Chapter17-1
Pricing of Services
17
 Three Key Ways that Service Prices Are
Different for Consumers
 Approaches to Pricing Services
 Pricing Strategies that Link to the Four
Value Definitions
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Objectives for Chapter 17:
Pricing of Services
17-2
 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.
17-3
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
$50
15 miles
3 Weeks
1.5 hour
None
B
$75
15 miles
1 Week
.5 hour
Novocain
C
$125
3 miles
1 Week
1 hour
Novocain
D
$200
3 miles
1 Week
No wait
Nitrous Oxide
& Novocain
Customer Often Lack of Knowledge of
Service Prices
17-4
 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
17-5
The Role of Non-monetary Price
 Time costs
 Search costs
 Convenience costs
 Psychological costs
Do you trade time for money?
17-6
Price as an Indicator of Service Quality
Can price attract some
customers?
17-7
Price as an Indicator of Service Quality
Infers High Quality
Service
Infers Low Quality Service
Three Basic Marketing Price Structures
and Challenges for Services
17-8
A Customer-Focused Approach to
The Pricing Process
Understand Customer Value
Determine Demand based on
Competition and Offering
Estimate Cost, Revenues and
LTV
Establish a Pricing Structure
and Level
Set Final Price
17-9
17-10
Four Customer Definitions of Value
Pricing Strategies When the Customer
Defines Value as Low Price
17-11
17-12
Pricing Strategies When the Customer Defines
Value as Everything Wanted in a Service
17-13
Pricing Strategies When the Customer
Defines Value as Quality for the Price Paid
17-14
Pricing Strategies When the Customer Defines
Value as All that Is Received for All that Is Given
17-15
Summary of Service Pricing Strategies for
Four Customer Definitions of Value