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Sm7 s04 Prices RK
Sm7 s04 Prices RK
Chapter 6:
Setting Prices and
Implementing
Revenue Management
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 1
Overview Of Chapter 6
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 2
Effective Pricing is
Central to Financial Success
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 3
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 4
Objectives for Pricing of Services
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 5
Pricing Strategy
As Represented by the Pricing
Tripod
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 6
The Pricing Tripod
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 7
Value to customer
Competition
Costs
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 8
Three Main Approaches to Pricing
• Pricing
implications of cost
analysis
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 9
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 10
Value-Based Pricing:
Understanding Net Value
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 11
Value-Based Pricing:
Strategies for Enhancing Net Value
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 12
Defining Total User Cost
Money Purchase
Search Costs*
Time Operating Costs
Necessary
Post Purchase Costs* Follow-up
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 13
Competition-Based Pricing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 14
Competitive-Based Pricing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 15
Revenue Management:
What it is and How it works
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 16
Maximizing Revenue from
Available Capacity at a Given Time
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 17
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 18
Price Elasticity
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 19
Product-Related Fences
Rate Fences Examples
Basic Product Class of travel (Business/Economy class)
Size and furnishing of a hotel room
Seat location in a theater
Amenities Free breakfast at a hotel, airport pick up, etc.
Free golf cart at a golf course
Service Level Priority wait listing
Increase in baggage allowances
Dedicated service hotlines
Dedicated account management team
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 20
Key Categories of Rate Fences:
Non Physical Fences
Transaction Characteristics
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 21
Consumption Characteristics
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 22
Key Categories of Rate Fences:
Non Physical Fences
Buyer Characteristics
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 23
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 24
Ethical Concerns in Service
Pricing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 25
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 26
Designing Fairness into
Revenue Management
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 27
Putting Service
Pricing into Practice
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 28
Pricing Issues:
Putting Strategy into Practice
3. Who should
1. How much to 2. What basis
collect
charge? for pricing?
payment?
7. How to
communicate
prices?
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 29
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 30
Putting Service Pricing into Practice
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 31
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 33
Summary
Revenue management
Maximizes revenue from a given capacity at a point in time
Manage demand and set prices for each segment closer to
perceived value
Use of rate fences
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 34
@RamyKhodeir
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 6– Page 35