The peculiar characteristics of service transactions and the economic properties exhibited by major
segments of the service industry make the pricing of services both an increasingly significant and
First of all the distinctive nature of services must be considered with regard to the pricing issues it
raises. Since a service is perishable by definition, i.e. it cannot be stored or inventoried by either
providers or consumers, the time of purchase2 always precedes the time of production3. That is a key
difference with regard to the selling of goods which can instead occur either before (e.g. in a make-
to-order scenario) or after production. This is equally true for simple and complex services alike:
calling a plumber to request a job, we accept his hourly rate, likewise a subscription is needed first to
use a SaaS application. This is to say, the pricing necessarily takes place in advance of service
If the pricing is to precede production – and thus consumption – an important consequence must be
underlined: in some instances the total price of the service will remain uncertain until after its
performance has actually taken place, e.g. the fee for a legal support in a litigation whose length and
outcomes are unknown. The same uncertainty hampers the predictability of the costs incurred
providing the service, for they might depend on the customer’s specific usage or on external factors.
Nowadays, advanced price structures encompass mechanisms to lower this uncertainty: for example
metered proxies that link charges to usage, aligning prices with costs, or price caps and flat rates to
hedge the consumer's risks.
For the model to be flexible and comprehensive enough to deal with the above-mentioned pricing
complexity of today's service market, the cascading backbone of the Pricing Module is made up of
three basic elements in a strict hierarchical structure: PricePlans, PriceComponents, and PriceLevels.
This allows to model scenarios where alternative price plans may be assigned to an offered
service, each plan possibly made up of multiple components and each component possibly
varying its charges, either by specifying different levels or by adjusting them by means of premiums