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Marketing Exam Study!

    • 4.

      Increasing surplus capacity in the industry

  • Price competition decreases with

    • 1.

      Non-price-related costs of using competing alternatives are high – saving time

and efford are of equal or greater importance to customers than price

  • 2.

    Personal relationship matter – services that are highly personalized and customized are very important customers, thus discouraging them from responding to price competitive offers

  • 3.

    Switching costs are high – taking time, money, and effort, to switch providers customers are less able to take advantage of competing offers

    • 4.

      Time and location specificity reduce choice

  • Managers should watch that firms should not fall in to the trap of comparing competitors’ prices dollar for dollar, and then seeking to match them

Value based pricing

Understanding Net Value

  • Customers weigh the perceived benefits obtained from the service against the

perceived costs they will incur

  • Valarie Zetihaml proposes four broad expressions of value:

    • 1.

      Value is low price

    • 2.

      Value is whatever I want in a product

    • 3.

      Value is the quality is the quality I get for the price I pay

    • 4.

      Value is what i get for what I give

  • #4 is known as Net Value – the sum of all the perceived benefits (gross value)

minus the sum of all the perceived costs of service

  • Four distinct but related strategies for capturing and communicating the value of a service:

    • 1.

      Uncertainty reduction, relationship

  • 2.

    Relationship enhancement

  • 3.

    Low-cost leadership

  • 4.

    Value perception management

    • Reducing uncertainty include: 28

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