The Pricing Tripod Pricing Strategy Costs Competition Value to Customer
Cost Based Pricing
Difficult to establish costs of intangibles
Services tend to have a higher fixed cost ratio to variable costs. Why?
ABC (Activity based cost)
Ignores the competition
Useful where the service is uncertain
Ignores customer perception of value
Service pricing strategies for Value Value is low price Discounting Odd Pricing Synchro Pricing Penetration Pricing Value is all that I get for all that I give Price framing Price Bundling Complimentary Pricing Results-based pricing Value is the quantity I get for the price I pay Value Pricing Market Segmentation Pricing Value is everything I want in a service Prestige Pricing Skimming Pricing (Zeithaml, V. (1988) Consumer Perceptions of Price, Quality, and Value: A means-End Model and Synthesis of Evidence Journal of Marketing. 52(July), 2 –21 .
How do you communicate value?
Benefit driven pricing
Flat rate pricing
Low cost leadership
The challenge of cost v quality
Value perception management
Price v speed of service
User Costs Search costs Purchase & use costs After costs Sensory Time Problem-solving Follow-up Psychological Physical Money Incidental expenses Purchase price Lovelock, 1999
Competition Based Pricing Going rate pricing Sealed-bid pricing