Pricing zethmal
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1. The document discusses different ways customers perceive value in services and pricing strategies associated with each perception of value. 2. It identifies four common ways customers define value: low price, getting everything wanted, quality for the price paid, and all received for all given. 3. The document then outlines specific pricing strategies service providers can use that correspond with each of the four customer definitions of value.
Pricing zethmal
- 1. McGraw-Hill © 2000 The McGraw-Hill Companies 1 SMSM Unit-2 PRICING OF SERVICES
- 2. McGraw-Hill © 2000 The McGraw-Hill Companies 2 SM Three Key Ways That ServiceThree Key Ways That Service Prices Are Different ForPrices Are Different For ConsumersConsumers 1. Customer Knowledge of Service Prices Reference Price: A price point in memory for a good or a service -Reasons for difference between reference and actual price: a) Service variability limits knowledge -Life Insurance -Medical Checkup
- 3. McGraw-Hill © 2000 The McGraw-Hill Companies 3 SM Three Key Ways That ServiceThree Key Ways That Service Prices Are Different ForPrices Are Different For ConsumersConsumers b) Providers are unwilling to estimate prices -Legal and medical service providers c) Individual customer needs vary -Hairstylist’s service and hotel room d) Collection of price information is overwhelming in services -Display in products e) Prices are not visible -Financial services
- 4. McGraw-Hill © 2000 The McGraw-Hill Companies 4 SM Three Key Ways That ServiceThree Key Ways That Service Prices Are Different ForPrices Are Different For ConsumersConsumers 2. Role of Nonmonetary Cost a) Time cost -Waiting -Interaction a) Search cost b) Convenience cost c) Psychological cost -Fear of not understanding -Fear of rejection -Fear of outcome
- 5. McGraw-Hill © 2000 The McGraw-Hill Companies 5 SM Three Key Ways That ServiceThree Key Ways That Service Prices Are Different ForPrices Are Different For ConsumersConsumers 3. Price as an indicator of service quality
- 6. McGraw-Hill © 2000 The McGraw-Hill Companies 6 SM Pricing ObjectivesPricing Objectives • Revenue oriented objectives • Operation oriented objectives • Patronage oriented objectives
- 7. McGraw-Hill © 2000 The McGraw-Hill Companies 7 SM Three Basic Price Structures/PricingThree Basic Price Structures/Pricing Approaches andApproaches and Difficulties Associated with Usage forDifficulties Associated with Usage for ServicesServices Demand-Based Cost-Based Competition- Based PROBLEMS: 1. Costs difficult to trace 2. Labor more difficult to price than materials 3. Costs may not equal value PROBLEMS: 1. Small firms may charge too little to be viable 2. Heterogeneity of services 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
- 8. McGraw-Hill © 2000 The McGraw-Hill Companies 8 SM Four Meanings of Perceived ValueFour Meanings of Perceived 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”
- 9. McGraw-Hill © 2000 The McGraw-Hill Companies 9 SM Four Meanings ofFour Meanings of Perceived ValuePerceived Value 1. Value is low price -For dry cleaning: “Value means the lowest price” - For airline travel: “Value is when airline tickets are discounted”
- 10. McGraw-Hill © 2000 The McGraw-Hill Companies 10 SM Four Meanings ofFour Meanings of Perceived ValuePerceived Value 2. Value is whatever I want in a product or service -For an MBA degree:“Value is the very best education I can get” - For medical services:“Value is high quality”
- 11. McGraw-Hill © 2000 The McGraw-Hill Companies 11 SM Four Meanings ofFour Meanings of Perceived ValuePerceived Value 3. Value is the Quality I get for the Price I pay -For a hotel for vacation:“Value is price first and quality second” - For a hotel for business travel:“Value is the lowest price for a quality brand”
- 12. McGraw-Hill © 2000 The McGraw-Hill Companies 12 SM Four Meanings ofFour Meanings of Perceived ValuePerceived Value 4. Value is what I get for what I give -For a housekeeping service: “Value is how many rooms I can get cleaned for what the price is” - For a hairstylist:“Value is what I pay in cost and time for look I get”
- 13. McGraw-Hill © 2000 The McGraw-Hill Companies 13 SM Pricing Strategies When thePricing Strategies When the Customer Defines Value as Low PriceCustomer Defines Value as Low Price “Value is Low Price” Discounting Odd Pricing Synchro-pricing Penetration Pricing
- 14. McGraw-Hill © 2000 The McGraw-Hill Companies 14 SM Pricing Strategies When thePricing Strategies When the Customer Defines Value asCustomer Defines Value as Everything Wanted in a ServiceEverything Wanted in a Service “Value is Everything I Want in a Service” Prestige Pricing Skimming Pricing
- 15. McGraw-Hill © 2000 The McGraw-Hill Companies 15 SM Pricing Strategies When thePricing Strategies When the Customer Defines Value asCustomer Defines Value as Quality for the Price PaidQuality for the Price Paid “Value is the Quality I Get for the Price I Pay” Value Pricing Market Segmentation Pricing
- 16. McGraw-Hill © 2000 The McGraw-Hill Companies 16 SM Pricing StrategiesPricing Strategies When the Customer Defines Value asWhen the Customer Defines Value as All that is Received for All that is GivenAll 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
- 17. McGraw-Hill © 2000 The McGraw-Hill Companies 17 SM Summary of Service Pricing StrategiesSummary of Service Pricing Strategies for Four Customer Definitions of Valuefor 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” Discounting Odd Pricing Synchro-pricing Penetration Pricing Prestige Pricing Skimming Pricing Value Pricing Market Segmentation Pricing Price Framing Price Bundling Complementary Pricing Results-based Pricing