A pricing approach for service companies: service blueprint as a tool of demand-based pricing

Abstract

Purpose

Demand-based pricing fixes price according to customers’ perceptions of service value and to their resulting willingness to pay. This pricing approach enables service companies to align their prices to customers’ preferences and to their expenditure propensity. Accordingly, it can generate higher margins than other pricing approaches. Nevertheless, this approach is difficult to implement operationally. Consequently, in order to overcome these implementation difficulties, the purpose of this paper is to provide a demand-based pricing approach based on the user-friendly technique of service blueprint (SB).

Design/methodology/approach

The methodology relies on the design science leads. Design science deals with creating artefacts or models for supporting human or organizational purposes; such artefacts have to be assessed against criteria of utility or value for users. Accordingly, an experimental action research is performed for both implementing and testing the proposed pricing approach.

Findings

Starting from the main difficulties hindering implementation of demand-based pricing, SB is proved to enable companies to overcome such difficulties and to support its implementation. Moreover, by employing SB, an innovative approach for fixing service prices is provided.

Practical implications

The proposed approach enables managers of service companies to overcome difficulties of demand-based pricing and to employ pricing strategies according to demand-based drivers.

Originality/value

In line with a recent call for research on service pricing, this paper develops a new pricing approach, which is able to promote demand-based pricing.

Citation

Calabrese, A. and De Francesco, F. (2014), "A pricing approach for service companies: service blueprint as a tool of demand-based pricing", Business Process Management Journal, Vol. 20 No. 6, pp. 906-921. https://doi.org/10.1108/BPMJ-07-2013-0087