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DISCUSSION QUESTIONS
1. Which approach to pricing (cost-based, competition-based, or demand-based) is the most fair to
customers? Why?
Cost-based pricing is likely to be the fairest approach to customers. Costs are based on the direct and
labor costs to provide the service, which should be fairly similar across providers. If all service
2. Is it possible to use all three approaches simultaneously when pricing services? If you answer yes,
describe a service that is priced this way.
Yes, it is possible to use all three pricing approaches simultaneously. In fact, most pricing decisions
do involve more than one approach either in the price strategy itself or in the tactics taken to create
3. For what consumer services do you have reference prices? What makes these services different from
others for which you lack reference prices?
Among the services that students may have reference prices for are dry cleaning, fast food, and
parking—services which are fairly standardized and are consumed frequently enough that students
4. Name three services you purchase in which price is a signal to quality. Do you believe that there are
true differences across services that are priced high and those that are priced low? Why or why not?
Among the services for which price is a signal to quality are spa fitness vacations, some medical
services, and legal services. In some cases, there are true differences between services priced high
and those priced low; sometimes the prices are established based on demand for the services and
5. Describe the nonmonetary costs involved in the following services: getting an automobile loan,
belonging to a health club, having allergies diagnosed and treated, attending an executive education
class, and getting braces.
Getting an automobile loan involves the psychic cost of getting a credit check, something that can be
painful to many customers. Belonging to a health club has the highest costs associated with the time
6. Consider the specific pricing strategies for each of the four customer value definitions. Which of
these strategies could be adapted and used with another value definition?
Most of the strategies could be (and frequently are) coupled with the low price strategies for
introductory offers when services are first introduced. However, the low price strategies do not fit
