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Summary Service Industry 2, ISBN: 9780273732037 Y1
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Summary of Service Industry 2-All weeks and concepts in-
, Week 1
Pricing
Pricing decision has the greatest impact on a company’s pro t. Pricing behaviour a ects
customer satisfaction and customer loyalty.
Price
Price distinguished from other marketing devices by the force and the speed of sales-e ect, the
shortness of time it takes to change it, the elasticity of competitive reactions and cash ow
implications.
Non monetary costs
Is what it costs a customer to buy a product (other than money), so including time spent shopping
and the risk taken in the assumption that the product will deliver expected or promised bene ts.
- The monetary price should already be taken into account, and compensated for the non
monetary price.
Types of non monetary costs: * all four
https://www.projectguru.in/publications/the-role-of-non-monetary-costs/
1. Search costs: the e ort to identify and select the desired service. eg: travel agency, time to
search.
2. In convenience costs: arranging schedules, travelling time
3. Time costs: length of time to be served, eg:to wait to be serve
4. Psychological costs: fear of not understanding eg: pension / fear of refusal eg: bank loans /
fear of the outcome eg: surgery , risk taking *
All change, even positive change, brings about psychological costs that consumers factor into the
purchase of services.
A rm needs to nd the perfect balance of monetary and non-monetary costs in order to sell its
product. This balance can be achieved by the rm itself. For example, a co ee shop owner may
choose to increase the price of his co ee in exchange for payment convenience- by o ering the
credit card payment facility. It is up to the consumers whether they are willing to pay more money
for convenience, or pay less money in return for extra e orts.
Role of non monetary costs
Non monetary costs play a role in the assessment of the quality of processes, the assessment of
the price/value relationship and hence in customer satisfaction.
People are willing to pay more if they perceive a decrease in non monetary costs.
EG: websites o ering comparison and expertise advice or the valet parking service at the airport
or additional service for visa application.
Pricing decisions: 4 step process
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