1. Afjal Hossain Assistant Professor Department of Marketing
MKT 5207 Service Marketing
Afjal Hossain
Assistant Professor
Department of Marketing

2. Chapter 17 Pricing of Services

3. Wait Period for an Appointment
Pricing Quiz
Which dentist would you choose for a filling in your tooth?
Dentist
Cost for Filling
Distance to Dentist
Wait Period for an Appointment
Time in Waiting Room
Anesthesia A
$50
15 miles
3 Weeks
1.5 hour
None B
$75
1 Week
.5 hour
Novocain C
$125
3 miles
1 hour D
$200
No wait
Nitrous Oxide
& Novocain

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

5. The Role of Non-monetary Price
Time costs
Search costs
Convenience costs
Psychological costs
Do you trade time for money?

6. Price as an Indicator of Service Quality
Can price attract some customers?

7. Price as an Indicator of Service Quality
Infers High Quality Service
Infers Low Quality Service

8. Three Basic Marketing Price Structures and Challenges for Services
1. Costs difficult to trace.
2. Labor is more difficult to
price than materials.
3. Costs may not equal the value that customers perceive the services are worth.
Challenges:
1. Small firms may charge too
little to be viable.
2. Heterogeneity of services
limits comparability.
3. Prices may not reflect customer value.
Cost-based
Competition-
based
Demand-based
Challenges:
1. Monetary price must be adjusted to reflect
the value of non-monetary costs.
2. Information on service costs is less available to
customers; hence, price may not be a central factor.
Figure 17.1

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

10. Four Customer Definitions of Value
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.
Figure 17.2

11. Pricing Strategies When the Customer Defines Value as Low Price
Value is low price
Discounting
Odd pricing
Synchro-pricing
Penetration pricing
Figure 17.3

12. Value is everything I want in a service
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
Figure 17.4

13. 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
Figure 17.5

14. Value is all that I get for all that I give
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
Figure 17.6

15. Summary of Service Pricing Strategies for Four Customer Definitions of Value
Value is low price
Discounting
Odd pricing
Synchro-pricing
Penetration pricing
Value is everything
I want in a service
Prestige pricing
Skimming pricing
Value is the quality
I get for the price I pay
Value pricing
Market segmentation pricing
Value is all that I get
for all that I give
Price framing
Price bundling
Complementary pricing
Results-based pricing
Figure 17.7