to examine the possibility of participating the study.7%) agreed to participate Appointment was made and interviews were conducted. 170 companies (36. ◦ From 464 companies. .
◦ Before using the questionnaire for data collection. (O and 1) . a detailed pretest based on personal interviews among two academics and ten practitioners was undertaken in order to increase its validity. Ten-page questionnaire. Pricing Objectives ◦ List of 28 pricing objectives and were asked to indicate using 1 to 5 scale. Pricing Methods ◦ List of 12 pricing methods and were asked to use binary scale.
(Table III) ◦ Other important objects were the cost coverage. the creation of a prestige image for the company. and the satisfaction of customer needs. ◦ Objectives related to profit. attracting of new customers. Pricing Objectives ◦ Factor Analysis was performed (Table III). ◦ Three most important are related to customers: maintenance of the existing customers. its long-term survival and the service quality leadership. sales and market share are less important .
Other researchers (Meidan and Chin. 1995. Companies tend to regard the qualitative objectives as being more significant than the quantitative ones. . Schlissel.Least important objective was discouragement of new competitors entering into the market. 1989. Morris and Fuller. 1977) said the profit related objectives are considered as being the most important ones.
. Pricing Methods ◦ Cost plus method and the pricing according to the market’s average prices.
◦ Nine logistic regression analysis were examined. ◦ Used to examine to the impact of pricing objects set on the pricing methods in the study are categorical variables while the pricing objectives are continuous variables. Target return pricing . and four were found to be statistically significant. Logistic regression analysis with the Maximum Likelihood Ratio Method was carried out.
The fundamental aim of the target return pricing method is to yield the target return on the firm’s potential investment and achieve satisfactory profit and sales. .
Service quality-related objectives and maximization of profits and sales reduced the probability of pricing according to market prices. The possibility of adopting it increases when the objectives that are pursued are associated with the competitors and the customer. .
Dominant Market Price Pricing Below Competitors .
maintaining the existing ones and satisfying their needs. Companies were pursuing qualitative rather than quantitative objectives with an emphasis being placed on attracting new customers. .
Managers responsible for pricing decisions within their firms is to move away from simplistic cost plus formulas and treat pricing from a customers point of view. ◦ Customer Orientation Managers need to continuously pay attention to competitors pricing behavior to make sure they stay in the market. .
Investigate the impact that different pricing objectives and methods have on the achievement of corporate objectives. . thus. the market structure.This research was based in Greece. future research must be in other countries. Future research may investigate the impact of the context of the organization and the impact of environmental variables such as the sector of operation.
. Increased heterogeneity associated with cross-sectional samples due to the fact that they induce negative effects on the quality of the findings.
19 (1). A. 47.The Journal of Services Marketing. K. Pricing objectives and pricing methods in the services sector. (2005). Retrieved March 23. Avlonitis. and Indounas. 2008. . J. G. from ABI/INFORM Global.