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Jochen Wirtz

Pricing Services and Revenue Management

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    -monetary costs (e.g., time, physical, psychological, and sensory costs
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    The less tangible or immediate the payment mechanism, the more consumers tend to spend.
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    build attendance and strong fan support throughout the season, Red Sox could spread out this large annual payment to four installments that coincide with their games. The team would garner a high game attendance and fan support, and their fans might prefer the lower and financially more manageable installments.
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    timing of payment can be used more strategically to manage capacity utilization
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    Bundled prices offer firms a certain level of guaranteed revenue from each customer, while providing customers a clear idea in advance of how much they can expect to pay. Unbundled pricing provides customers with the freedom to choose what to buy and pay for
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    Recent research suggests that access or subscription fees are an important driver of adoption and customer retention
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    Consumers of hedonic services such as amusement parks tend to prefer flat rates for access rather than by individual usage as they do not like to be reminded of the pain of paying while enjoying the service.
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    Firms should build in strategies for retaining valued customers, even to the extent of not charging the maximum feasible amount on a given transaction.
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    Bundling usually makes price comparisons between the bundles and its components impossible, and thereby sidesteps potential unfairness perceptions and reductions in reference prices. This reduces unfairness perceptions.24
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    Rate fences framed as customer gains (i.e., discounts) are generally perceived as fairer than those framed as customer losses (i.e., surcharges), even if the situations are economically equivalent.
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    was found that customers who generally observe all the rules, and therefore have not paid fines in the past, react particularly negatively, if they are fined.
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    perceptions of fairness were lower and negative responses were higher when they perceived the causes that led to the penalty to be out of their control
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    Customers’ negative feelings were further aggravated if they were “surprised” by the penalty being charged to them suddenly and they had not been aware of the fee or the magnitude of it.
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    Airlines have a larger ability to use pricing to expand travel demand from their key markets. By contrast, pricing practices in hotels can shift market share within a location but, as a rule, not overall market size
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    revenue management (also known as yield management) involves setting prices according to predicted demand levels among different market segments.
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    When saving time and effort are of equal or greater importance to customers than price in selecting a supplier, the intensity of price competition is reduced
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    Most services have at least two segments; one that spends time to save money, and another that spends money to save time.
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    Working with operations experts to reduce time required to complete service purchase,
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    Minimizing unwanted psychological costs of service at each stage by eliminating or redesigning unpleasant or inconvenient procedures,
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    Eliminating or minimizing unwanted physical effort during search and delivery processes;
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