Chapter

16 Pricing of Services

• Three Key Ways Service Prices are Different

for Consumers
• Approaches to Pricing Services
• Pricing Strategies That Link to the Four
Value Definitions

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 Objectives for Chapter 16:
Pricing of Services
• Discuss three major ways that service prices differ
from goods prices for customers.
• Demonstrate what value means to customers and
the role that price plays in value.
• Articulate the key ways that pricing of services
differs from pricing of goods.
• Delineate strategies that companies use to price
services.
• Give examples of pricing strategy in action.
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 Figure 16.1
Customers Will Trade Money for
Other Service Costs

= or or

Time Effort Psychic Costs

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 Figure 16.2
Three Basic Price Structures and
Difficulties Associated with Usage for Services

PROBLEMS: PROBLEMS:
1. Costs difficult to trace
1. Small firms may charge too
2. Labor more difficult to
little to be viable
price than materials
2. Heterogeneity of services
3. Costs may not equal value
limits comparability
3. Prices may not
reflect customer
value

PROBLEMS:
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

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 Figure 16.3
Four Customer Definitions of Value

Value is low price. Value is everything

I want in a service.

Value is the Value is all that

quality I get for I get for all
the price I pay. that I give.

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 Figure 16.4
Pricing Strategies When the
Customer Defines Value as Low Price

Value is low price.

• Discounting
• Odd pricing
• Synchro-pricing
• Penetration Pricing

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 Figure 16.5
Pricing Strategies When the Customer Defines
Value as Everything Wanted in a Service

Value is everything
I want in a service.

• Prestige pricing
• Skimming pricing

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 Figure 16.6
Pricing Strategies When the Customer
Defines Value as Quality for the Price Paid

Value is the quality I

get for the price I pay.

• Value pricing
• Market segmentation
pricing

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 Figure 16.7
Pricing Strategies When the Customer Defines
Value as All That Is Received for All That Is Given

Value is all that I get

for all that I give.
• Price framing
• Price bundling
• Complementary pricing
• Results-based pricing

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 Figure 16.8
Summary of Service Pricing Strategies
for Four Customer Definitions of Value
Value is low price. Value is everything
I want in a service.
• Discounting
• Odd pricing • Prestige pricing
• Synchro-pricing • Skimming pricing
• Penetration Pricing

Value is the quality Value is all that I get

I get for the price I pay. for all that I give.
• Value pricing • Price framing
• Market segmentation • Price bundling
pricing • Complementary pricing
• Results-based pricing

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