Pricing Services

The key to making the sale is to communicate VALUE! Do it strongly that the price seems reasonable in relation to the product or service you are offering. A Customer perception of what is a reasonable price is more important than what you want to charge for your product or service. And the customer decides whats reasonable based on perceived value for money, not price. Its creating this perception of value that tells the customer- the price is right.

Key Characteristics of Pricing in Services

Price is a measure of quality in services- the higher the price the better is the service Non-monetary costs and pricing like time cost, search cost, psychological cost and convenience cost Difficulty in comparing prices of services: Airline companies charge different prices for same destination.

Key Characteristics of Pricing in Services

Prices vary with demand

Pricing Objectives

Survival Present Profit maximization Present revenue maximization Prestige Product quality leadership

Approaches to pricing services

Cost Based Pricing: Cost-plus pricing/basic cost covering Contribution Pricing Working Back method/ expected return

Approaches to pricing services

Market-Oriented Pricing/ DemandBased Pricing Market skimming Penetration Pricing Price discrimination Pricing to meet customer expectations Discount and sales

Approaches to pricing services

Competition-Based Pricing: Destroyer Pricing Price matching/Going rate pricing Price bidding/Close bid pricing

Demand Variation and Capacity Constraints

Common Strategies are: Differential pricing Non-peak demand Complementary services Reservation systems Part-time employees Peak-time efficiency Increased consumer participation Shared services