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
Filling
Distance
to Dentist
Wait Period
for an
Appointment
Time in
Waiting
Room
Anesthesia
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
 Psychological costs
Do you trade time for money?
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