The Marketing Book 5th Edition

The core

service offer

Peace of mind

Security

The secondary service offer

Flexibility

Benefits Ease of

purchase

“Excess”

deductions

Speed and

efficiency

Friendliness of

front-line

staff

600 The Marketing Book

Services tend to be relatively easy to copy
and cannot generally benefit from patent pro-
tection, as is often the case with goods. New
product development often occurs in an incre-
mental fashion, with many variants of a basic
service. The proliferation of mortgage prod-
ucts by a building society, all with slightly
differing terms and conditions, but basically
similar in their function, is an example of
this.

Pricing

Within the services sector, the term price often
passes under a number of names, sometimes
reflecting the nature of the relationship
between customer and provider in which
exchanges take place. Professional services

companies therefore talk about fees, while

other organizations use terms such as fares,

tolls, rates, charges and subscriptions. The art

of successful pricing is to establish a price level

which is sufficiently low that an exchange

represents good value to buyers, yet is high

enough to allow a service provider to achieve

its financial objectives.

In principle, setting prices for services is

fundamentally similar to the processes

involved in respect of goods. At a strategic

level, a price position needs to be established

and implemented with respect to the strength

of customer demand, the costs of production

and the prices that competitors are charging. A

number of points of difference with respect to

services pricing are noted here: the effects of

inseparability; the effects on pricing of cost

Figure 23.4 An analysis of the product offer of an insurance policy, comprising core and secondary levels
of service offer