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What Makes Service Pricing Strategy Different and Difficult

Updated on May 25, 2010

No ownership of services - Its hard for firms to calculate financial costs of creating an intangible performance as we in production sector may calculate per unit cost but in service sector its just like doing impossible thing, you may have rough estimate but exact amount may never be calculated

Variability of inputs and outputs - how can firms define a “unit of service” and establish basis for pricing? Firms have standardized pricing for all services but for each customer it may vary

Many services hard for customers to evaluate - what are they getting in return for their money? Customers are always aware that they are not getting some physical or tangible thing while buying a service and its hard for them to be satisfied with what they are being provided by vendor

Importance of time factor - Same service may have more value to customers when delivered faster, Customers are highly aware of importance of time and when a service delivery takes much time; customers get bored of waiting

Delivery through physical or electronic channels - May create differences in perceived value, as services are delivered mostly through these channels customer may expect something different than what they actually acquired.

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