Distinguish the pricing of service from product

Essay by kingjames March 2006

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Price is a "language" to customers. If a marketer does not pay attention to the price structure that the market prefers, he may be unable to achieve his company goal, which is gaining profit. Why service pricing is so important to marketers? It is significant because service does more than just provide a means to drive sales. Marketers can capture and maintain their market share and build sales in the their particular industry. In these days, as service is becoming the main source of profit for many companies, it is playing a more essential role in marketers point of view. Thus, marketers around the world who has recognize the necessity to value service pricing has grown. However, service pricing is different from product pricing in many aspects. These articles have illustrated the difference between these two elements.

First of all, the major difference is the nature of the two elements; service is intangible whereas product is tangible (Docters et al, 2004; Groth, 1995; Berry and Yadav, 1996).

According to Groth (1995), services cannot be seen by customers, therefore customers often hesitate about the service whether matching their needs. In contrast, customers are more confident as they get to feel the product, try it, operate it or put it on. They can also observe the characteristics of the products that suit more to their preferences.

As service is intangible, customers are more difficult to compare price. Unlike the products, customers get to compare the cost of the products as they are well categorized (Berry and Yadav, 1996). In addition, Docters et al (2004) say that the intangible nature of services have created more customers demand such as counting units sold, which are more complicated to apply on a service than a product.

Besides that, services are...