The pricing of services

Question 1

How can value be defined?

Answer 1

The buyers perception of the benefits (product/service/personnel/image) less the costs (Price/time/effort/emotion)

Question 2

What are the 3 types of pricing objectives?

Answer 2

1) Revenue
2) Operations (yield/revenue management)
3) Patronage

Question 3

What are factors which influence price sensitivity?

Answer 3

Substitutes/competitors
Unique value 
Switching costs
Ability to compare alternatives
Quality 
The $value compared with household income

Question 4

What is the criteria for effective price segmentation?

Answer 4

Different groups respond differently to price (elastic/inelastic)
Ability to segment
Customers must not be able to sell between segments
Segments must be large enough
Costs should not exceed increases to revenue
Customers should not be confused

Question 5

What are the types of service pricing?

Answer 5

Cost based
Satisfaction based
Relationship
Efficiency 
Revenue/yield management

Question 6

What does successful revenue/yield management include?

Answer 6

Knowing the range of customers at any given time and developing strategies which avoid selling units below what they are prepared to pay.

Question 7

How are revenue/yield management strategies determined?

Answer 7

Through mathematical modelling to determine the prices of each pricing bucket and how many units to allocate to each bucket. Rate fences are used

Question 8

How are rate fences are used?

Answer 8

Physical (class of travel) or non-physical (advance purchase discounts) are used to deter customers who are willing to pay more to trade down.

Question 9

How is Average Revenue Generating efficiency (ARGE) calculated?

Answer 9

Average price achieved/Maximum price = Yield

Occupancy rate X yield = ARGE