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PRESENTATION BY
GROUP 6
PRICING STRATEGIES OF
SERVICE OFFERING
Group (6) Members
NAME REG. NO.
AKINGBADE OLADIMEJI DANIELS DBS/18/MBA/00398
UNYIME EFFIONG UDOFIA DBS/19/MBA/00217
ABDULWAHAB JAMIU BELLO DBS/19/MBA/00220
RAMATU ISAH LAWAL DBS/19/MBA/00521
ABDULQUDDUS MUHAMMAD SIRAJ DBS/19/MBA/00701
Introduction
 Pricing is one of the major elements of the marketing plan.
It enables to differentiate a product or service from another
one of similar characteristics. Pricing decisions derive from
the underlying objectives and best-suited strategies. The
elements of pricing objective include profit maximization,
revenue maximization, quality leadership, quantity
maximization and survival (Kimes, 2016).
 Price is a significant element in the marketing mix. Pricing
strategy is beneficial in terms of diverse purchasing
behavior of various customers, high degree of demand and
uncertainty create more revenue. On the other hand, rigidity
of services boosts the organization to play with prices
(Dolan & Jeuland, 2016).
 The effectiveness and relevance of different pricing
strategies such as penetration strategy and price
Concept of Pricing Strategy
 According to Kimes (2016), Pricing strategy is the
policy a firm adopts to determine what it will
charge for its products and services.
 Pricing strategy is a key variable in financial
modeling, which determines the revenues
achieved, the profits earned, and the amounts
reinvested in the firm’s growth for its long-term
survival.
 Pricing strategy for service offering can be
challenging, as so much of the value comes from
your personal ability to deliver.
 Customers like to see things like testimonials,
portfolios, and case studies of your work before
they’re even willing to consider hiring you. While
price is important, make sure you don’t disqualify
yourself by keeping necessary information from
Pricing Strategies of Service Offering
 According to Benoit and Krishna (2017), pricing of
service include (but are not limited to) the following:
 Penetration Pricing: This is a pricing strategy that
revolves around pricing a product or service low
enough so that it attracts customers and captures
market share.
 Pre-emptive Pricing: Also known as predatory
pricing, this strategy is aggressive in nature and is
intended to drive away competition or deter others
from entering the marketplace by deliberately selling
at below market prices (temporarily, of course).
 Premium Decoy Pricing: This is a pricing structure
that as opposed to preemptive pricing sets prices in
conflict with one another internally. In other words,
you will be pricing one of your products or services at
a higher price to encourage sales of another product.
Pricing Strategies of Service Offering
Cont.
 Premium pricing: Premium pricing represents a
way for you to set its value artificially high in an
attempt to encourage a favorable public perception,
something that you’ll have on your side as a new
startup.
 Psychological pricing: It is often used to
overinflate items such as confectionary at cinema
stands. One thing is abundantly clear this method
can make a dramatic difference in sales.
 Skimming strategy: High price is charged for a
product till such time as competitors allow after
which prices can be dropped.
 Perceived value pricing: The price is set to
Market Segment and Classes of Services
 According to Talluri and Van Ryzin (2017), service market
is composed of two segments, in which one of the
segments has a higher valuation for the service than the
other. The segment with the higher valuation is willing to
pay more for the service. This segment is refer as the
price-insensitive (PI) segment and the other is refer as
the price-sensitive (PS) segment. Talluri and Van Ryzin
(2017) also further stressed that services are classified
into three they are;
 Class A Services: Here, customers who arrive early are
willing to pay less than those who buy late. For Class A
services, the segment either arrives late or has a greater
preference to buy late. Examples of Class A services
include airlines, hotels, and car rentals. These
customers; are usually price sensitive and have low costs
of committing to an early purchase.
Market Segment and Classes of Services
Cont.
 Class B Services: These services experience early
arrivals from the price insensitive (PI) segment (i.e.,
consumers with higher relative reservation prices).
Here, customers who arrive early are willing to pay
more than those who buy late. Examples of Class B
services include many bakery services, cellular
services, and high-fashion retailers
 Class C: These services experience arrivals that
are uncorrelated with reservation prices. The
customers who arrive early are likely to have similar
reservation prices to those who arrive late. Here,
time of arrival is uncorrelated with the segment (PI
or PS). Examples of Class C services include
catering, repair, and lawn care services. Here,
Pricing Objectives for Service
Offering
 According to Deville and Saporta (2018), pricing
objectives provide directions for action. “To have them is
to know what is expected and how the efficiency of the
operations is to be measured” (Deville & Saporta, 2018).
 Cattin and Wittink (2020), suggests that pricing objectives
can “fall under three main headings relating to their
content (i.e. nature), the desired level of attainment and
the associated time horizon”. As far as their content is
concerned, both quantitative and qualitative objectives
can enter the objective functions of firms.
 The quantitative objectives can be measured easily and
include those objectives that are related to the firm’s
profits, sales, market share and cost coverage. On the
other hand, the qualitative ones are associated with less
quantifiable goals such as the relationship with
customers, competitors, distributors, the long-term
survival of the firm and the achievement of social goals.
Factors Impacting Price Strategies of
Service Offering
 Factors affecting the nature of
pricing strategies according Cattin &
Wittink (2020) are;
 Corporate Image
 Geography
 Discounts
 Price discrimination
Conclusion
The reasons of entering business selling services
to customer was to make profit. If service is
rendered for less than cost, or just breaking even,
that means the business is operating a non-profit
venture or a business that is likely to fail. Service
offering can range from a sole proprietorship
consultancy to mid-sized businesses with several
hundred employees, some of whom go out to
customers and perform anything from cleaning
homes to providing information technology
expertise to large corporations. Getting the your
pricing strategy for these services wrong will create
a problem you may never overcome. Getting it right
will dramatically increase the likelihood of creating a
business that perseveres and takes care financially.
Group 6 Service Marketing.pptx

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Group 6 Service Marketing.pptx

  • 1. PRESENTATION BY GROUP 6 PRICING STRATEGIES OF SERVICE OFFERING
  • 2. Group (6) Members NAME REG. NO. AKINGBADE OLADIMEJI DANIELS DBS/18/MBA/00398 UNYIME EFFIONG UDOFIA DBS/19/MBA/00217 ABDULWAHAB JAMIU BELLO DBS/19/MBA/00220 RAMATU ISAH LAWAL DBS/19/MBA/00521 ABDULQUDDUS MUHAMMAD SIRAJ DBS/19/MBA/00701
  • 3. Introduction  Pricing is one of the major elements of the marketing plan. It enables to differentiate a product or service from another one of similar characteristics. Pricing decisions derive from the underlying objectives and best-suited strategies. The elements of pricing objective include profit maximization, revenue maximization, quality leadership, quantity maximization and survival (Kimes, 2016).  Price is a significant element in the marketing mix. Pricing strategy is beneficial in terms of diverse purchasing behavior of various customers, high degree of demand and uncertainty create more revenue. On the other hand, rigidity of services boosts the organization to play with prices (Dolan & Jeuland, 2016).  The effectiveness and relevance of different pricing strategies such as penetration strategy and price
  • 4. Concept of Pricing Strategy  According to Kimes (2016), Pricing strategy is the policy a firm adopts to determine what it will charge for its products and services.  Pricing strategy is a key variable in financial modeling, which determines the revenues achieved, the profits earned, and the amounts reinvested in the firm’s growth for its long-term survival.  Pricing strategy for service offering can be challenging, as so much of the value comes from your personal ability to deliver.  Customers like to see things like testimonials, portfolios, and case studies of your work before they’re even willing to consider hiring you. While price is important, make sure you don’t disqualify yourself by keeping necessary information from
  • 5. Pricing Strategies of Service Offering  According to Benoit and Krishna (2017), pricing of service include (but are not limited to) the following:  Penetration Pricing: This is a pricing strategy that revolves around pricing a product or service low enough so that it attracts customers and captures market share.  Pre-emptive Pricing: Also known as predatory pricing, this strategy is aggressive in nature and is intended to drive away competition or deter others from entering the marketplace by deliberately selling at below market prices (temporarily, of course).  Premium Decoy Pricing: This is a pricing structure that as opposed to preemptive pricing sets prices in conflict with one another internally. In other words, you will be pricing one of your products or services at a higher price to encourage sales of another product.
  • 6. Pricing Strategies of Service Offering Cont.  Premium pricing: Premium pricing represents a way for you to set its value artificially high in an attempt to encourage a favorable public perception, something that you’ll have on your side as a new startup.  Psychological pricing: It is often used to overinflate items such as confectionary at cinema stands. One thing is abundantly clear this method can make a dramatic difference in sales.  Skimming strategy: High price is charged for a product till such time as competitors allow after which prices can be dropped.  Perceived value pricing: The price is set to
  • 7. Market Segment and Classes of Services  According to Talluri and Van Ryzin (2017), service market is composed of two segments, in which one of the segments has a higher valuation for the service than the other. The segment with the higher valuation is willing to pay more for the service. This segment is refer as the price-insensitive (PI) segment and the other is refer as the price-sensitive (PS) segment. Talluri and Van Ryzin (2017) also further stressed that services are classified into three they are;  Class A Services: Here, customers who arrive early are willing to pay less than those who buy late. For Class A services, the segment either arrives late or has a greater preference to buy late. Examples of Class A services include airlines, hotels, and car rentals. These customers; are usually price sensitive and have low costs of committing to an early purchase.
  • 8. Market Segment and Classes of Services Cont.  Class B Services: These services experience early arrivals from the price insensitive (PI) segment (i.e., consumers with higher relative reservation prices). Here, customers who arrive early are willing to pay more than those who buy late. Examples of Class B services include many bakery services, cellular services, and high-fashion retailers  Class C: These services experience arrivals that are uncorrelated with reservation prices. The customers who arrive early are likely to have similar reservation prices to those who arrive late. Here, time of arrival is uncorrelated with the segment (PI or PS). Examples of Class C services include catering, repair, and lawn care services. Here,
  • 9. Pricing Objectives for Service Offering  According to Deville and Saporta (2018), pricing objectives provide directions for action. “To have them is to know what is expected and how the efficiency of the operations is to be measured” (Deville & Saporta, 2018).  Cattin and Wittink (2020), suggests that pricing objectives can “fall under three main headings relating to their content (i.e. nature), the desired level of attainment and the associated time horizon”. As far as their content is concerned, both quantitative and qualitative objectives can enter the objective functions of firms.  The quantitative objectives can be measured easily and include those objectives that are related to the firm’s profits, sales, market share and cost coverage. On the other hand, the qualitative ones are associated with less quantifiable goals such as the relationship with customers, competitors, distributors, the long-term survival of the firm and the achievement of social goals.
  • 10. Factors Impacting Price Strategies of Service Offering  Factors affecting the nature of pricing strategies according Cattin & Wittink (2020) are;  Corporate Image  Geography  Discounts  Price discrimination
  • 11. Conclusion The reasons of entering business selling services to customer was to make profit. If service is rendered for less than cost, or just breaking even, that means the business is operating a non-profit venture or a business that is likely to fail. Service offering can range from a sole proprietorship consultancy to mid-sized businesses with several hundred employees, some of whom go out to customers and perform anything from cleaning homes to providing information technology expertise to large corporations. Getting the your pricing strategy for these services wrong will create a problem you may never overcome. Getting it right will dramatically increase the likelihood of creating a business that perseveres and takes care financially.