Consumer Services Pricing

Services, unlike products, can be ongoing. It is therefore crucial to understand not only what consumers are willing to pay, but also how they are willing to pay. Do they want to pay a subscription fee? A per-delivery fee? Or something in between? What should these fee(s) be? Does how customers want to pay affect how much they want to pay?

When you have this information, and can make smart, data driven decisions, you can ensure your price and your pricing structure is designed to meet your business goals, which might be maximum market share, maximum revenue, or a combination of both so you can make sure you get the revenue and sales volume you deserve.

Case Study - TV over the Internet

Television viewing over traditional channels (cable, satellite, over-the-air) are rapidly decreasing in favor of a plethora of services for television and movies delivered over the Internet (called Over The Top or OTT networks). But are they pricing right )?

Well, some are, and some are not. In a project using PriceBeam technology, it was found that:
  • Netflix can increase prices from $9.95/month to $14.95/month with minuscule reduction of the number of subscribers. This would increase their revenues by approximately 50%.
  • HBO Now is priced correctly at $14.95/month, and both decreasing and increasing prices would negatively affect revenue and number of subscribers.
  • Hulu can increase prices from $7.99/month to $9.99/month with no loss of the number of subscribers, but with an approximately 25% increase in revenue.

With the higher income Netflix and Hulu would have, should they price correctly, they would be able to serve their customers better by providing more of their original content and popular movies. All in all, they could increase customer satisfaction and, thereby, also subscriber growth.

Case Study - Veterinary Services

A small, sole proprietor veterinary practice offers a unique service: emergency house calls, day or night. This, obviously, puts a strain on the sole vet, and he was looking for ways both to avoid getting called too frequently and to leverage the uniqueness of this service to expand the business.

Research discovers a couple of interesting data points:
  • The pet-owning population is willing to a pay relatively-high monthly subscription fee for the right to call for emergency vet services at any time day or night.
  • By marginally lowering the cost of the house call emergency visit, the number of pet owners who request visits more than doubled, and since almost every house call includes additional services over and above the examination, revenues more than tripled.

With the income from the monthly subscription fee, the sole proprietor was able to hire a couple of on-the-call vets in order to provide the service at night, and with the added income from the house calls and the added service, the company now has the financial strength to continue to grow. Without knowing that consumers are, in fact, willing to pay for a subscription that provided the right to emergency house calls (almost like insurance) the veterinary practice would never have had the confidence to develop and implement such a subscription service, and without the finances this provided, would never have had the cash to recruit additional veterinaries to work the night shift.