Page 217 - DMGT510_SERVICES_MARKETING

Services Marketing

Notes z There are two approaches to cost-based pricing: full cost or mark-up pricing and marginal
cost pricing.

z Competitor-based pricing is based on what the competitor is offering. A service firm uses
this method to make an entry in the market, finding an appropriate price bracket for its
service offer - without having to go through a trial and error process - by pegging itself to
the competition.
z Demand-based pricing is based on what the customers are prepared to pay. Different
customers have different upper-ceilings on the price that they are willing to pay for a
service.

11.7 Keywords

Full-cost Pricing: prices are based on total or full cost plus the desired profit.

Going Rate Pricing: keeping price that is prevailing in the market.
Marginal Cost Pricing: occurs when service firms choose not to include their fixed costs.
Price: The amount customers are willing to pay for the service.
Price Skimming: it is a pricing strategy in which a marketer sets a relatively high price for a
product or service at first, and then lowers the price over time.
Sealed Bid Pricing: system of tenders where bids are received from service providers.
Value: ratio of perceived benefits of the service to price and other added costs.

11.8 Review Questions

1. “Pricing is one of the tactical tools least understood by the marketer”. Discuss

2. “Consumer makes a straight-cut analogy: high price = high quality”. Is this a right approach?
How can marketers make use of this mindset of consumers?
3. Explain how pricing can be an effective tool while entering a market and trying to expand
market share.
4. Suppose you are the marketing head of a travel and tour company. What factors will you
keep in mind while deciding prices for your tour packages?
5. Which pricing approach would be most suitable for an airline firm and why?
6. Is price equal to pricing? Substantiate your answers with examples.
7. “Price is only a component of value”. Substantiate

8. Explain the pricing policy adopted by Big Bazaar.
9. Contrast the pricing strategies of Airtel and Vodafone.
10. If you were salon owner, what factors would you keep in mind while pricing your services?
What strategies would you use to price your services?

Answers: Self Assessment

1. Price 2. Value
3. Personnel value 4. Psychic

212 LOVELY PROFESSIONAL UNIVERSITY