How are prices set? An exploratory investigation in the Greek services sector

Abstract

Purpose

The purpose of the present study is to explore the pricing methods that service companies adopt in order to set their prices, along with the service, organizational and environmental characteristics that influence these methods.

Design/methodology/approach

To achieve the research objectives, data were collected through personal interviews in 170 companies operating in six different services sectors in Greece.

Findings

The study concluded that the two most popular pricing methods are the traditional “cost‐plus” method and “pricing according to the market's average prices”, while all the other methods (including customer‐based methods) are adopted by a small number of companies in the sample. Similarly, “service cost” along with “competitors' prices” were found to be the two most important characteristics that are taken into consideration when setting prices.

Research limitations/implications

Despite the importance attached to cost and competitive issues when setting prices, pricing decisions need to be treated from a more “holistic” approach, where apart from cost and competition, emphasis will also be placed on other company and environmentally related characteristics, including customers. The significance of these findings notwithstanding, the context of the study is a caveat, since it limits the ability to generalize the results to other countries.

Originality/value

The contribution of the paper lies in the fact that it presents the first attempt to examine empirically the potential impact of these characteristics on the pricing methods used.

Citation

Avlonitis, G. and Indounas, K. (2006), "How are prices set? An exploratory investigation in the Greek services sector", Journal of Product & Brand Management, Vol. 15 No. 3, pp. 203-213. https://doi.org/10.1108/10610420610668649