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Service pricing wk_7

Service pricing wk_7






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    Service pricing wk_7 Service pricing wk_7 Presentation Transcript

    • Service Pricing Tom Chapman
    • Indicative Content
      • Pricing Strategies
      • Problems associated with pricing services
      • Influences on Price
      • Price discrimination
      • Relating Price and Value
    • Pricing Strategies
      • Revenue & Profit Objectives
        • Seek Profit
        • Cover Costs
      • Patronage & User Base
        • Build Demand
        • Build a user base
    • 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?
      • Reduce uncertainty
        • Benefit driven pricing
        • Flat rate pricing
      • Enhance relationships
        • Relationship pricing
          • Bulk discounts
          • Bundled pricing
      • Low cost leadership
        • The challenge of cost v quality
      • Value perception management
        • Credence services?
        • 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
    • High Price Competition when -
      • Large number of competitors
      • Large number of substitutes
      • Wide distribution of offers
      • Surplus capacity in industry
        • Think Porters 5 Forces
        • Think Globalisation
        • Think Internet
    • Reduced Price Competition -
      • Non-price related costs of alternatives are high
      • Personalisation, Customisation & Switching costs matter
      • Time & Location reduce choice
    • Revenue / Yield Management
      • Supply & Demand forecasting
      • Reserve Capacity
      • Price Elasticity
      • Rate Fences
        • Physical
        • Non-physical
    • Rate Fences
      • Physical
        • Basic Product
        • Amenities
        • Service Level
      • Non-Physical
        • Transactional Characteristics
        • Consumption Characteristics
        • Buyer Characteristics
    • Yield Management
      • Effective When-
        • Relatively fixed capacity
        • High fixed cost structure
        • Perishable inventory
        • Variable / uncertain demand
        • Varying customer price sensitivity
    • Ethical Concerns
      • Clear, logical & fair pricing schedules
      • Use high published prices and frame fenced as discounts
      • Communicate benefits
      • Use bundles to hide discounts
      • Take care of loyal customers
      • Use service recovery to compensate for overbooking
    • Service Pricing in Practice
      • How much should be charged?
      • What should be the basis of pricing?
      • Who should collect payment?
      • Where should payment be made?
      • When should payment be made?
      • How should payment be made?
      • How should prices be communicated to the target market?
    • Pricing Strategies
      • New Service Pricing
      • Portfolio Pricing
      • Tactical Pricing
      • Public Sector Pricing
      • Internal Market Pricing
    • New Service Pricing Strategy
      • Price Skimming
      • Saturation Pricing
      • Evaluating Options
        • Market research
        • Competitive actions
        • Government regulation
      • Leader or follow
    • Service Portfolio Pricing
      • Optional additional services
      • Captive services
      • Competing Services
      • Price Bundling
    • Tactical Pricing
      • Short term competitive advantage
      • Remove unplanned excess supply
      • Defend against new entrants
      • Method of differential pricing
        • Time
        • Place
        • Segments
      • Motivate intermediaries
    • Public Sector Pricing
      • External benefits difficult to appropriate from consumers
      • Benefits to society may be as large as the benefits to the individual consumer
      • Pricing as a means of social policy
    • Internal Market Pricing
      • Cross billing / inter-departmental costing
      • Does not necessarily reflect market pricing
      • Real market may not exist
    • Pricing Problems
      • Demand based
        • Monetary price must be adjusted to reflect the value of non-monetary costs
        • Information on service costs are less available to customers, hence price may not be a central factor
      • Cost based
        • Costs are difficult to trace
        • Labour is more difficult to price than materials
        • Costs may not equal value
      • Competitor based
        • Small firms may charge too little to be viable
        • Heterogeneity of services limits comparability.
        • Prices may not reflect customer value