Services Marketing

Pricing is an important element of the marketing mix that brings in revenues and profits. The success of a service depends on the pricing strategy developed or adopted by the company. However, it is easier for customers to evaluate the value derived from goods, when compared to services. There are four ways in which prices of services are perceived to be different from those of goods.

Service customers perceive the price as an indicator of the quality offered and they include non-monetary costs like time costs, search costs, convenience costs, and psychological costs involved in consuming the services, while estimating their value. There is difficulty in comparing the prices of services due to their specific characteristics such as intangibility. Finally, prices vary with fluctuations in demand.

A company's pricing structure should reflect its long-term and short-term objectives. A company might price its services to survive in the market, to maximize the current profit, to maximize the current revenues or to obtain a prestigious position or a product quality leadership. In order to achieve these objectives, a company might choose cost-based pricing, demand-based pricing or competition-based pricing.