Page 207 - DMGT510_SERVICES_MARKETING

Services Marketing

Notes Self Assessment

Match the following sets:

Set A Set B
5. Profit related objectives a. Bring about stability in prices
6. Volume related objectives b. Become the market leader
7. Status-quo oriented objectives c. Maximum ROI

8. Society oriented objectives d. Provide benefits to the lower sections of
the society

11.3 Framework for Pricing Decisions in Services

The service marketer has to make his pricing decisions after obtaining in-depth knowledge of
his firm’s costs, competitive strategies, government policy, the prevailing and potential demand
and most important, his corporate objective.
Customer Demand: Price elasticity of demand for offers has to be analyzed by the marketer.

As mentioned before, services have inelastic demand; for goods this analysis is important
- for forecasting, estimation, inventory management. The marketer has to consider the
following factors which imply price elasticity of demand to be low:
Non-availability of competitive products and substitutes will keep demand

unchanged even if prices are increased.
Price-quality perception.

Customer is resistant to change or to adopt new shopping behaviour.

Customers do not notice higher prices anyway if they are of higher income group or

have urgency in service consumption - like an immediate surgery.
A service marketer’s cost structure - fixed, variable, direct and indirect components, as

also their long-term impacts.
Corporate objective of a service marketer could be a premium player (foreign banks like

American Express), a mass/social service provider (State Bank of India and Indian Postal
Service), a market skimmer, or to achieve market penetration, etc.
Government policy will include taxation, excise, export and import duties, etc., all of

which would greatly affect price.
Competitor reactions whether they are from market leaders or bit players, will greatly

affect price.
Entry and exit barriers in the industry will affect price.

Self Assessment

State whether the following statements are true or false:
9. Price elasticity of demand for offers has to be analyzed by the marketer.
10. Entry and exit barriers in an industry will not affect the prices.

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