Abstract
These days, services have known an outstanding growth and have become an important part of economies (Avlonitis and Indounas 2007). Thus, more people work today on services, than ever before and services are no longer just an insignificant option linked to tangible goods (Palmer 2005). However, marketers cope with many issues in services due to its special characteristics, issues “that are not encountered by marketers of tangible goods” (Clemes et al 2000). Pricing is one of these issues as Berry and Yadav (1996) explained that “little research exists on the pricing of services and few people understand the special challenges involved». Similarly, Monroe and Kent (1989) have suggested that service providers have “a naive and unsophisticated approach to pricing». In this situation, it can be argued that service users could feel lost and quite uncertain about prices.
Thus, the purpose of this essay is to discuss the difficulty of comparing competitor's prices in a service context and to investigate its implications for setting up an effective pricing strategy. According to Berry and Yadav (1996), it is very complicated for customers to compare and evaluate prices in a service context. This is mainly due to the special characteristics of the services, especially the intangibility and the Heterogeneity (Zeithaml and Bitner 2000).
Rushton and Carson (1989) have argued that intangibility, or lack of physical attributes (Bebko 2000), is considered as the main and the most important characteristic of the service. Thus, because services are “intangible deeds and performances” (Zeithaml and Bitner 2000), they cannot be seen or touched in the same manner that we can see or touch tangible goods. Consequently, it makes the evaluation, before and after purchase, more difficult for customers (Rushton and Carson 1989). Levitt (1981) suggested that the intangibility is the main factor responsible for the evaluation problems for customers.
