A customer pays for a product or service because of its ability to

satisfy some specific need or want. This imparts a value to the

product.
Pricing plays important role in the marketing mix of service
because pricing attracts revenue to the business & has direct
impact on profits.

Pricing is the art of translating into quantitative terms the value of

the product or a unit of a service to customers.
It is a managerial task that involves establishing pricing
objectives, identifying the factor governing the price, determining
the method of pricing & formulation of pricing strategies &
policies.

Pricing decisions have an impact on all parts of the marketing

system, suppliers, intermediaries, customers, competitors & the
government are all affected by pricing.
It affect the standard of living of the people, it regulates sales
growth & thus brings about economic development
It is an important competitive tool especially in those services
which are price sensitive for the marketer. Pricing is very useful in
developing marketing strategies-right from the introduction of the
service, maintaining market share in all stages of the service
cycle, until its decline.
It also helps the organisation to achieve its financial objectives
Pricing is the mechanism that constantly monitors the
alternative use of capital & it corrects itself as & when competition
intensifies.

Analyzing the organisational objectives

Analyze cost incurred in delivering the service
Determine demand levels & customer characteristics
Examine competitor pricing & positioning
Consider the regulatory measures relating to pricing
Set price based on the method adopted-cost, demand,
competitor
Implement suitable strategy based on market condition
Monitor the market response to the price set & identify
problems.

Survival
Maximize profits
Maximize profit share
Service quality leadership
Stimulating patronage

Internal Factors
Organisational Factors
Marketing Mix Elements
Positioning
Service Cost
External Factors
Competition
Demand
Regulatory Factors

 Intangibility
Perishability
Customer
Participation
Variability
Controllability

The methods for setting price may vary for firm to firm in the
service sector, but some logical factors should be common:The cost of producing the service will be the price floor - the
least price
The maximum price the customers are willing to pay will be
the price ceiling the maximum price
Between the two extremes in the area of price discrimination
which will be affected by the level of competition actual price
Based on the above factors, the approaches to pricing takes
three forms:Cost Based Pricing
Demand Based Pricing
Competition Based Pricing

Problems in Cost Based Pricing

It does not consider the price perception of the consumers
It does not consider competition in the service offering
Where the structure of cost has both variable & fixed
components, it becomes difficult to apportion fixed costs in
case of multiple service offering.
Problems in Demand Based Pricing
It is complicated to adjust the non-monetary cost incurred by
the consumer (time, inconvenience, psychic cost)
Consumers may not have adequate information on the
service cost. They tend to value the price in terms of quality
Problems in Competition Based Pricing
It does not take the cost structure & demand level for the
service into consideration
It may lead to predatory competition as small firms may not
be able to sustain competition
Many services are heterogeneous & more customer specific,
thus making comparisons difficult

 New Service Pricing Strategy

1. Price Skimming Strategy
2. Price Penetration
Differential Pricing/Market Segmentation
Pricing
Service Mix Pricing(1+1)
Price Bundling
Relationship Pricing