Pricing practices of service organizations

Abstract

PurposeThe purpose of this paper is to explore the pricing policies that service companies adopt along with the pricing information that they gather to set their prices. Despite previous authors' suggestions regarding the need for a coherent process when setting prices, there seems to be a lack of empirically‐based theory on how pricing policies and pricing information might be interrelated.Design/methodology/approachFollowing 26 in‐depth exploratory interviews, additional personal interview data were collected from 170 companies operating in six different services sectors in Greece.FindingsThe paper finds that “list pricing” is the only policy that is adopted by the majority of the surveyed companies. Further, they tend to collect more than one type of information giving particular emphasis on market‐based information. The “customer‐based” information was found to be associated positively with the policy of “cash discounts”, while the “competition‐based” information with the policies of “trade discounts” and “differentiated pricing”. Moreover, the “cost‐based information” is associated positively with the “cash discounts” and “efficiency pricing” policies and negatively with the “loss leader pricing” policy.Research limitations/implicationsThe findings refer to the need for a “balanced” market‐oriented and “situation‐specific” approach when setting prices The significance of these findings notwithstanding, the context of the study (Greece) is the most important caveat since it limits the ability to generalize the results in other countries.Originality/valueThe paper represents the first attempt to examine empirically the potential relationship between pricing policies and pricing information.