Pricing services is different from pricing and good/product as it completely based on the value it delivers.

1. PRICING
SERVICES
Vijyata
Assistant Professor
RanchiWomen’s College
RanchiUniversity

2. PRICING A SERVICE
Price is what customers are willing to pay for services. How
much a customer has to pay depends on the value he
perceives in the service offer.The payment can be in many
forms - money, barter, or return services. Price can be simply
explained, thus:
Price = Quantity of money received by service provider
Quantity of service received by the buyer

3. CONCEPT OFVALUE &
PRICE IN SERVICES
Value is the ratio of perceived benefits of the service to be
purchased to price and other added costs.Travelling time, hassles,
energy costs, and psychic costs are some examples of added costs.
• ProductValue: The worth assigned to the product by the
customer.
• ServiceValue: The worth assigned to the service by the customer.
• PersonnelValue: The worth assigned to the service-providing
personnel by the customer.

4. • ImageValue: The worth assigned to the image of the service
or the service provider by the customer.
• Monetary Price: The actual rupee price paid by the consumer
for a product;
• Time Costs: The time the customer has to spend to acquire
the service
• Energy Costs: The physical energy spent by the customer to
acquire the service.
• Psychic Costs: The mental energy spent by the customer to
acquire the service, that is, worrying and aggravation.

5. OBJECTIVES FOR
ESTABLISHING PRICES
PRICING
OBJECTIVES
Revenue &
Profit
Objectives
Patronage &
User Base-
related
Objectives
Seek
Profit
Build a
User
Base
Build
Demand
Cover
Costs

6. REVENUE AND PROFIT OBJECTIVES
SEEK PROFIT:
• Make the largest possible contribution or profit
• Achieve a specific target level, but do not seek to maximize profits
• Maximize revenue from a fixed capacity by varying prices
COVER COSTS:
• Cover fully allocated costs, including institutional overhead
• Cover costs of providing one particular services, excluding overhead
• Cover incremental costs of selling one extra unit or to one extra
customer.

7. PATRONAGE AND USER BASE – RELATED
OBJECTIVES
BUILD DEMAND:
• Maximize demand subject to achieving a certain minimum level
of revenues
• Achieve full capacity utilization
BUILD A USER BASE:
• Stimulate trial and adoption of a service
• Build market share and /or a large user base with significant
economies of scale

8. VALUETO
CUSTOMER
COMPE
TITION
COST
PILLARS OF PRICING STRATEGY

9. COST-BASED PRICING
STEP 1 : Identification and calculation of cost
- Traditional cost accounting approach
- Activity based costing approach
STEP 2 : Choosing the method of pricing
- Targeted return pricing
- Mark-up pricing
- Full cost pricing

10. SERVICE COST
Search Cost
Purchase and
service Encounter
costs
Aftercosts
Money
Time
Physical Effort
Psychological Burdens
Sensory Burdens
Necessary Follow-up
Problem Solving
Purchase
Operating Costs
Incidental
Expenses

11. COMPETITION-BASED PRICING
Price competition is affected by :
• Increased number of competitors
• Increased number of substitute
• Increased surplus in the industry
• Switching cost
• Time & Location
• Personal relationships with buyers

12. COMPETITION-BASED
PRICING METHOD
•Going rate pricing
•Sealed-bid Pricing
•Pricing above competition
•Pricing below competition

13. VALUE – BASED PRICING
Zeithaml proposed four broad expressions of
VALUE :
Value is low price.
Value is whatever I want in a product
Value is the quality I get for the price I pay.
Value is what I get for what I give.

14. VALUE-BASED PRICING APPROACHES
1. Reducing Uncertainty
(a). Benefit –driven pricing – It involves pricing that aspect of the
service that benefits customer directly by identifying the most and
least valued benefit.
(b). Flat-rate Pricing - It involves quoting a fixed price in advance
of service delivery so as to avoid surprises for users.
2. Relationship Pricing
giving price as well as non-pricing incentives to customers to
consolidate their business with a single supplier.

15. VALUE-BASED PRICING APPROACHES
3. Cost Leadership
Low-pricing with enabled profits helps in appealing customers
and stimulating larger purchases.
4.Value Perception Management
Value is subjective , and not all customers have the expertise
to assess the quality and value they receive even after
consumption. Communicating value to the customer is the key in
value perception management

16. PRICE MANGEMNT ISSUES
How much should be charged for this service?
What should be the basis of pricing?
Who should collect payment?
Where should payment be made?
How should payment be made?
How should prices be communicated to the target
market?

17. THANK YOU !!!
For any query / feedback mail me at vijyata.rwc@gmail.com or comment in the
comment box