Price-Based Global Market Segmentation for Services
Ruth N. Bolton & Matthew B. Myers
Price-Based Global Market Segmentation for Services
In business-to-business marketing, managers are often tasked with developing effective global pricing strategies for customers characterized by different cultures and different utilities for product attributes. The challenges of formulating international pricing schedules are especially evident in global markets for service offerings, where intensive customer contact, extensive customization requirements, and reliance on extrinsic cues for service quality make pricing particularly problematic. The purpose of this article is to develop and test a model of the antecedents of business customers’ price elasticities of demand for services in an international setting. The article begins with a synthesis of the services, pricing, and global marketing literature streams and then identifies factors that account for differences in business customers’ price elasticities for service offerings across customers in Asia Pacific, Europe, and North America. The findings indicate that price elasticities depend on service quality, service type, and level of service support and that horizontal segments do exist, which provides support for pricing strategies transcending national borders. The article concludes with a discussion of the managerial implications of these results for effective segmentation of global markets for services.
nternational services are defined as “deeds, performances, and efforts conducted across national boundaries in critical contact with foreign cultures” (Clark, Rajaratnam, and Smith 1996, p. 15). They constitute a sector of the global economy that is growing exponentially relative to the industrial goods sector (Knight 1999). Organizations are taking an interest in the international marketing of services because of low cost factors and the ability to compete in nearby country markets (Bradley 1995); however, international services pose special challenges for
Price-Based Global Market Segmentation for Services
In business-to-business marketing, managers are often tasked with developing effective global pricing strategies for customers characterized by different cultures and different utilities for product attributes. The challenges of formulating international pricing schedules are especially evident in global markets for service offerings, where intensive customer contact, extensive customization requirements, and reliance on extrinsic cues for service quality make pricing particularly problematic. The purpose of this article is to develop and test a model of the antecedents of business customers’ price elasticities of demand for services in an international setting. The article begins with a synthesis of the services, pricing, and global marketing literature streams and then identifies factors that account for differences in business customers’ price elasticities for service offerings across customers in Asia Pacific, Europe, and North America. The findings indicate that price elasticities depend on service quality, service type, and level of service support and that horizontal segments do exist, which provides support for pricing strategies transcending national borders. The article concludes with a discussion of the managerial implications of these results for effective segmentation of global markets for services.
nternational services are defined as “deeds, performances, and efforts conducted across national boundaries in critical contact with foreign cultures” (Clark, Rajaratnam, and Smith 1996, p. 15). They constitute a sector of the global economy that is growing exponentially relative to the industrial goods sector (Knight 1999). Organizations are taking an interest in the international marketing of services because of low cost factors and the ability to compete in nearby country markets (Bradley 1995); however, international services pose special challenges for
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