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Service Marketing

The document discusses key aspects of setting prices and implementing revenue management strategies for services. It outlines that pricing should be based on understanding costs, customer value, and competitors. The document also discusses using revenue management to reserve capacity for high-paying customer segments by setting different prices for different groups. Fairness and ethics in pricing are also addressed.

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Jenniferdjaja
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247 views15 pages

Service Marketing

The document discusses key aspects of setting prices and implementing revenue management strategies for services. It outlines that pricing should be based on understanding costs, customer value, and competitors. The document also discusses using revenue management to reserve capacity for high-paying customer segments by setting different prices for different groups. Fairness and ethics in pricing are also addressed.

Uploaded by

Jenniferdjaja
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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SETTING PRICES & IMPLEMENTING REVENUE MANAGEMENT

Effective Pricing is Central to Financial Success

The creation of a viable service require


Any pricing strategy must be based on
a business model that allows for the
clear understanding of a company’s
costs of creating and delivering the
pricing objectives.
service.
Objectives of Service Pricing

•  Gain Profit and cover costs


•  Build demand and develop a
user base
•  Support positioning strategy
Pricing Tripod

1. Unit Cost to Firm 2. Value to Customer


(Cost-based (Value-based
Pricing) Pricing)

3. Competitor Pricing
(Competitor-based
Pricing)

1. Cost-based Pricing
•  Establishing the Costs of Providing Service
•  Activity-Based Costing
•  Pricing Implications of Cost Analysis
2. Value-based Pricing
•  Understanding Net Value
•  Managing the Perception of Value
•  Reducing Related Monetary and Non-Monetary Costs
3. Competition-based Pricing
•  Price Competition Intensifiers
•  Price Competition Inhibitors
Revenue Management
•  It is most effective when applied to service businesses
characterized by :
–  High fixed cost structure and relatively fixed capacity, which
result in perishable inventory
–  Variable and uncertain demand
–  Varying customer price sensitivity
Reserving Capacity for High-Yield Customers
•  Revenue management involves setting prices according to predicted
demand levels among different market segments.
•  Firms need a disciplined approach to save capacity for them instead
of simply selling on a first-come, first-served basis.
Price Elasticity
•  How sensitive demand is to changes in price.
•  If a small change in price has a big impact on sales, demand for that
product is said to be price elastic.
Rate Fences

•  Price Customization - Charging different customers different prices


for what is actually the same product.
•  Rate fences allow customers to self-segment on the basis of service
characteristics and willingness to pay.
•  Fences can be either physical or non-physical.
Key Categories of Rate Fences

•  Physical (Product-related) Fences


–  Basic Product
–  Amenities
–  Service Level
–  Other Physical Characteristics

•  Non-Physical Fences
Transactional Characteristics
Time of booking or reservation
Location of booking or reservation
Flexibility of ticket usage
Consumption Characteristics
Time or duration of use
Location of consumption
Fairness & Ethical Concerns in Service Pricing

•  Service Pricing is Complex


•  Piling on the Fees
•  Designing Fairness into Revenue Management
–  Design Price Schedules & Fences That Are Clear, Logical & Fair.
–  Use High Published & Frame Fences as Discounts.
–  Communicate Consumer Benefits of Revenue Management.
–  “Hide” Discounts through Bundling, Product Design & Targeting.
–  Take Care of Loyal Customers.
–  Use Service Recovery to Compensate for Overbooking.
Putting Service into Pricing

•  How Much Should Be Charged?


•  What Should Be the Specified Basis for Pricing?
•  Who Should Collect Payment and Where Should Payment Be Made?
•  When Should Payment Be Made?
•  How Should Payment Be Made?
•  How Should Prices Be Communicated to the Target Markets?
THANK YOU

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