MKT 723 Chapter Notes - Chapter 17: Contingent Fee, Value-Based Pricing, Price Point

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Service organizations use a na ve approach to pricing without regard to underlying shifts in demand, the rate that supply can be expanded, prices of available substitutes, consideration of the price-volume relationship or availability of future substitutes. Three key ways that service prices are different for consumers. Reference price - price point in memory for a good or service. Can consist of last paid price, frequently paid price, or average price. If one cannot readily produce a price for a service out of memory, there are many reasons for this difference. Service variability limits knowledge firms can offer an infinite variety of combinations leading to a complicated pricing structure. Providers are unwilling to estimate prices until the service is performed, an accurate estimate cannot be given. Individual customer needs vary costs vary amongst customers. In the example of a hairdresser, longer hair would cost more than shorter hair.

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