Pricing Decisions:

The basic methods of pricing for tangible products are applicable for services. Car rental agencies give quantity discounts and their daily rates are cheaper if you agree to rent the car for a week, or a month at any given period of time. Insurance companies also give cash discounts if their customers pay premiums annually, or quarterly, instead of monthly. Doctors and management consultants use variable - price policies, while hotel and building owners offer different services (e.g. one bedroom, two bedrooms, suites, etc) and seasonal discounts for hotel accommodation.

Geographical pricing may apply where mechanics charge more if they go to work out of a town, or doctors may charge more if you call them from their homes instead of their offices. Lower rates for long distance telephoning at night and on Sunday can be seen as another example of geographical pricing and creative pricing.

Perfect competition does not exist in service marketing because of the heterogeneous nature of services. Most services are highly differentiated because of the difficulty in standardisation. To have complete market information is not possible and there are geographical limits for offering services. There is a small number of sellers, and freedom of entry is hampered by the heavy capital requirement for producing certain services like transport and medical car. For the above reasons, the private seller just establishes a price, but it must be reasonable and approved by a government or regulatory agency.

Finally, the need for managerial creativity and skill in pricing is essential and necessary as well, because:-

• services are extremely perishable and not storable
• demand for services often fluctuates considerably
• customers can postpone purchases or perform the services by themselves

The price should be based on the elasticity of demand, i.e. High price should be charged whenever the demand is low;

the price will depend on the intensity of demand, the cost of producing the service and the existing competition.

In practice, "uniform" prices are charged by land valuers, doctors, lawyers and shoe-shine boys who operate in the same geographical areas, e.g. within Nairobi area.