CHAPTER 9
Pricing
, 1. Pricing Objectives
Since price is apart of the marketing mix elements that will contribute to the marketing
positioning of the service organization, the price should be consistent with the positioning
The effect that price has on the characteristics of a service:
Intangibility
- Purchasers of service incur an expense rather than add to their accumulation of
physical goods.
- The higher the tangible competent of the service, the greater the tendency towards
more standardized prices.
- Tangibles include aspects such as convenience of the location, business hours,
ability to place special orders and friendliness of staff.
- Higher levels of intangibility will lead to greater customer orientation and fewer
standardized prices.
Inseparability
- The inseparable nature of the service from the person providing the service, may
place time or geographical limits on the organization in terms of the market to be
served, as well as the buyers’ search for a service provider.
- Because of the necessity to function within these limits, the degree of competition
will also influence prices.
- Example: competition between hairdressers is high.
Perishability
- The fact that services cannot be stored and that demand fluctuations cannot always
be met by means of inventory management affects the pricing decision.
- Pricing attempts to smooth demand through the creation of demand in off-peak
periods and flattening peaks by moving existing demand from peak demand times
to less-busy times
Variability
- Services can often be more easily varies than can physical products.
- The service level, service quantity and service quality can be adjusted to meet
customer requirements.
- Sometime the price can be negotiation between service provider and customer.
- Prices can be very competitive if services are homogenous, and it is difficult to
establish a competitive advantage.
- The more unique a service, the greater the tendency to vary prices according to the
individual’s needs.
- Price is a quality indicator.
Pricing Policies are of strategic importance in the context of sales and market share objectives
and the revenue requirements of the rest of the organization’s service portfolio.
Every service organization purses one or more objectives by means of its pricing policy.
Survival
In unfavorable market conditions, the pricing objective may be the attainment of
desired levels of profitability to ensure the organization’s survival.
Pricing
, 1. Pricing Objectives
Since price is apart of the marketing mix elements that will contribute to the marketing
positioning of the service organization, the price should be consistent with the positioning
The effect that price has on the characteristics of a service:
Intangibility
- Purchasers of service incur an expense rather than add to their accumulation of
physical goods.
- The higher the tangible competent of the service, the greater the tendency towards
more standardized prices.
- Tangibles include aspects such as convenience of the location, business hours,
ability to place special orders and friendliness of staff.
- Higher levels of intangibility will lead to greater customer orientation and fewer
standardized prices.
Inseparability
- The inseparable nature of the service from the person providing the service, may
place time or geographical limits on the organization in terms of the market to be
served, as well as the buyers’ search for a service provider.
- Because of the necessity to function within these limits, the degree of competition
will also influence prices.
- Example: competition between hairdressers is high.
Perishability
- The fact that services cannot be stored and that demand fluctuations cannot always
be met by means of inventory management affects the pricing decision.
- Pricing attempts to smooth demand through the creation of demand in off-peak
periods and flattening peaks by moving existing demand from peak demand times
to less-busy times
Variability
- Services can often be more easily varies than can physical products.
- The service level, service quantity and service quality can be adjusted to meet
customer requirements.
- Sometime the price can be negotiation between service provider and customer.
- Prices can be very competitive if services are homogenous, and it is difficult to
establish a competitive advantage.
- The more unique a service, the greater the tendency to vary prices according to the
individual’s needs.
- Price is a quality indicator.
Pricing Policies are of strategic importance in the context of sales and market share objectives
and the revenue requirements of the rest of the organization’s service portfolio.
Every service organization purses one or more objectives by means of its pricing policy.
Survival
In unfavorable market conditions, the pricing objective may be the attainment of
desired levels of profitability to ensure the organization’s survival.
