McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter

Pricing of Services 15

 Three Key Ways that Service Prices Are Different

for Consumers

 Approaches to Pricing Services

 Pricing Strategies that Link to the Four Value

Definitions

15-2
Objectives for Chapter 15:
Pricing of Services
 Discuss three major ways that service prices are perceived
differently from goods prices by customers.

 Articulate the key ways that pricing of services differs from

pricing of goods from a company’s perspective.

 Demonstrate what value means to customers and the role that

price plays in value.

 Describe strategies that companies use to price services.

 Give examples of pricing strategy in action.

15-3
Pricing Quiz

 Which dentist would you choose for a filling in

your tooth?
Dentist Cost for Distance Wait Period Time in Anesthesia
Filling to Dentist for an Waiting
Appointment Room
A 75 15 miles 3 Weeks 1.5 hours None

B $100 15 miles 1 Week 0.5 hour Novocain

C $150 3 miles 1 Week No wait Novocain

D $225 3 miles 1 Week No wait Nitrous Oxide

& Novocain

15-4
Customer Often Lack of Knowledge of Service
Prices
 Customers often lack reference prices for
service
 Service variability limits knowledge
 Providers are unwilling to estimate prices
 Individual customer needs vary
 Collection of price information by customers is
difficult
 Prices are not visible

15-5
The Role of Nonmonetary Costs
 Time costs
 Search costs
 Convenience costs Do you trade time for money?

 Psychological costs

15-6
Price as an Indicator of Service Quality

Can price attract some

customers?

15-7
Price as an Indicator of Service Quality

Infers High Quality

Service

Infers Low Quality Service

15-8
Three Basic Marketing Price Structures and
Challenges for Services

15-9
How Does Price Relate to Service Value?

 What is service value?

 Mental tradeoff of perceived quality and perceptions
of sacrifice
 Can include both monetary and non-monetary
sources of sacrifice
 But it may mean different things to different people!

15-10
Four Customer Definitions of Value

15-11
Pricing Strategies When the Customer Defines
Value as Low Price

15-12
Pricing Strategies When the Customer Defines Value as
Everything Wanted in a Service

15-13
Pricing Strategies When the Customer Defines
Value as Quality for the Price Paid

15-14
Pricing Strategies When the Customer Defines Value as
All that Is Received for All that Is Given

15-15
Summary of Service Pricing Strategies for
Four Customer Definitions of Value

15-16