17-1

Pricing of Services

▪ Three Key Ways that Service Prices Are Different

for Consumers

▪ Approaches to Pricing Services

▪ Pricing Strategies that Link to the Four Value

Definitions
 17-2

Pricing of Services

▪ Discuss three major ways that service prices are perceived

differently from goods prices by customers.

▪ Articulate the key ways that pricing of services differs from

pricing of goods from a company’s perspective.

▪ Demonstrate what value means to customers and the role

that price plays in value.

▪ Describe strategies that companies use to price services.

▪ Give examples of pricing strategy in action.

 17-3

Pricing Quiz

▪ Which dentist would you choose for a filling in

your tooth?
Dentist Cost for Distance Wait Period Time in Anesthesia
Filling to Dentist for an Waiting
Appointment Room
A INR 3000 15 Kms 3 Weeks 1.5 hour None

B INR 5000 15 Kms 1 Week 0.5 hour Novocain

C INR 7500 3 Kms 1 Week 1 hour Novocain

D INR 12000 3 Kms 1 Week No wait Nitrous Oxide

& Novocain
 17-4

Customer Often Lack of Knowledge of Service

Prices
▪ Customers often lack reference prices for
service
▪ Service variability limits knowledge
▪ Providers are unwilling to estimate prices
▪ Individual customer needs vary
▪ Collection of price information by customers is
difficult
▪ Prices are not visible
 17-5

The Role of Non-monetary Price

▪ Time costs
▪ Search costs
▪ Convenience costs Do you trade time for money?

▪ Psychological costs
 17-6

Price as an Indicator of Service Quality

Can price attract some

customers?
 17-7

Price as an Indicator of Service Quality

Infers High Quality Service

Infers Low Quality Service

 17-8

Three Basic Marketing Price Structures and

Challenges for Services
 17-9
A Customer-Focused Approach to
The Pricing Process

Understand Customer Value

Determine Demand based on

Competition and Offering

Estimate Cost, Revenues and

LTV

Establish a Pricing Structure

and Level

Set Final Price

 17-10

Four Customer Definitions of Value

 17-11

Pricing Strategies
When the Customer Defines Value as Low Price
 Pricing Strategies 17-12

When the Customer Defines Value as Everything

Wanted in a Service
 Pricing Strategies 17-13

When the Customer Defines

Value as Quality for the Price Paid
 17-14
Pricing Strategies When the Customer Defines Value as
All that Is Received for All that Is Given
 17-15

Summary of Service Pricing Strategies for

Four Customer Definitions of Value