Explain Pricing in Services


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PRICING IN SERVICES

Price is a significant element of the marketing mix because it is the only element that produces revenue whereas the other elements produce cost. Price reflects the value attached to the service by the service provide- and it must correspond with the customer’s perception of value. Pricing is a dynamic tool for meeting competition. It is the art of translating into quantitative terms the value of the product or a unit of a service to customer. Service providers offer a range of service at different price levels to cater to the needs of different target segments that may have different levels of purchasing power. For an example, airline offers business class as well as economy class travel. They also vary the price of the product in order to address the problems arising out of demand and capacity constraints.

For managing demand they offer different prices to customers buying the services at different point of time, with lower prices being charged in the slack periods.

 

Objective of Pricing:

i)      Survival.

ii)     Growth.

iii)    Maximize profit.

iv)   Maximize Market share.

v)    Leadership in service quality.

vi)   Stimulating patronage.

 

Factors Affecting Pricing Decisions:

The factors affecting pricing decision may be classified as internal factors which are controllable and external factors that stem from external environment.

Internal Factors:

i)      Organizational factors: It refers to the internal arrangement for decision making.

ii)     Marketing mix Elements: Which includes the service offering the promotion, .people; process and physical evidence are important in determining the value for money aspect in the service sector.

iii)    Positioning

iv)    Service cost: Pricing policy should cover at least the basic cost.

External Factors:

i)      Competition: This is more relevant it) case of homogenous services like laundry, vending 1 machines etc.

ii)     Demand: The demand may vary for a number of reasons.

iii)    Regulatory factors: In many of the services the prices are either administered & controlled e.g. post & telegraph, banking, railways and education.

 

Special Issues of Pricing in a Service Sector:

A service marketer has to consider the following issues regarding pricing methods and policies to be adopted.

(i) Intangibility            (ii) Perishability           (iii) Customer participation.

(iv) Controllability      (v) Variability

 


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