Pricing of Servic

es

T u l a chan
Arati
d r a P a njiyar
Manen
j B h a t tarai
Nira
a n S h arma
Nish
Pricing Strategy

It is a strategic tool that organizations use to

differentiate their products from competitors and
thereby gain the competitive edge to capture the
market.
“It is very difficult to price
services because we need a
model that is scalable yet
flexible enough to solve our
customer’s problems”
Three Ways Service Prices are Different for Consumers

Consumer Knowledge of Service Prices

The Role of Nonmonetary Costs

Price as an Indicator of Service Quality

Customer Knowledge of Service Prices

Service heterogeneity limits knowledge

Providers are unwilling to estimate prices

Customer Knowledge of Service Prices

Individual customer need vary

Prices are not visible

Three Ways Service Prices are Different for Consumers

Consumer Knowledge of Service Prices

The Role of Nonmonetary Costs

Price as an Indicator of Service Quality

The Role of Nonmonetary Costs

Convenience
Cost
Time Cost

Search Cost Psychological

Cost
Three Ways Service Prices are Different for Consumers

Consumer Knowledge of Service Prices

The Role of Nonmonetary Costs

Price as an Indicator of Service Quality

Price as an Indicator of Service Quality

Customers prefer cues like company

reputation, level of advertising to access the
quality

In other situations when quality is hard to detect or price

varies a great deal within a class of services, consumers
may believe that price is the best indicator of quality
• Approaches to Pricing Services

• STRATEGY Insight :Strategic Decisions in pricing

• Three Pricing Structures

• Cost-based
• Competition-based
• Demand-based

• Global Features: Unique Pricing Around The World

• Technology Spotlight: Pricing On The Internet allows Price adjustments based on Supply and Demand
STRATEGY Insight :Strategic Decisions in
pricing
 PRICING STRUCTURE

COST BASED
PRICING

COMPETITION
BASED
PRICING
DEMAND
BASED
PRICING
Global Feature: Unique Pricing around the
World

• Tippping
 Global Feature: Unique Pricing around the
World

• SERVICE FEE

• PRICELESS

• PAY BY MINUTE IN TOKYO

 Technology Spotlight

• Dutch AUCTION :KLICK-KLICK.COM

• EBAY AND 1500 RIVALS

• REVERSE AUCTION

• GROUP BUYING

• DININHG WITH DYNAMIC PRICING

• FINDING THE LOWEST PRICE ACROSS INTERNET

SITES:BUY.COM
Four Customer Definition of Value

Value is
Value is low everything
price I want in a
service

Value is the Value is all that

Quality I get for I get for all
the price I pay That I give
 Value is low Price
Some consumers equate value with low price, indicating that what they have to give up in terms of
money is most salient in their perceptions of value.
 Value is everything I want in a service

Rather than focusing on the money given up, some consumers emphasize the benefits they receive
from a service or product as the most important component of value.
Value is the Quality I get for the price I pay
Other consumers see value as a trade-off between the money they give up and the quality they
receive.
 Value is all that I get for all That I give
Some consumers consider all the benefits they receive as well as all sacrifice components (money,
time, effort) when describing value.
Pricing Strategies When the Customer Means
“Value is Low Price”

• Discounting
Value is • Odd Pricing
low price • Synchro-pricing
• Penetration Pricing
 Synchro-Pricing
The use of price to manage demand for a service by capitalizing on customer sensitivity
to services.

• Place Differentials- front row at concerts, ocean side rooms in resort hotels.
(Higher Prices)

• Time Differentials- Ncell talk time after 10 PM. (Lower Prices)

• Quantity Differentials- corporate discounts for airlines, hotels. (Lower Prices)

 Penetration Pricing
The strategy is appropriate when,

• Sales volume of the service is very sensitive to price, even in the early stages,

• It is possible to achieve economies in unit costs by operating at large volumes,

• A service face threats of strong potential competition very soon after introduction,

• There is no class of buyers willing to pay a higher price to obtain the service.
Pricing Strategies When the Customer Means
“Value is Everything I want in a Service”

Value is Everything I • Prestige Pricing

want in a Service
• Skimming Pricing

Customers are more concerned about obtaining the service than

about the cost of the service.
Pricing Strategies When the Customer Means
“Value is Quality I Get for the Price I Pay”

Value is Quality I • Value Pricing

Get for the Price I • Market Segmentation
Pay
Pricing
Pricing Strategies When the Customer Means
“Value is All That I Get for All That I Give”
• Mixed Bundling
• Mixed Leader Bundling
• Price Framing • Mixed Joint Bundling
Value is All That I • Price Bunding
Get for All That I
Give • Complementary Pricing • Captive Pricing
• Results-based Pricing • Two Part Pricing
• Loss Leadership

• Sealed Bid Contingency Pricing

• Money Back Guarantees
• Commission
 INDIAN SERVICE
STRATEGY INSIGHT

Modular Service

Pricing & Service Tiering

Joint Venture from INTRODUCTION
TATA & STARS
In addition to is
Super Server Pack-94

Price is determined
by Customer Preference
Mix
• The Starter Pack-35
• The Family Pack-71
Offer 3 Service
• The Western Pack-67
Packages
 Available
for Rs. 130 pm

• ESPN
• STAR Sports The Starter
Comprises 35 channels • 2 interactive services
Including Actve (TM Wizkids & TM Pack
Games)
 • Actve TM Khabar
• Actve TM Star News
• Acrve TM Wizkids
Available • Actve TM Games
for Rs. 250 pm

The Family
Pack
Comprises 71
Channels Along with 4
Including Interactive Services
All Popular Hindi,
Regional & Sports
 Available
for Rs. 250 pm

Spans over 67 • Actv TM Newsrooms The Western

Channels • Actv TM Wizkids

Covering All
• Actv TM Games
Pack
English, Regional
Along with 3
&
Interactive
Sports
Services
1 pe3
&
2 pe5 May
2007
Entitles
3 months
Special
Free Subscription Existing User
On the
Purchase of
Could Avail this Offer Promotional
1 connection
5 Months Offer
free subscription per connection
On the
Purchase of
2 or more connections
 Top
End Pack
99 Channels

Actve TM :
Sports
Games
Jumbo
Hindi, English
Wizkids
Sports
&
Newsroom
Khabar
Super Saver
Regional Channels
STAR News
Along with 6 Pack
Interactive Services
With Modular Pricing

TATA Sky Conclusion

Customers
Freedom of Genuine Choice
At Affordable Price
 Biggest Surprise

ARTICLE
More Aggressive Device
ON and Services Pricing

By Chaim Gartenberg By Mark Gurman

March-20, 2019 & September 11, 2019
www.theverge.com www.Bloomberg.com
 Breaking down Apple’s new focus

“It’s Show Time” events

Apple’s focus is New subscription services:
shifting  a TV service for original
shows and movies,
 An Apple News service

Apple Services
Apple
Encompasses everything
wants to sell
From App Store to licensing
people constant
deals
 Brought in over $10.9
billion during
the most recent quarter

More per quarter than

the Mac ($7.4 billion),
or
“Wearables, Home, and
Accessories” ($7.3 billion)

Continue to shift as
it starts to push services harder Apple’s services
&
introduces new services
business
 Designing
World’s innovative hardware
most valuable companies &
Software's

And charging a lot to the

customers
for the gadgets
More Aggressive Device
and
Services Pricing
 Struggled to maintain
once-frenzied demand for
the iPhone

Western and Chinese

consumers
already own a smartphone 

Are reluctant to upgrade

due to a lack of
breakthrough features and
cheaper alternatives
Key Reasons
 Lowering
prices may encourage
more people to upgrade Key Thoughts about
iPhone sooner
Aggressive
While luring
new users for a growing Pricing Strategy
digital subscriptions
business
 Apple shares rose 1.2%
to $216.70 in New York
on Tuesday,
the highest close since early
November

“Many of the users who purchase

lower priced devices Effects of
will eventually become customers of
Apple services,” Aggressive
- IDC Research Manager
Pricing Strategy
The Apple Arcade gaming service
is $4.99 a month,
roughly half the cost of
Apple Music and Apple News+
The $4.99 monthly cost
of Apple’s upcoming
TV+ video streaming service
surprised many analysts
And undercuts
Netflix Inc., Plan of Tackling
Amazon.com Inc.’s Prime Video,
and the Disney+ offering Challenges
And when people buy
an iPhone and iPad, with
a Mac or an Apple TV,
they get a free year of TV+ Aggressive Pricing
 With an installed base
of 900 million
active iPhone worldwide

Opportunity to gain
100 million
consumers on the streaming
front in the next
3-4 years
They called
TV+ price a “show stopper”

Current Status
Help Apple
to gain more subscribers
 Can Apple Inc.
What do you Win through
think?
Aggressive Price

Was it actually Strategy?

Right Pricing
Strategy?