Price Mix

 Price is the value that a business charges for its products or services, and it is an important element of the marketing mix. In the service sector, pricing strategies can vary widely depending on the type of service being offered. 

Here are some pricing strategies used by Indian companies in the service sector:

Skimming pricing: This strategy involves setting a high price for a new product or service in order to maximize revenue from early adopters. Indian companies in the technology sector often use this strategy for new software or hardware products. For example, when Apple launched its iPhone in India, it was priced at a premium compared to other smartphones in the market, but it was still able to attract a significant number of early adopters who were willing to pay the higher price.

Penetration pricing: This strategy involves setting a low price for a new product or service in order to attract a large number of customers and gain market share. Indian companies in the e-commerce sector often use this strategy to gain a foothold in the market. For example, when Flipkart launched its online shopping platform in India, it offered deep discounts and free shipping to attract customers and gain market share.

Value-based pricing: This strategy involves setting a price based on the perceived value of the product or service to the customer. Indian companies in the hospitality sector often use this strategy for luxury hotels and resorts. For example, the Taj Group of Hotels sets its prices based on the level of luxury and exclusivity offered by each property.

Bundling pricing: This strategy involves offering multiple products or services together as a package at a discounted price. Indian companies in the telecom sector often use this strategy for mobile phone and internet plans. For example, Jio, a telecom company in India, offers bundled plans that include voice calls, data, and messaging at a lower price than if these services were purchased separately.

Dynamic pricing: This strategy involves setting prices that fluctuate based on market demand and other factors. Indian companies in the airline industry often use this strategy for ticket pricing. For example, airlines may offer lower prices for flights during off-peak hours or for flights booked in advance.

Special Considerations of Service Pricing:

1. Pricing Decision:

• Firms face the challenge of setting prices that balance profitability and market competitiveness. Strategic pricing involves proactive management of market conditions rather than reactive price setting.

Cost Considerations:

• Service pricing is often determined after provision, leading to price uncertainty for consumers.
• Services lack a tangible cost of goods sold, making cost-based pricing challenging.
• Service industries often have a high fixed-cost-to-variable cost ratio, posing pricing challenges.
• Limited economies of scale exist due to the mass production of services.

1. Demand Considerations:

   • Service demand tends to be more inelastic, allowing cost increases to be passed to consumers.
   • Consumers often implicitly bundle prices, impacting demand for related services.
   • Price discrimination strategies should be considered due to supply and demand fluctuations.

2. Customer Considerations:

   • Service price is a significant quality cue for consumers, affecting perceived service quality.
   • Services priced too low may be perceived as inferior, leading consumers to opt for higher-priced alternatives.
   • Service customers are often uncertain about reservation prices.

3. Competitive Considerations:

   • Comparing service prices is often difficult, making competitive-based pricing less significant.
   • Self-service consumers present a unique competitive consideration, as they may opt for lower-priced alternatives to customize their experience.

4. Profit Considerations:

   • Price bundling can increase profit opportunities for service firms by offering bundled services at a lower price than if bought separately.
   • Bundles are perceived as better value and generate additional revenue for the firm.

5. Product Considerations:

   • Price may be perceived differently across different service sectors.
   • Service consumers are less price-sensitive and less likely to delay purchases due to inability to inventory services.
   • Traditional price lining practices may not align with service consumer behavior.

6. Legal Considerations:

   • Pricing strategy must comply with legal regulations.
   • Intangibility, inseparability, and heterogeneity of services can expose customers to coercive influence techniques, necessitating ethical pricing practices.