Chapte

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
 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.
 Figure 16.2
Three Basic Price Structures and
Difficulties Associated with Usage for Services
PROBLEMS:
1. Costs difficult to trace
PROBLEMS: 2. Labor more difficult to
1. Small firms may charge too Co price than materials
little to be viable st
-B

d n-
2. Heterogeneity of services as

se tio
limits comparability ed

Ba peti
m
Co

d- Ba sed
De man

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
 Figure 16.3

Four Customer Definitions of Value

Value is everything
Value is low price. I want in a service in
terms of benefit

Value is the Value is all that

quality I get for I get for all
the price I pay. that I give.
 Figure 16.4

Pricing Strategies When the

Customer Defines Value as Low Price

Value is low price.

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