Pricing in Services

By Nitika Sharma

What Do Customers Know

about the Prices of
Services?
Wedding
Advisor?

Nutritionist?

Movie Fee?

Doctor
Consultan
cy?

Customers Will Trade Money

for
Other Service Costs

or
Time

or
Effort

Psychic Costs

Four Customer Definitions of Valu

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

Price
Price represents the sum of the values
consumers exchange for the benefits
of possessing the product or services.
Price represents the value of the
product for the customer that he
perceived whereas it determines the
Profits for the manufactures.

Objectives of Pricing
Profit Oriented Objectives
Current Profit Maximization
Achieving ROI
Sales Related Objectives
Obtaining Desired Sales Volume
Achieving Desired Market Share
Competition Oriented Objectives
Survival
To Prevent Competition
Other Objectives
Price Stabilization
Price Leadership

Methods Of Price
Determination
Cost Based Pricing
Cost Plus Pricing
Break Even Analysis Pricing
Buyer Based Pricing
Perceived value Pricing
Differential Pricing
Competition Based Pricing
Going Rate Pricing
Seal Bid Pricing

Three Basic Price Structures and

Difficulties Associated with Usage for Services
PROBLEMS:

PROBLEMS:

Co
m
Ba pet
se itio
d n-

m
De
PROBLEMS:

ed
as
-B
st
Co

1. Small firms may charge too

little to be viable
2. Heterogeneity of services
limits comparability
3. Prices may not
reflect customer
value

-B
d
an

1. Costs difficult to trace

2. Labor more difficult to
price than materials
3. Costs may not equal value

ed
s
a

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

Summary of Service Pricing

Strategies
Value is Everything
forValue
Four
Customer Definitions
is Low Price
I Want in a Service
Discounting
of Value Prestige Pricing
Odd Pricing

Penetration Pricing

Value is the Quality

I Get for the Price I Pay
Value Pricing
Market Segmentation

Pricing

Skimming Pricing

Value is All that

I Get for All that I Give
Price Framing
Price Bundling
Complementary

Pricing
Results-based Pricing

Thank You