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BM404 Lecture11
BM404 Lecture11
BM404 Lecture11
Provider Gap 4
CUSTOMER
COMPANY
Service Delivery
Part 6 Opener
Lecture 11
Pricing of Services
Discuss
three major ways that service prices are perceived differently from goods prices by customers
the key ways that pricing of services differs from pricing of goods from a companys perspective
Articulate
Overview (cont.)
Demonstrate what value means to customers and the role that price plays in value Describe strategies that companies use to price services
3 key differences
Service variability limits knowledge Providers are unwilling to estimate prices Individual customer needs vary Collection of price information is overwhelming Prices are not visible Time costs Search costs Convenience costs Psychological costs
Three Basic Marketing Price Structures and Challenges Associated with Their Use for Services
P= DC+OC+Profit Challenges: Challenges:
1. Small firms may charge too little to be viable. 2. Heterogeneity of services limits comparability. 3. Prices may not reflect customer value. 1. Costs difficult to trace. 2. Labor is more difficult to price than materials. 3. Costs may not equal the value that customers perceive the services are worth.
Challenges:
1. Monetary price must be adjusted to reflect the value of non-monetary costs. 2. Information on service costs is less available to customers; hence, price may not be a central factor.
Pricing Strategies When the Customer Defines Value as Everything Wanted in a Service
Pricing Strategies When the Customer Defines Value as Quality for the Price Paid
Pricing Strategies When the Customer Defines Value as All That Is Received for All That Is Given
communication challenges. Integrated service marketing communications Present four ways to integrate marketing communications in service organizations Present specific strategies for managing promises, managing customer expectations, educating customers, and managing internal communications.
Employees
Interactive Marketing
Personal selling Customer service center Service encounters Servicescapes
Customers
Source: Kotler, Philip, Marketing Management: Analysis, Planning, Implementation, and Control, 9th Edition, 1997.
Source: Adapted from B. Mittal, The Advertising of Services: Meeting the Challenge of Intangibility, Journal of Service Research, 2, no. 1, August 1999, pp. 98116.
Teach customers to avoid peak demand periods and seek slow periods