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Comparison of the competitor prices in a service context and the implications of setting up an effective pricing strategy

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  1. Introduction
  2. The competitor prices in a service context
  3. The implications of setting up an effective pricing strategy
  4. Comparison between the two
  5. Conclusion

These days, services have known an outstanding growth and have become an important part of economies (Avlonitis and Indounas 2007). Thus, more people work today on services, than ever before and services are no longer just an insignificant option linked to tangible goods (Palmer 2005). However, marketers cope with many issues in services due to its special characteristics, issues ?that are not encountered by marketers of tangible goods? (Clemes et al 2000). Pricing is one of these issues as Berry and Yadav (1996) explained that ?little research exists on the pricing of services and few people understand the special challenges involved». Similarly, Monroe and Kent (1989) have suggested that service providers have ?a naive and unsophisticated approach to pricing». In this situation, it can be argued that service users could feel lost and quite uncertain about prices.

Thus, the purpose of this essay is to discuss the difficulty of comparing competitor's prices in a service context and to investigate its implications for setting up an effective pricing strategy. According to Berry and Yadav (1996), it is very complicated for customers to compare and evaluate prices in a service context. This is mainly due to the special characteristics of the services, especially the intangibility and the Heterogeneity (Zeithaml and Bitner 2000).

Rushton and Carson (1989) have argued that intangibility, or lack of physical attributes (Bebko 2000), is considered as the main and the most important characteristic of the service. Thus, because services are ?intangible deeds and performances? (Zeithaml and Bitner 2000), they cannot be seen or touched in the same manner that we can see or touch tangible goods. Consequently, it makes the evaluation, before and after purchase, more difficult for customers (Rushton and Carson 1989). Levitt (1981) suggested that the intangibility is the main factor responsible for the evaluation problems for customers.

[...] Finally, it can be argued that the rapid growth of services in economies, and even in marketing research will facilitate the work of marketers for setting up efficient marketing strategies, especially in pricing. Furthermore, people realise the special challenges involved with services and services marketing is becoming a big academic field. So, even if few researches exist on pricing today, the importance of services will set up a new deal. Customers need more transparency from companies to understand the way they set up their prices. [...]

[...] Indeed, it creates a certain difficulty for customers to set up an accurate reference price and it increases the uncertainty about the knowledge of services' prices (Zeithaml and Bitner 2000). Under circumstances, customers cannot compare competitor's prices and even worse, they are unable to evaluate the price of the service before experiencing it. As well as intangibility, heterogeneity plays a role for customer's evaluation of prices. Many authors have argued that services cannot be exactly the same and can't be standardized (Zeithaml and Bitner (2000), Clemes et al because of many factors, such as people and customers' different behaviours, or even because the experience resulted from one service to another may differ from day to day, and from customer to customer. [...]

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