Market Strategy Depends Upon Pricing Approaches in Service
Keywords:
Service pricing, service marketing, discounts, value-based pricing, pricing approaches, marketing strategyAbstract
Pricing is the only element of the marketing mix that generates revenue, yet in services it is also the hardest to set and defend, because services are intangible, perishable and variable and customers have little physical evidence on which to judge value. This conceptual paper examines how the marketing strategy of a service firm depends on the pricing approach it adopts. The objectives of pricing (profit-, sales- and status-quo-oriented), the internal and external factors that shape price decisions, and the main methods and strategies in use: cost-based, competition-based, demand-oriented and value-based pricing; premium, penetration, economy and skimming strategies; psychological, product-line, bundle, promotional and geographical pricing; and discounts and allowances. The paper also considers the non-monetary costs that service customers bear, namely time, search, convenience and psychological costs. The review suggests that buyers of services are becoming more price-resistant, that discounts must be controlled and linked to clear objectives, and that firms which communicate value and build long-term relationships are better placed than those competing on price alone. Recent literature adds that digital platforms and data analytics are making dynamic and personalised pricing common, which raises questions of fairness and transparency.
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