Chapter 15-1

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 Chapter
Chapter 15-2

Pricing of Services 15

 Three Key Ways that Service Prices Are

Different for Consumers

 Approaches to Pricing Services

 Pricing Strategies that Link to the Four Value

Definitions

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 Chapter 15-3

Objectives for Chapter 15:

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.

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 Chapter 15-4

Pricing Quiz (see Exhibit 15.1)

 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 $75 15 miles 3 Weeks 1.5 hours None

B $100 15 miles 1 Week 0.5 hour Novocain

C $150 3 miles 1 Week No wait Novocain

D $225 3 miles 1 Week No wait Nitrous Oxide

& Novocain

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 Chapter 15-5

Three Ways That Service Prices are

Perceived Differently from Goods Prices
1. Customer knowledge of service prices

2. The role of nonmonetary costs

3. Price as an indicator of service quality

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 Chapter 15-6

Customer 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 for services is
difficult
 Prices are not visible

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 Chapter 15-7

The Role of Nonmonetary Costs

 Time costs
 Search costs
 Convenience costs
 Psychological costs

Do you trade time for

money?
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 Chapter 15-8

Price as an Indicator of Service Quality

Can price attract some

customers?

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 Chapter 15-9

Price as an Indicator of Service Quality

Infers High Quality

Service

Infers Low Quality Service

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 Chapter 15-10

Three Basic Marketing Price Structures

and Challenges for Services

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 Chapter 15-11

How Does Price Relate to Service

Value?
 What is service value?
 Mental tradeoff of perceived quality and
perceptions of sacrifice
 Can include both monetary and non-monetary
sources of sacrifice
 But it may mean different things to different
people!
 Only demand-based pricing involves
setting prices based on what the customer
will pay for the service.
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 Chapter 15-12

Four Customer Definitions of Value

(Figure 15.2)

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 Chapter 15-13

Pricing Strategies: Value as Low Price

(Figure 15.3)

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 Chapter 15-14

Pricing Strategies: Value as Everything

Wanted in a Service (Figure 15.4)

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 Chapter 15-15

Pricing Strategies: Value as Quality for the

Price Paid (Figure 15.5)

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 Chapter 15-16
Pricing Strategies: Value as All that Is
Received for All that Is Given (Figure 15.6)

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 Chapter 15-17

Summary of Service Pricing Strategies for

Four Definitions of Value (Figure 15.7)

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