Brokers Commission
Insurance companies---premium
Roadways---toll
Make the largest possible contribution or profit Achieve a specific target level, but did not seek the
maximum profit
3.
Maximum revenue from a fixed capacity by varying prices and target segment overtime, typically using yield or revenue management system
overhead
2. Cover cost of providing one particular service excluding
overhead
3. Cover incremental cost of selling one extra unit of one
extra customer
A. Build demand
1.
Achieve full capacity utilization , especially when high capacity utilization adds to the value created for all customers . Ex. Full
2.
Build market share and / or a large user base , especially if there are significant economies of scale that can lead to a competitive cost advantage ( ex. If development of fixed cost are high)
Competition
Costs
Value to customer
lacks differentiation)
Who is the price leader? (one firm sets the pace) Value-Based Relate price to value perceived by customer
physical good
Labour and infrastructure needed to create performance , many
services etc.
customers
When looking at prices, customers care about value to themselves, not what
of overheads
ABC management systems examine activities needed to create and deliver service
activities being performed and then determine the cost of each activity as it relates to each expense category.
Unit level activities Batch level activities
other firms in the same industry or market as an anchor for the firms price This approach use in two situations: 1. When services are standard across providers Ex. Dry cleaning industry 2. In oligopoly with a few large service providers Ex. Airline industry
Increase in number of competitors Increasing number of substituting offers Increasing surplus capacity in Industry Wider distribution of competitor
Non price related costs of using alternatives are high (Save time or effort are more important to customer )
2.
Personalization , customization and switching cost matters ( hair Styling , family medical care discouraging them from competitive offer )
3.
Time and location specificity reduce choice( Ex Bank near to your home )
thinks it is worth. To set an appropriate price , marketer needs to understand how customer perceive service value
Understanding Net Value
When customers purchase a service , they are weighing the
perceived benefits obtained from the service against the perceived cost they will incur. People are willing to pay higher price to reduce the nonmonetary cost of service
Dry cleaning value means the lowest price Discounting, Odd pricing, Penetration pricing 2. Value is whatever I want in product or service MBA : Value is best education I can get Prestige pricing, Skimming pricing 3. Value is the quality I get for the quality I pay Hotel for vacation: Value is the price first and quality second Value pricing, Market Segmentation pricing 4. Value is what I get for what I give For a hairstyle : value is what I pay in cost and time for the look I get Price framing , Price bundling
Effort Time
Perceive d Benefits
Perceived Outlays
Relationship Pricing
non-price incentives discounts for volume purchases discounts for purchasing multiple services
Low-cost Leadership
Convince customers not to equate price with quality Must keep economic costs low to ensure profitability at low
price
usage
Time expenditures Physical effort (e.g., fatigue, discomfort) Psychological burdens (mental effort, negative feelings) Negative sensory burdens (unpleasant sensations affecting any
Clinic B
Price Rs 85 Located 15 min away by car or transit Next available appointment is in 1 week Hours: Monday Friday, 8am 10pm Estimated wait at clinic is about 30 - 45 minutes
Clinic C
Price Rs 125 Located next to your office or college Next appointment is in 1 day Hours: Mo Sat, 8am 10pm By appointment estimated wait at clinic is about 0 to 15 minutes
Price Elasticity
Price per unit of service
Di De
De Di
Comparative study of any four mobile service provider pricing schedule on the following dimensions Air time , Subscription fees Free minutes Per second/ minute bills Usage profile of customer
define value in the following services: A hairdressing salon A legal firm specializing in business and taxation law A nightclub