Week 7 DB Service
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Chapter_15.pptx
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
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
Chapter
15
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
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.
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
Pricing Quiz (see Exhibit 15.1)
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 | $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 |
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
Three Ways That Service Prices are Perceived Differently from Goods Prices
Customer knowledge of service prices
The role of nonmonetary costs
Price as an indicator of service quality
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
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
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
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-‹#›
Price as an Indicator of Service Quality
Can price attract some customers?
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
Price as an Indicator of Service Quality
Infers Low Quality Service
Infers High Quality Service
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Chapter 15-‹#›
Three Basic Marketing Price Structures and Challenges for Services
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
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.
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
Four Customer Definitions of Value (Figure 15.2)
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
Pricing Strategies: Value as Low Price (Figure 15.3)
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
Pricing Strategies: Value as Everything Wanted in a Service (Figure 15.4)
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
Pricing Strategies: Value as Quality for the Price Paid (Figure 15.5)
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
Pricing Strategies: Value as All that Is Received for All that Is Given (Figure 15.6)
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
Summary of Service Pricing Strategies for Four Definitions of Value (Figure 15.7)
McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved
Chapter 15-‹#›
Multimedia Lecture Support Package to Accompany Services Marketing
