INTRODUCTION TO 7 P’SINTRODUCTION TO 7 P’S

PRICE & PLACEPRICE & PLACE

Factors considered in Pricing a ServiceFactors considered in Pricing a Service

CostCost CompetitionCompetition Strategic Considerations/ ObjectivesStrategic Considerations/ Objectives

Increase Market share- Penetrative PricingIncrease Market share- Penetrative Pricing Build exclusive brand image- Skimming PricingBuild exclusive brand image- Skimming Pricing

Demand Variations, Capacity ConstraintsDemand Variations, Capacity Constraints Differential PricingDifferential Pricing Complementary ServicesComplementary Services ReservationsReservations Part-time employeesPart-time employees Increased consumer participationIncreased consumer participation

Short-term Pricing TacticsShort-term Pricing Tactics

Price Price TacticsTactics

ObjectivesObjectives Forms/examplesForms/examples

Differential Differential PricingPricing

Even-out fluctuations in Even-out fluctuations in DemandDemandBuild demand during Build demand during non-peak timenon-peak time

Price time Price time differentialsdifferentialsCustomer AbilityCustomer AbilityPlace DifferentialsPlace Differentials

Discount Discount PricingPricing

Encourage actions like Encourage actions like early payments, bulk early payments, bulk purchases or peak usagepurchases or peak usage

Price-offsPrice-offs

Limited offersLimited offers

Short-term Pricing TacticsShort-term Pricing Tactics

DiversionaryDiversionary

PricingPricingMake customer visit facility Make customer visit facility at least once to avail basic at least once to avail basic service at discount & with service at discount & with that experience try out that experience try out othersothers

Car service Car service StationsStationsRestaurantsRestaurants

High Price High Price maintenancmaintenance pricinge pricing

Associate Price with qualityAssociate Price with qualityHold out against price Hold out against price threat of low price Sellersthreat of low price Sellers

AirlinesAirlinesHospitalityHospitality

Loss Leader Loss Leader PricingPricing

To charge a reduced price To charge a reduced price for first order with a hope to for first order with a hope to get further business at get further business at better pricebetter price

Restaurant Restaurant offering discount offering discount on day of on day of inaugrationinaugration

Foundations for Setting PricesFoundations for Setting Prices

The Pricing TripodThe Pricing Tripod Cost - minimum price or floorCost - minimum price or floor Customer’s Perceived value - maximum Price Customer’s Perceived value - maximum Price

or Ceilingor Ceiling Competitors PriceCompetitors Price

Cost Based pricingCost Based pricing

Establishing the Cost of ServiceEstablishing the Cost of Service Fixed CostFixed Cost Variable costVariable cost Semi-variable costSemi-variable cost ContributionContribution Break-even pointBreak-even point

Activity based CostingActivity based Costing Identification of various activities Identification of various activities Determining the cost of each activityDetermining the cost of each activity

Value- Based PricingValue- Based Pricing

Understanding Net ValueUnderstanding Net Value Enhancing Gross valueEnhancing Gross value

Pricing Strategies to reduce uncertaintiesPricing Strategies to reduce uncertainties Relationship PricingRelationship Pricing Low-Cost LeadershipLow-Cost Leadership Managing the perception of ValueManaging the perception of Value

Reducing related monetary & non monetary Reducing related monetary & non monetary costcost Time cost, physical cost, psychological cost & Time cost, physical cost, psychological cost &

Sensory costSensory cost

Competition – Based pricingCompetition – Based pricing

Price leadershipPrice leadership Price Bids & NegotiationsPrice Bids & Negotiations

Pricing Strategy How much to Charge?

Cost, Competition, Consumer Demand What Should be the basis of pricing?

Based on completion of Task Based on admission to a Service performance Time Based Tied to consumption of physical resources

Pricing Strategy

How should payment be made? Cash, Credit / debit cards, Directed towards third party

Where should the payment be made?

To whom should the payment be made

Communicating Prices to the target market

Place- Third P

Location is considered to be the key for successful marketing of services

Customers are present at the same place where the services are “manufactured” & “delivered”. (Intangibility, Inseparability)

Research indicates consumer prefer conveniently located supplier of service over the best service provider far away

Distribution

Distribution embraces three interrelated element Information & Promotion flow Distribution of information &

promotion materials relating to service offers

Negotiation flow Focuses on reaching an agreement on service features & configuration & terms of offer so that purchase contract could be closed

Product flow Many services, especially those involving people & possession processing require physical facilities for delivery

For information- processing services (internet banking, entertainment etc) product flow can be undertaken via electronic channel

Type of Contact: Option for service delivery

Nature of Interaction Availability of service outlets

Customer goes to service organization

Theater, Bus service, fast-food chain

Service organization comes to Customer

House painting, mail delivery

Customer & service organization transact at arm’s length

Credit card company, telephone company, broadcast network

Transcending physical constraints of location

Franchised Outlets Co- marketing or sharing resources with product

or service partnersEg. Syndicate Bank & Bajaj Allainz, Corporation

Bank & New India assurance Company Petroleum Retail outlets Agents & Distribution Partners

Channel Management Issues

Serving Customers efficiently Ensuring Viability & Profitability of Channel

Partners Managing potential conflicts among multiple

channels