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Chapter 6:
Setting Prices and
Implementing
Revenue Management
Chapter 6 Page 1
Overview Of Chapter 6
Services Marketing
Chapter 6 Page 2
Services Marketing
Effective Pricing is
Central to Financial Success
Chapter 6 Page 3
Services Marketing
Chapter 6 Page 4
Demand maximization
Chapter 6 Page 5
Services Marketing
Pricing Strategy
As Represented by the Pricing
Tripod
Chapter 6 Page 6
Chapter 6 Page 7
Value to customer
Competition
Costs
Chapter 6 Page 8
Cost-Based
Pricing
Value-Based
Pricing
CompetitionBased Pricing
Relate price to
value perceived by
customer
Monitor competitors
pricing strategy
Activity-Based
Costing
Dependent on the
price leader
Pricing
implications of cost
analysis
Chapter 6 Page 9
Services Marketing
Chapter 6 Page 10
Value-Based Pricing:
Understanding Net Value
Services Marketing
Chapter 6 Page 11
Value-Based Pricing:
Strategies for Enhancing Net Value
Services Marketing
Chapter 6 Page 12
Purchase
Time
Operating Costs
Physical Effort
Incidental Expenses
Search Costs*
Psychological Burdens
Sensory
Burdens
Necessary
Post Purchase Costs*
Follow-up
Problem
Solving
cost categories
Chapter 6 Page 13
Competition-Based Pricing
Services Marketing
Increasing competition
Increase in substituting offers
Wider distribution of competitor
Increasing surplus capacity in the industry
Chapter 6 Page 14
Competitive-Based Pricing
Services Marketing
Chapter 6 Page 15
Services Marketing
Revenue Management:
What it is and How it works
Chapter 6 Page 16
Services Marketing
Chapter 6 Page 17
Services Marketing
Chapter 6 Page 18
Price Elasticity
Services Marketing
Chapter 6 Page 19
Product-Related Fences
Rate Fences
Examples
Basic Product
Amenities
Service Level
Chapter 6 Page 20
Transaction Characteristics
Rate Fences
Examples
Time of booking or
reservation
Location of booking or
reservation
Chapter 6 Page 21
Services Marketing
Consumption Characteristics
Rate Fences
Example
Chapter 6 Page 22
Services Marketing
Buyer Characteristics
Rate Fences
Examples
Frequency or volume of
consumption
Group membership
Chapter 6 Page 23
Services Marketing
Chapter 6 Page 24
Services Marketing
Chapter 6 Page 25
Chapter 6 Page 26
Services Marketing
Chapter 6 Page 27
Services Marketing
Putting Service
Pricing into Practice
Chapter 6 Page 28
Pricing Issues:
Putting Strategy into Practice
Services Marketing
1. How much to
charge?
2. What basis
for pricing?
3. Who should
collect
payment?
4. Where
should payment
be made?
5. When should
payment be
made?
6. How should
payment be
made?
7. How to
communicate
prices?
Slide 2010 by Lovelock & Wirtz
Chapter 6 Page 29
1. How much
to charge?
2. What basis
for pricing?
Completing a task
Admission to a service performance
Time based
Monetary value of service delivered (e.g., commission)
Chapter 6 Page 30
3. Who should
collect
payment?
4. Where should
payment be
made?
5. When should
payment be
made?
Chapter 6 Page 31
Cash
Token
Stored value card
Electronic fund transfer
Charge Card (Debit/Credit)
Vouchers
7. How to
communicate
prices?
Chapter 6 Page 32
Summary
Services Marketing
Chapter 6 Page 33
Summary
Services Marketing
Revenue management
Maximizes revenue from a given capacity at a point in time
Manage demand and set prices for each segment closer to
perceived value
Chapter 6 Page 34