The 7 P’s of Services Marketing
2. Pricing: Pricing of services is tougher than pricing of goods. While the goods can be priced easily by taking into account the raw material costs, in case of services attendant costs - such as labour and overhead costs & others - also need to be factored in. Thus, a restaurant not only has to charge for the cost of the food served but also has to calculate a price for the ambience etc provided. The final price for the service is then arrived at by including a mark-up for an adequate profit margin.
Price:
Price is the amount
a consumer has to pay to purchase and consume the service. Price from the view
point of the service provider represents revenue and this is the only component
of the service marketing mix which brings him revenue whereas all other
components are sources of expenses.
Service being
intangible in nature, pricing is a very difficult and complex issue as compared
with pricing of goods. Price is also considered an indicator of quality-of-service
marketing. It is essential, therefore that the service firm prices its services
very appropriately. Price discrimination is a common phenomenon in pricing
services.
Ideally, the price
should provide for the cost of generating the service and also a certain amount
of profit to the service provider.
A service provider
may follow any of the following pricing objectives while pricing:
i. Profit related
objectives
ii. Volume or value
of sales objective
iii. Competition
based objectives
iv. Social
responsibility related objectives
v. Market
leadership related objectives
vi. Market share related
objectives
The following are
the factors influencing pricing decisions:
i. Cost of
providing the service
ii. Market demand
iii. Expected
competitors’ reactions
iv. Government
restrictions
v. Company
objectives
vi. Barriers of
entry and exit in the industry
vii. The prevailing
economic situation
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