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Download Services Marketing An Asia Pacific and Australian Perspective 6th Edition Lovelock Solutions Manual all chapters
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CHAPTER 6
UNDERSTANDING COSTS AND DEVELOPING
PRICING
.
Learning objectives
6.1 Describe the foundations of pricing strategy
6.2 Formulate pricing objectives
6.3 Formulate pricing strategies and policies
6.4 Define and distinguish different types of costs
6.5 Describe the significance of revenue management for service firms
6.6 Understand how to communicate and implement service pricing
strategies
Copyright © 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 1
9781486002702/Lovelock/Services Marketing/6e
would instead choose the regular tables. John’s prior experience with demand
patterns had led to these assumptions.
The pricing tripod approach considers the costs to the provider, competitors’
prices and value to the customer. Obviously, the price set must cover the
Copyright © 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 2
9781486002702/Lovelock/Services Marketing/6e
provider’s costs and an allocation for profit. However, the price set must be
competitive in terms of the value provided to customers or customers will
patronise those competitors providing superior value for their money.
Monetary costs are all those of a purely financial nature – i.e. the costs of,
and directly associated with, the purchase. Non-monetary costs represent the
sacrifices made to acquire and experience the service and typically refer to
the customer’s time and effort. From the customer’s perspective, there is
always a trade-off between the price-value and the sacrifices made. For some
segments of the market, time savings are an important consideration when
comparing price and value. For other segments, price sensitivity is a major
issue. Non-monetary costs should only be cut if doing so will provide
acceptable value to customers compared to competitive offerings. For
example, some customers might be willing to pay higher prices for the
convenience of being able to order online or for home delivery.
Copyright © 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 3
9781486002702/Lovelock/Services Marketing/6e
• Being competitively attractive and appealing;
• Reflecting the marketed quality of the service offering;
• Demonstrating the quantifiable benefit to the customer.
Revenue and profit objectives focus on the use of price to maximise revenue,
contributions or profit. Marketers setting prices to achieve these objectives
have to have a good knowledge of costing, competition and price elasticity of
market segments and their value perceptions.
Patronage and user base-related objectives are used to build demand (trying
to achieve as close as possible to full capacity) and build a customer base
(encouraging trial and building market share). Non-monetary objectives focus
on positive attitudinal and behavioural responses and seek to express the
company’s principles and value offered to customers.
Copyright © 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 4
9781486002702/Lovelock/Services Marketing/6e
media sales especially TV and radio, fixed seating sporting and entertainment
venues, many educational institutions. Indeed, any industry in which firms are
constrained by the capacity of their respective capital equipment and
technological resource base (printing, equipment servicing, and
telecommunications for example) stands to benefit from revenue
management.
8. What are the seven key decisions managers need to make when
designing an effective pricing schedule?
Copyright © 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 5
9781486002702/Lovelock/Services Marketing/6e
Students might begin approaching this question with reference to their own
experience but should also bring into play the determinants of value defined
by Valarie Zeithaml, and the perceived benefits and (potential) costs
associated with the consumption of each service. Students may also wish to
explore the type of value (e.g. functional, hedonic, symbolic or cost/sacrifice).
In explaining why this occurs students might adopt both a customer and
organisational perspective. In discussing this from a customer perspective one
might usefully invoke self-concept theory, Maslow’s Hierarchy of Needs, Risk
Aversion Theory, ways by which otherwise high-involvement decision-making
may be shortened, individual aspirations and motivations. From an
organisational perspective one might take into account niche marketing and
targeting objectives, competitive positioning, and Role and Script Theory.
3. Select a service organisation and find out what its pricing policies and
methods are. In what respects are they similar or different to what
has been discussed in this chapter?
In addition to fulfilling the basic requirement of this task students might gain
from thinking through, recommending and discussing, ways in which their
chosen service organisation might benefit from changes to their pricing
policies and practices.
Copyright © 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 6
9781486002702/Lovelock/Services Marketing/6e
4. Compare the pricing strategies of two main competitors in a service
industry that you are interested in. How far does the pricing tripod
play a role? Can you determine who is the leader and who is the
follower with regards to pricing decisions?
Students answers will vary depending on the service industry selected. For
example, students might select Qantas and Air New Zealand, using their
websites to compare prices for the same route on the same day/time. With
respect to the pricing tripod, students would have to make assumptions
concerning each airlines costs (they could assume cost structures are
comparable for the same route), gather price data from other airlines flying
the same routes (e.g. Jetstar or Virgin Blue) and then ask their friends for an
assessment of customer value for both the Qantas and Air New Zealand
offerings.
The key would be for students to determine in each instance when there is
peak demand and when patronage is down. Students should then consider
how pricing could be used to ensure that revenue is maximised during the
down time and demand shifted away from peak periods to down times e.g.
reduced entry or greens fees on traditionally slower days, advanced booking
(perhaps with a fee) during peak times (price discrimination). Students might
also consider using product discrimination e.g. offering free popcorn to movie
goers on slower nights or free golf club rental during off-peak times.
Copyright © 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 7
9781486002702/Lovelock/Services Marketing/6e
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wondered why his wife was ke kapa, kuu i kahi hilahila, a ua
crying; but after a while he was like o Piikea ia wa me he pupule
told that it was because his la, ka ulala. Ma keia uwe ana o
brother-in-law, Kihapiilani had Piikea, he manao a me ka
arrived. Soon after [246]this noonoo kona, i mea e ikaika ai
Piikea came out of her house, ka manao i loko o kana kane o
still crying in a loud voice, and Umi.
began disrobing and acting the
part of one bereft of her mind. In
doing this, Piikea was but acting
her part; she had her senses
about her all right enough, but
she did this to impress on her
husband Umi that a very great
wrong had been committed, to
rouse him to action.
At the end of the wailing, Umi A pau ka Piikea uwe ana, ninau
came up to her and asked her: mai la o Umi: “Heaha kou mea i
“What is it that has made you cry uwe ai me ka leo nui, a me kou
out so loud and why have you kuu ana i kou wahi hilahila?” I
disrobed yourself?” Piikea aku o Piikea: “No ka nui o ko’u
answered: “Because of the great aloha i ko’u kaikunane; akahi no
love I bear my brother; this is the maua a halawai kino, a no ko’u
first time that we have met after lohe ana mai nei i ka hana ino o
such a long separation; and also kona kaikuaana, o Piilani, ia ia;
because I am grieved at the ill- nolaila, nui ko’u aloha, a o ia ke
treatment given him by his kumu o ko’u kuu ana i ko’u mai
brother Piilani. Because of this nona. Nolaila, e pono e kii kaua
treatment I became so worked e kaua ia ia.” A lohe o Umi, olelo
up that I wanted to show my aku la ia ia Piikea: “Aole paha e
great grief. We must therefore go pono kaua ke kii e kaua ia
and make war on Piilani.” When Piilani, no ka mea, o kou
Umi heard this, he said: “I don’t kaikunane ponoi no ia, aole he
think it proper for us to go and pili aoao, a hanauna hoi.” I aku o
make war on Piilani, because he Piikea ia Umi: “Ina aole oe e ae
is your own brother; he is not mai i ka’u e koi aku nei ia oe, e
connected to you from a kii kaua e kaua ia Piilani, alaila,
distance, a mere relative.” Piikea ua oi ka pono o kuu make
said: “If you will not give your mamua o kuu ola ana.” Ma keia
consent to my request, to go and olelo a Piikea, manao iho la o
make war on Piilani, then it Umi, he mea pono ole ia ia ke
would be far better for me to die hoole i ka olelo a kana wahine,
than to live.” At this, Umi decided nolaila, o ka ae ka pono loa. Ia
that he must obey his wife’s wa, olelo aku la o Umi i kona
demand and so he gave his mau hoakuka kaua, oia o
consent. Umi then summoned Omaokamau, Piimaiwaa, Koi, e
his war counselors, hoomakaukau i na waa, no ka
Omaokamau, Piimaiwaa and holo i Maui e kaua ai me Piilani.
Koi, and gave them orders to
prepare the fleet of war canoes
for a trip to Maui to make war on
Piilani.
When Umi heard the words of A lohe o Umi i keia mau olelo a
his priest, he was much relieved. kona kahuna mana, a Kaoleioku,
He then ordered his chiefs who oluolu iho la ia. Kena ae la o Umi
had charge of the different i na alii aimoku o Hawaii, e
districts, to get the fleet of war makaukau na waa, a me na
canoes in readiness and to get kanaka a pau loa, a akoakoa ma
the men under them ready and kahi hookahi, he mau anahulu i
to all come together in one hala, ua makaukau na waa a me
place. After several tens of days na kanaka. Ua olelo ia, aole e
passed they finally reported that pau i ka helu no ka nui loa.
the canoes and men were ready
to start out. It was said that the
men were so numerous that they
could not be counted.
CHAPTER III. MOKUNA III.
[237]
[256]
Story of Ka Moolelo o
Lonoikamakahiki. Lonoikamakahiki.
CHAPTER I. MOKUNA I.