How are prices set? An exploratory investigation in the Greek services sector
| Pages | 203-213 |
| Date | 01 April 2006 |
| Published date | 01 April 2006 |
| DOI | https://doi.org/10.1108/10610420610668649 |
| Author | George Avlonitis,Kostis Indounas |
| Subject Matter | Marketing |
Pricing strategy & practice
How are prices set? An exploratory
investigation in the Greek services sector
George Avlonitis and Kostis Indounas
Department of Marketing and Communication, Athens University of Economics and Business, Athens, Greece
Abstract
Purpose – The purpose of the present study is to explore the pricing methods that service companies adopt in order to set their prices, along with the
service, organizational and environmental characteristics that influence these methods.
Design/methodology/approach – To achieve the research objectives, data were collected through personal interviews in 170 companies operating
in six different services sectors in Greece.
Findings – The study concluded that the two most popular pricing methods are the traditional “cost-plus” method and “pricing according to the
market’s average prices”, while all the other methods (including customer-based methods) are adopted by a small number of companies in the sample.
Similarly, “service cost” along with “competitors’ prices” were found to be the two most important characteristics that are taken into consideration
when setting prices.
Research limitations/implications – Despite the importance attached to cost and competitive issues when setting prices, pricing decisions need to
be treated from a more “holistic” approach, where apart from cost and competition, emphasis will also be placed on other company and
environmentally related characteristics, including customers. The significance of these findings notwithstanding, the context of the study is a caveat,
since it limits the ability to generalize the results to other countries.
Originality/value – The contribution of the paper lies in the fact that it presents the first attempt to examine empirically the potential impact of these
characteristics on the pricing methods used.
Keywords Pricing, Services, Organizational philosophy, Business environment, Grecee
Paper type Research paper
Introduction
According to Shipley and Jobber (2001, p. 301), “price
management is a critical element in marketing and
competitive strategy and a key determinant of performance.
Price is the measure by which customers judge the value of an
offering, and it strongly impacts brand selection among
competing alternatives”. Within the same context, Potter
(2000) has pointed out that pricing is the only element of the
marketing mix that generates revenues for the firm.
However, there are certain contradicting views regarding
the importance of pricing. On the one hand, there are
empirical studies, which show that criteria such as reliability,
service quality, and time delivery are often regarded as more
important when selecting a vendor (Ghymn et al., 1999; Gil
and Sanchez, 1997), while on the other hand, there are
empirical studies that have supported empirically the
significance attached to pricing when choosing among
competitive brands (Huber et al., 2001; Monteiro and
Lucas, 2001).
This fact notwithstanding, there seems to be a lack of
interest in the field of pricing among marketing academics.
Ten years ago, Nagle and Holden (1995) suggested that
pricing is the most neglected element of the marketing mix.
However, even a decade later, things do not seem to have
changed dramatically. As Hinterhuber (2004, p. 765) has
suggested:
Not only managers, but also academics, have shown little interest in the
subject of pricing. Publications on this subject are not anywhere as numerous
as publications on other classical marketing instruments such as product,
promotion and distribution.
In a sense, the little interest in the field of pricing is
paradoxical given its importance, as underlined above. A
possible reason for this may be that there is a tendency within
the marketing discipline to suggest that a sustainable
competitive advantage c an be achieved by placing t he
emphasis not on price but on non-price elements, such as
product differentiation, value, service quality and branding
(Boone and Kurtz, 2002).
The lack of interest among marketing academics in the field
of pricing is even more evident in the case of services, where
most of the few studies that have been conducted tend to be
descriptive in their nature, focus on a single sector of
operation, and rely on very small samples (e.g. Meidan and
Chin, 1995; Morris and Fuller, 1989). Hoffman et al. (2002,
p. 1015) provide some explanations for this:
The absence of a dominant research agenda or a well-developed research
stream in service pricing contributes to this problem [...] The existing body
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
15/3 (2006) 203–213
qEmerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/10610420610668649]
203
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