Unit 4: Pricing and applications
Services Marketing notes · PTU syllabus (MBA 922-18)
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Unit summary
Pricing services is difficult because costs and value are hard to see, and each service industry has its own marketing challenges. This unit covers pricing approaches and strategies for services and applications of services marketing in the financial, healthcare and hospitality sectors.
After this unit you can
- Explain why service pricing differs from goods pricing
- Apply pricing approaches and strategies for services
- Apply services marketing concepts in financial services and healthcare
- Apply services marketing concepts in hospitality
PTU syllabus topics
- Pricing approaches and strategies for services
- applications in financial
- healthcare and hospitality sectors
Financial services
Trust and intangibility
Relationship managers, digital self-service
Healthcare
High stakes, credence qualities
Credentials, patient experience
Hospitality
Perishable capacity
Dynamic pricing, loyalty programmes
Topic 1
Pricing approaches and strategies for services
Customers' knowledge of service prices is low because prices are often customised, varied by provider, and not visible before purchase; price is used as an indicator of quality.
Cost-based
Price = direct + overhead costs + profit margin (legal fees, consultancy hourly rates)
Competition-based
Price signals from rivals; going-rate pricing (airlines, telecom)
Demand-based
Price matches the customer's perceived value
Demand-based pricing strategies (by meaning of value)
| Value means | Strategy | Example |
|---|---|---|
| Low price | Discounting, odd pricing, penetration, synchro-pricing (off-peak) | Matinee shows, happy hours |
| Whatever I want in a service | Prestige pricing, skimming | Luxury spa, premium consulting |
| Quality for the price I pay | Value pricing, market segmentation pricing | Student discounts, economy vs business class |
| All that I get for all I give | Price framing, price bundling, complementary pricing, results-based pricing | Hotel packages, "no win, no fee" lawyers |
- Dynamic / yield pricing: prices change with demand to maximise revenue from perishable capacity — airlines, hotels, ride-hailing surge pricing.
Example
An IndiGo seat costs ₹3,000 if booked two months ahead but ₹9,000 a day before departure — yield management.
Topic 2
Marketing of financial services
- Features: intangible and abstract, high trust and fiduciary responsibility, long relationships, heavy regulation (RBI, SEBI, IRDAI), risk and return elements, customers with low financial literacy.
Product
Accounts, loans, cards, insurance, mutual funds — bundled and personalised
Price
Interest rates, fees, premiums, NAV-based charges
Place
Branches, ATMs, apps, business correspondents
Promotion
Trust-building advertising, financial literacy, digital campaigns
People
Relationship managers, advisers
Process
Digital KYC, instant loans, grievance redressal
Physical evidence
Branch ambience, app design, statements
- Trends: UPI and digital public infrastructure, fintech partnerships, robo-advice, account aggregators, mis-selling regulation.
Topic 3
Marketing of healthcare services
- Features: high involvement and anxiety, credence qualities (patients cannot judge technical quality), professional ethics, information asymmetry, regulation.
- Marketing focus: trust and reputation, doctor–patient communication, waiting time management, empathetic staff, clean and calming servicescape, transparent pricing and packages, insurance tie-ups (Ayushman Bharat PM-JAY).
- Trends: telemedicine, health apps, medical tourism, preventive health packages, digital health records (ABDM).
Example
Narayana Health's high-volume cardiac care lowers costs while maintaining quality — a service operations strategy that makes treatment affordable.
Topic 4
Marketing of hospitality services
- Features: perishable capacity (unsold rooms), high customer contact, seasonality, experience-centred, heavy dependence on staff.
- Marketing tools: yield management and dynamic pricing, loyalty programmes, online travel agents and direct booking, reviews and ratings management, personalised guest experience, servicescape and theming.
- Service quality: standard operating procedures with empowered staff; service recovery for complaints.
Example
The Taj group's staff response during the 2008 Mumbai attacks is widely studied as an example of a service culture built on employee values.
Key terms
- Yield management
- Varying prices to maximise revenue from fixed capacity
- Price bundling
- Pricing two or more services together
- Credence quality
- Attribute customers cannot evaluate even after use
- Bancassurance
- Selling insurance through banks
- Medical tourism
- Travelling abroad for medical treatment
Quick revision
- Service pricing: low price knowledge, price as quality signal.
- Approaches: cost, competition, demand; four meanings of value and strategies.
- Financial services: trust, regulation, 7Ps, fintech trends.
- Healthcare: credence qualities, trust, telemedicine.
- Hospitality: perishability, yield management, reviews, service culture.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Why do customers have low knowledge of service prices?
- Q2.What is yield management?
- Q3.Name two demand-based pricing strategies.
- Q4.What is a credence quality?
- Q5.State two features of financial services marketing.
- Q6.Give two marketing tools used in hospitality.
Long-answer questions
- Q1.Explain pricing approaches and strategies for services.
- Q2.Discuss the marketing of financial services.
- Q3.Discuss the marketing of healthcare services.
- Q4.Discuss the marketing of hospitality services.
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