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Chapter. 16. Pricing of Services. Three Key Ways Service Prices are Different for Consumers Approaches to Pricing Services Pricing Strategies That Link to the Four Value Definitions. Objectives for Chapter 16: Pricing of Services.

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  1. Chapter 16 Pricing of Services • Three Key Ways Service Prices are Different for Consumers • Approaches to Pricing Services • Pricing Strategies That Link to the Four Value Definitions

  2. Objectives for Chapter 16:Pricing of Services • Discuss three major ways that service prices differ from goods prices for customers. • Demonstrate what value means to customers and the role that price plays in value. • Articulate the key ways that pricing of services differs from pricing of goods. • Delineate strategies that companies use to price services. • Give examples of pricing strategy in action.

  3. Figure 16.1Customers Will Trade Money for Other Service Costs = or or Psychic Costs Time Effort

  4. Figure 16.2Three Basic Price Structures and Difficulties Associated with Usage for Services PROBLEMS: 1. Costs difficult to trace 2. Labor more difficult to price than materials 3. Costs may not equal value PROBLEMS: 1. Small firms may charge too little to be viable 2. Heterogeneity of services limits comparability 3. Prices may not reflect customer value Cost-Based Competition- Based Demand-Based PROBLEMS: 1. Monetary price must be adjusted to reflect the value of non-monetary costs 2. Information on service costs less available to customers, hence price may not be a central factor

  5. Figure 16.3Four Customer Definitions of Value Value is everything I want in a service. Value is low price. Value is the quality I get for the price I pay. Value is all that I get for all that I give.

  6. Value is low price. • Discounting • Odd pricing • Synchro-pricing • Penetration Pricing Figure 16.4 Pricing Strategies When the Customer Defines Value as Low Price

  7. Value is everything I want in a service. • Prestige pricing • Skimming pricing Figure 16.5Pricing Strategies When the Customer Defines Value as Everything Wanted in a Service

  8. Value is the quality I get for the price I pay. • Value pricing • Market segmentation pricing Figure 16.6Pricing Strategies When the Customer Defines Value as Quality for the Price Paid

  9. Figure 16.7Pricing Strategies When the Customer Defines Value as All That Is Received for All That Is Given Value is all that I get for all that I give. • Price framing • Price bundling • Complementary pricing • Results-based pricing

  10. Figure 16.8 Summary of Service Pricing Strategies for Four Customer Definitions of Value Value is everything I want in a service. Value is low price. • Discounting • Odd pricing • Synchro-pricing • Penetration Pricing • Prestige pricing • Skimming pricing Value is the quality I get for the price I pay. Value is all that I get for all that I give. • Value pricing • Market segmentation pricing • Price framing • Price bundling • Complementary pricing • Results-based pricing

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