Services, Pricing Strategies, and Segmentation

Subject: Marketing
Pages: 8
Words: 2705
Reading time:
9 min
Study level: Bachelor


Services differ from products due to their intangible nature and the fact that services arise from the efforts made by a person. Products, on the other hand, are tangible and physically acquired goods that a customer pays for (Fjeldstad and Snow, 2018). An example of a good is a house, while an example of a service is the shaving services that are offered by a barber. When one buys a house from UK Property Sellers, they can touch it, count its features, and examine its durability (UK Property Sellers, 2021). These are the features that services lack as one cannot count or feel the haircut service they receive from various UK barbers (British Barbers’ Association, 2021). Services do not allow for interaction with a buyer before a decision can be made. Goods, on the other hand, allow a potential buyer to carefully examine the quality before making a purchase. Services do not allow a customer to examine the actions about to be performed for their gain. There is no way of telling that the shoe-shiner is going to effectively clean the shoes to the liking of the customer.

Services cannot be stored for future use, unlike goods, where some are considered imperishable. Services are utilized as soon as the provider engages in the actions that constitute provision (Fjeldstad and Snow, 2018). Products such as jewelry and automobiles are considered imperishable, while most food items are considered perishable. Some services, such as air transport provision, are considered perishable if a buyer is absent from utilizing them (British Airways, 2019). When one fails to fly at the specified time after purchasing an air ticket, the airline renders the voucher expired. Goods can be returned to a seller, but services cannot be returned to the provider. This means that services are considered the moment the provider completes the action that they are vending. When a waitress serves a customer, the food is the product, while the interaction between the two constitutes the service. A customer cannot claim that they are interested in returning the service the waitress has offered due to dissatisfaction but can return the food.

Similarities between Marketing of Services and Physical Goods

Both physical goods and services rely on advertising as a marketing strategy to increase their sales. Advertising is aimed at informing potential customers about the existence of what a provider is selling and employing the use of similar media (Manandhar, 2018). The promotion of both involves the use of popular mediums such as television and newspapers. The promotion of goods and services is also similar and aids in causing customers to engage in repeat purchases (Manandhar, 2018). Promotion of goods and services involves making offers for the customers that enable them to deem the seller more affordable and regard the deal as valuable. A barber can decide to shave their customers for free the fourth time if they visit thrice, while a restaurant can offer free salad to customers that buy three meals. The promotion of their goods ensures that customers attain loyalty and repeatedly visit the enterprise. Promotion services also increase referrals as they are incentives for the customers.

Both services and goods rely on public relations as a marketing mechanism. The actions of both are aimed at ensuring the clients hold their provision in high regard and view the entities as community-oriented establishments (Manandhar, 2018). Many service providers, such as internet provision companies, engage in public activities such as tree planting, where their employees interact with their customers (Gregory and Halff, 2017). These events ensure that the companies obtain the image of an environmentally friendly entity. Product sellers also engage in public relations activities such as donations to initiatives by their clients. Involvement in such ventures ensures that the image of product companies is regarded highly, and the company is considered to be concerned with the welfare of its buyers.

Pricing Strategies

Differences between Cost-Oriented Pricing and Market-Oriented Pricing

In cost-oriented pricing, the desired profit is added as a percentage of the cost incurred in manufacturing the goods or services. Market-oriented pricing on the other hand relies on the competition and current status of competitor products to determine the prices of goods and the profits to be accrued (Francis, 2020). Cost-oriented pricing monitors the changes in the prices of various raw materials and relies on these modifications to make decisions on the gains to be made. Market-oriented pricing requires the management of a company to be keen on the actions of its competitors (Francis, 2020). Whenever a competitor decreases the price of their goods or services to a value lower than theirs, the corporation decreases its prices to ensure it remains competitive. Whenever a competitor increases its price, a company may decide to increase their price to a value slightly lower than its competitor. This ensures that the company increases its profit margin while remaining relatively cheaper and more appeasing than its competitor.

Value-Oriented Pricing to Customers

Value-based pricing is more logical for customers compared to cost-oriented pricing due to the personal appreciation of the former. The determination of the prices of goods and services is based on how valuable the customers consider the products to be (Sheu and Choi, 2019). A seller focuses on offering goods and services which are considered luxurious and that customers associate with an upgrade in the quality of their lives. Clients are not likely to care about the cost of producing certain goods and services as this information is considered irrelevant to them. The value of the goods is based on a buyer’s need, hence the appreciation for this pricing model (Sheu and Choi, 2019). The value pricing system is also psychologically appealing due to the image of the company registering in the mind of a customer. The company is perceived to be an entity that is committed to the needs of the customers. This enables companies that set their prices based on the value of their goods and services to gain a competitive edge over those that focus on the costs of their production. Value-based pricing also enables a customer to exhibit loyalty toward a certain brand. This loyalty emanates from the belief that the specific brand is the only perfect one for them.

Role Costs Can Play In the Setting of Prices

The costs are used to calculate the profits the firm is likely to accrue by selling the goods at a certain price over the production expenses. The cost considerations ensure that the company attains a consistent return on investment (Hoch and Rao, 2020). Considerations of the expenses incurred during production ensure that a company does not exaggerate its final price to the customers hence preventing exploitation. This also ensures that a company does not underprice a certain commodity under the guise of other reasons, such as competing in the market (Hoch and Rao, 2020). This prevents losses within the company hence consistent operations and existence in the market. Considerations of the cost in target return pricing enable a company to make estimates for its growth and prevent stagnation. Estimations of a certain investment return ensure that a company does not operate blindly. The returns on investment are usually prices above the costs of production of certain goods and services. Considerations of the costs ensure that a company is not operating to merely meet its operational costs. Profit estimations that are cost-based must exceed the break-even point for a certain producer. Exceeding this point though, this method enables a company to exist in a profitable manner that prevents stagnation.


Meaning of Segmentation

Segmentation is the practice of dividing a target market into approachable groups. It enables a seller to create groups of buyers based on various features such as demographics, requirements, priorities, common interests, and other psychological criteria (Pridmore and Hämäläinen, 2017). Segmentation enables a company to effectively promote certain goods and services through various marketing criteria. By leveraging on segmentation, a company is likely to reach larger customer bases and make higher returns on its goods.

Purposes of Segmentation to a Marketing Firm

Segmentation enables a marketing firm to come up with stronger messages for their different audiences. Different sections of clients speak and understand marketing messages differently. When marketing products to the youth and millennials in general, companies are likely to attain a higher reach and increase their sales if they incorporate slang in the messages (Melancon and Dalakas, 2018). This is because this message would resonate with the youth. When marketing goods and services to adults, companies opt to promote the products in clean language and also incorporate these messages with positive values. This occurs because older people are considered more value-based, straight speaking and, family-oriented.

Segmentation also ensures a company can attain customer loyalty by trapping certain clients through adequate focus. Separation guarantees that a firm provides certain goods and services in packages and models that suit a certain population (Pridmore and Hämäläinen, 2017). Companies that focus on meeting the needs of certain groups are valued more than companies that indulge in the general production and sale of goods. Businesses mostly rely on their loyal returning clients for sales and enterprises must outsmart their competition by ensuring adequate focus (Melancon and Dalakas, 2018). The segmentation that ensures customer loyalty and retention stems from the promotion of product value to a customer. Through various marketing criteria, such as advertising and promotion, companies can ensure their messages are not offending any section of their customers. It also ensures inclusiveness and no target audience is excluded in the process.

Segmentation enables a company to appear different from its competitor. The competitor produces similar products and it is easy for customers to assume that the products are the same. Segmentation entails product promotion that is grounded in certifying the company’s features to ensure that this entity is separated from others. Company segregation in some instances, makes some companies the preferred brand for certain products (Melancon and Dalakas, 2018). This preference is exhibited in customers seeking a certain product using the name of a certain brand. This phenomenon entails a business gaining the household name and features of a certain product. The obvious preference for the products of such an entity promotes tremendous growth while reducing the strength of the competition.

Segregation is vital in discovering niche markets for a certain good. The sale of goods and services by certain companies mainly involves mass selling to all customers and markets. Segregation enables the marketing teams of the entity to enable the purchase of the goods by customers who may consider the goods exclusive to certain populations (Pridmore and Hämäläinen, 2017). Certain commodities may be popular amongst a certain age group due to the initial time of their invention. Goods innovated in the 90s are popular amongst people who were around during those times and unpopular amongst the younger generations. Segregation enables the removal of this bias and provokes younger customers to purchase those goods. Other goods may be popular amongst younger people and the older people may evade them with this thought. Product segregation enables the promotion and inclusion of packages that favor these people hence their inclusion. The discovery of new markets spurs growth and ensures that a company progressively advances.

Segmentation Basis

Demographic segmentation groups a market by features, such as age, education, income, family size, race, gender, occupation, and nationality. Demographic factors affect how certain clusters of people purchase and utilize certain products and services. Marketing the goods in a manner that fits the requirements of such a group is vital in ensuring that the commodities achieve a favorable market presence (Dobscha, 2019). Segregation according to demographics considers the incomes of these people and how much they are willing to spend on certain goods and services. Quantities and qualities of goods are adjusted according to their desires and abilities, hence effectiveness.

Behavioral segmentation considers the trends in the decision-making of different markets. Younger clients are more inclined to purchase goods and services that are considered trendy (Simion and Popescu, 2019). Companies oriented towards selling to such a market must ensure that developments are regularly assessed and customer needs investigated. Older customers are inclined toward purchasing products that exhibit a significant amount of stability hence the need for behavioral segmentation.

Firmographic segmentation is based on company and organizational attributes and looks at an entity’s internal features. Firmographic classification considers the location of an industry, the number of its employees, and its revenues (Dao, 2020). The marketing of various firms requires analysis of the values a company would want customers to associate its products with. Filmographic segmentation is the most vital in promoting customer loyalty.

Psychographic segmentation is a classification based on attitudes and aspiration values. This classification considers the lifestyle of the clients and adjusts the messages in the promotion methods to fit this criterion. This ensures that customers who are apprehensive of a certain aspect of their lives can purchase certain goods to fulfill this need (Anand et al., 2021). Extensive research goes into this kind of method to ensure that the features of customers are discovered.

Examples of Segmentation Basis Companies

Behavioral segmentation is popular with BabyCenter UK, which produces children’s commodities. The company markets various goods on its various social media platform according to the stage a client’s data indicates their child to be in (Simion and Popescu, 2019). It provides the appropriate age for parents to wean their children and provides them with symptoms to pick when their children have various illnesses and recommend the appropriate products. iPhone in the UK uses psychographic segmentation to sell its products (Anand et al., 2021). The company regards itself as a luxury product and the customers associate their phones and laptops with affluence. VNPT-IT is a popular marketing firm in the UK that employs firmographic segmentation for its customers (Dao, 2020). The company groups these customers based on their financial strength so that companies within the same range are displayed together. Bic has used demographic segmentation in the UK by promoting the sale of its pens to female customers (Dobscha, 2019). The company produced pink pens and used photographs of girls in their advertisement photos.

Reference list

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