Service Pricing: a Differentiation Premium Approach

Abstract

States that current pricing strategies used in the service industries are often too simplistic and ineffective in the face of complex environmental conditions. Introduces the Pricing Differentiation Premium Model, which includes in the firm′s pricing strategy its ability to differentiate itself from competitors. Discusses possible strategies for influencing differentiation premiums which can improve the pricing discretion of the service provider.

Consultation Pricing of the Online Health Care Service in China: Hierarchical Linear Regression Approach

“…The main theoretical contribution of this study is that of enhancing and complementing the past service pricing literature to make it more applicable to the OHC. Specifically, the consideration of both cost-based and competition-based pricing approaches involves service characteristics [ 31 , 33 ]; however, there are many differences between the features of online health care consultation and general services, such as more specialized service providers, zero fixed costs, and online service in online health care consultation. Thus, we propose six determinants of online health care consulting prices to bridge this gap in knowledge of this field.…”

“…The cost-oriented pricing approach arrives at a service price by considering all of the costs and adding a desirable profit margin [ 29 , 30 ]. In the competition-oriented pricing approach, the price is set to meet that of the competitors or to accord with the market situation [ 31 , 32 ]. Although the simplistic nature of both approaches brings advantages of usability and rapidity, to accurately reflect the practices of complex business organizations, many extended approaches also take the characteristics of the service into consideration.…”

“…In particular, they take the service characteristics premium to be based on essentiality, durability, and tangible intrinsic value-added, which are also widely regarded as service characteristics. Similarly, Arnold et al [ 31 ] proposed a premium competition-oriented pricing approach in which the service price is equal to a differentiation premium plus the average competitor’s price. They suggest that the differentiation premium could be a function of availability, reputation testability, commitment incentive, and price sensitivity premiums.…”

“…Reputation is one of the important service characteristics [ 31 ]. A physician’s offline reputation is a useful signal that can increase patient trust.…”

Consultation Pricing of the Online Health Care Service in China: Hierarchical Linear Regression Approach

“…The main theoretical contribution of this study is that of enhancing and complementing the past service pricing literature to make it more applicable to the OHC. Specifically, the consideration of both cost-based and competition-based pricing approaches involves service characteristics [ 31 , 33 ]; however, there are many differences between the features of online health care consultation and general services, such as more specialized service providers, zero fixed costs, and online service in online health care consultation. Thus, we propose six determinants of online health care consulting prices to bridge this gap in knowledge of this field.…”

“…The cost-oriented pricing approach arrives at a service price by considering all of the costs and adding a desirable profit margin [ 29 , 30 ]. In the competition-oriented pricing approach, the price is set to meet that of the competitors or to accord with the market situation [ 31 , 32 ]. Although the simplistic nature of both approaches brings advantages of usability and rapidity, to accurately reflect the practices of complex business organizations, many extended approaches also take the characteristics of the service into consideration.…”

“…In particular, they take the service characteristics premium to be based on essentiality, durability, and tangible intrinsic value-added, which are also widely regarded as service characteristics. Similarly, Arnold et al [ 31 ] proposed a premium competition-oriented pricing approach in which the service price is equal to a differentiation premium plus the average competitor’s price. They suggest that the differentiation premium could be a function of availability, reputation testability, commitment incentive, and price sensitivity premiums.…”

“…Reputation is one of the important service characteristics [ 31 ]. A physician’s offline reputation is a useful signal that can increase patient trust.…”

Multi-Stage Synthetic Hotel Pricing

“…On the other hand, hotels that are unable to differentiate themselves from competitors should set room prices comparable to their average competitor's prices. Finally, hotels that have differentiated themselves from competitors, but in a negative manner, are able to command lower than average competitor's prices and need to take steps necessary to improve the differentiation premium factors (Arnold et al, 1989). Commoditization is one of the serious problems facing many hospitality firms.…”

Consultation Pricing of the Online Health Care Service in China: Hierarchical Linear Regression Approach

“…The main theoretical contribution of this study is that of enhancing and complementing the past service pricing literature to make it more applicable to the OHC. Specifically, the consideration of both cost-based and competition-based pricing approaches involves service characteristics [ 31 , 33 ]; however, there are many differences between the features of online health care consultation and general services, such as more specialized service providers, zero fixed costs, and online service in online health care consultation. Thus, we propose six determinants of online health care consulting prices to bridge this gap in knowledge of this field.…”

“…The cost-oriented pricing approach arrives at a service price by considering all of the costs and adding a desirable profit margin [ 29 , 30 ]. In the competition-oriented pricing approach, the price is set to meet that of the competitors or to accord with the market situation [ 31 , 32 ]. Although the simplistic nature of both approaches brings advantages of usability and rapidity, to accurately reflect the practices of complex business organizations, many extended approaches also take the characteristics of the service into consideration.…”

“…In particular, they take the service characteristics premium to be based on essentiality, durability, and tangible intrinsic value-added, which are also widely regarded as service characteristics. Similarly, Arnold et al [ 31 ] proposed a premium competition-oriented pricing approach in which the service price is equal to a differentiation premium plus the average competitor’s price. They suggest that the differentiation premium could be a function of availability, reputation testability, commitment incentive, and price sensitivity premiums.…”

“…Reputation is one of the important service characteristics [ 31 ]. A physician’s offline reputation is a useful signal that can increase patient trust.…”

Multi-Stage Synthetic Hotel Pricing

“…On the other hand, hotels that are unable to differentiate themselves from competitors should set room prices comparable to their average competitor's prices. Finally, hotels that have differentiated themselves from competitors, but in a negative manner, are able to command lower than average competitor's prices and need to take steps necessary to improve the differentiation premium factors (Arnold et al, 1989). Commoditization is one of the serious problems facing many hospitality firms.…”

Consultation Pricing of the Online Health Care Service in China: Hierarchical Linear Regression Approach

“…The main theoretical contribution of this study is that of enhancing and complementing the past service pricing literature to make it more applicable to the OHC. Specifically, the consideration of both cost-based and competition-based pricing approaches involves service characteristics [ 31 , 33 ]; however, there are many differences between the features of online health care consultation and general services, such as more specialized service providers, zero fixed costs, and online service in online health care consultation. Thus, we propose six determinants of online health care consulting prices to bridge this gap in knowledge of this field.…”

“…The cost-oriented pricing approach arrives at a service price by considering all of the costs and adding a desirable profit margin [ 29 , 30 ]. In the competition-oriented pricing approach, the price is set to meet that of the competitors or to accord with the market situation [ 31 , 32 ]. Although the simplistic nature of both approaches brings advantages of usability and rapidity, to accurately reflect the practices of complex business organizations, many extended approaches also take the characteristics of the service into consideration.…”

“…In particular, they take the service characteristics premium to be based on essentiality, durability, and tangible intrinsic value-added, which are also widely regarded as service characteristics. Similarly, Arnold et al [ 31 ] proposed a premium competition-oriented pricing approach in which the service price is equal to a differentiation premium plus the average competitor’s price. They suggest that the differentiation premium could be a function of availability, reputation testability, commitment incentive, and price sensitivity premiums.…”

“…Reputation is one of the important service characteristics [ 31 ]. A physician’s offline reputation is a useful signal that can increase patient trust.…”

Multi-Stage Synthetic Hotel Pricing

“…On the other hand, hotels that are unable to differentiate themselves from competitors should set room prices comparable to their average competitor's prices. Finally, hotels that have differentiated themselves from competitors, but in a negative manner, are able to command lower than average competitor's prices and need to take steps necessary to improve the differentiation premium factors (Arnold et al, 1989). Commoditization is one of the serious problems facing many hospitality firms.…”