MARKETING OF SERVICES
Ing. Veronika Braciníková, Ph.D.
MARKETING MIX IN SERVICES
PRICE
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• Factor that has received much less attention in
service firms.
• Pricing decisions approached in a not-very-sophisticated
manner.
• The use of price as a purposive marketing tool has been
limited to a few marketers.
PRICING
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• The most common mistakes are these:
• pricing is too cost-oriented;
• price is not revised often enough;
• price is set independent of the rest of marketing mix,
• price is not varied enough.
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THE MOST COMMON MISTAKES
• Price in services goes by different names.
• The services are diverse.
• The extent of their diversity can be gauged by the names.
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THE TERMINOLOGY
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Price Terminology for Selected Services
SERVICE TERMINOLOGY
Advertising Commission
Brokerage service Commission
Consultancy Fee
Employee services Salary
Education Tuition fee
Financial services Interest/charge/commission
Guest speaker Honorarium
Health care Fee
Insurance Premium
Legal service Fee
Property/Accommodation Rent
Road use Toll
Recreational service Ticket charge/money, Admission charge
Share/Stock service Brokerage/Commission
Transport Fare
Utilities Tariff
• Direct bearing on sales and profits of an organization.
• Price cannot be determined in isolation.
• Pricing arithmetic is not simple.
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PRICING
• There are number of factors that influence the pricing
decisions of a firm.
• Pricing methods and practices tend to vary widely
in service industries.
PRICING
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• This service character does not allow standardization
of pricing across various service categories.
• Tend to consider their pricing in a variety of ways.
PRICING
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• The one characteristic which has great impact is their
perishability.
• Another characteristic is the high content of the
intangible component.
PRICING
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• In general, the more unique a service is, the
greater the freedom to fix the price at any level.
• The prices are subject to regulations, either by
the government or by trade associations in order
to avoid undercutting and maintain quality
standards.
PRICING
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• The two methods:
• cost-based pricing – basis of the cost incurred by the most
efficient unit.
• market-oriented pricing – a result of the competition or
customer-oriented.
METHODS OF PRICE DETERMINATION
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• To reduce the ‘perishability’ characteristic of services.
• Implies changing different prices according to:
• customer’s ability to pay differentials,
• price time differentials,
• place differential used in rent of property.
DIFFERENTIAL OR FLEXIBLE PRICING
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• The practice of offering a commission or discount.
• Promotional device to encourage use during lowdemand
time slots.
DISCOUNT PRICING
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• Low price which is quoted for a basic service
to attract customers, who may be tempted to
buy an additional product.
DIVERSIONARY PRICING
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• Payment is to be made only after the results are achieved.
GUARANTEED PRICING
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• The high price is associated with the quality of the service.
HIGH PRICE MAINTENANCE PRICING
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• Low price is charged in the hope of getting more business.
INTRODUCTORY PRICING
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• Basic low price is quoted but the extra
services are rather highly priced.
OFFSET PRICING
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• Prices are set on the
basis of following
those set by the
market leader.
COMPETITIVE PARITY PRICING
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• Prices are based on the service’s perceived value
to a given customer segment.
VALUE BASED PRICING
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• Prices are based on considerations of future potential
profit streams over the lifetime of customers.
RELATIONSHIP PRICING
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1. Pricing objectives.
2. Determining demand.
3. Estimating costs.
4. Analyzing competitors’ costs, prices and offers.
5. Selecting a pricing method.
6. Selecting final price.
PRICING PROCESS
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What is the organization trying to achieve?
• FINANCIAL OBJECTIVES
• Return on investment
• Profit optimization
• Generating cash flow
• MARKETING OBJECTIVES
• Survival
• Maximum market share
• Maximum market skimming
• Product-quality leadership
PRICING OBJECTIVES
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• All pricing decisions are, in the end, dependent
on the level of market demand.
DETERMINING DEMAND
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• Full cost pricing: calculates all costs together, fixed
costs and variable costs per unit, and adds a
margin.
• Direct cost pricing: sometimes called marginal cost
pricing. It includes the calculation of only those
costs that are likely to rise as output increases.
ESTIMATING COSTS
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• Within the range of possible prices determined by
market demand and company costs, the firm must
take competitor’s costs, prices, and possible price
reactions into account.
ANALYZING COMPETITORS’ COSTS, PRICES AND OFFERS
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• Given the customers demand schedule, the cost
function, and competitors’ prices, the company is
now ready to select a price.
SELECTING A PRICING METHOD
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• Pricing methods narrow the range from which
the company must select its final price.
SELECTING FINAL PRICE
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THANK YOU
FOR YOUR ATTENTION☺
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