Chapter 17: Pricing of services Flashcards
Basic types of Pricing (3)
- Cost-based pricing
- Competitions-based pricing
- Demand-based pricing
Reference price
A reference price is a price point in memory for a good or a service; it can consist of the price last paid, the price most frequently paid or the average of all prices customers have paid for similar offerings.
Non-monetary costs
Represent other sources of sacrifice perceived by consumers when buying and using a service. Time costs, search costs and psychological costs often enter into the evaluation of whether to buy or rebuy a service, and may at times be more important concerns than monetary price.
Value is low price - ‘Value is price, which one is on sale’ (5)
- Discounting pricing
- Odd pricing
- Synchro pricing
- Penetration pricing
- Dynamic pricing
Value is everything I want in a service - ‘Value is the best performance’ (2)
- Prestige pricing
- Skimming pricing
Value is all I get for all that I give - ‘Value is how many rooms I can get cleaned for what the price is’ (4)
- Price framing
- Price bundling
- Complementary pricing
- Results-based pricing
Value is the quality I get for the price I pay - ‘Value is the lowest price for a quality brand’ (2)
- Value pricing
- Market segmentation pricing
Discounting pricing
Service providers offer discounts or price cuts to communicate to price sensitive buyers that they are receiving value.
Odd pricing
Odd pricing is the practice of pricing services just below the exact Euro amount to make buyers perceive that they are getting a lower price.
Synchro pricing
Synchro-pricing is the use of price to manage demand for a service by capitalizing on customer sensitivity to prices. Time, place, quantity and incentive differentials have all been used effectively by service firms.
Penetration pricing
Penetration pricing is a strategy in which new services are introduced at low prices to stimulate trial and widespread use.
Dynamic pricing
Is a form of technology-led synchro-pricing frequently used as part of a revenue management/yield management model. It involves the buying and selling of goods and services in markets in which prices move quickly in response to supply and demand fluctuations.
Group buying sites
Is a concept that the greater the number of people who want to buy the service, the lower the price will be for everyone. E.g. Groupon
Aggregators
(comparison websites) Are website portals or search utilities that enable clients to gain several
quotes or prices via an electronic e-quote form.
Online auction sites
Used for auctioning products rather than services. the highest bid at the end of the auction period gets the meal package at that price. E.g. Vakantie veilingen.
Prestige pricing
Is a special form of demand-based pricing by service marketers who offer high-quality or status services. Starbucks
Skimming pricing
A strategy in which new services are introduced at high prices with large promotional expenditures, is an effective approach when services are major improvements over past services. Customers are more concerned about obtaining the service than about the costs of the service.
Value pricing
The widely used term value pricing has come to mean ‘giving more for less’. In current usage it involves assembling a bundle of services that are desirable to a wide group of customers and then pricing them lower than they would cost separately.
Market segmentation pricing
a service marketer charges different prices to groups of customers for what are perceived to be different quality levels of service, even though there may not be corresponding differences in the costs of providing the service to each of these groups. E.g. student discounts.
Price framing
Because many customers do not possess accurate reference prices for services, services marketers are more likely than product marketers to organize price information for customers so they know how to view it.
Price bundling
Bundling, which means pricing and selling grouped rather than individual services, has benefits to both customers and service companies.
Complementary pricing (3)
Captive pricing: offers a base service and then provides the services needed to continue the service.
Two-part pricing: printers are normally cheap, but they make up the loss with higher prices for the ink, paper or maintenance costs.
Loss leadership: when providers place a familiar service on special, largely to draw the customer to the store and then reveal other levels of service available at higher prices.
Results-based pricing
Service in which the outcome is very important, but uncertainty is high, the most relevant aspect of value is the result of the service. E.g. universities, students most value is getting a job after graduation.
