Two-part pricing

A pricing strategy normally used by service marketers, which consists of a fixed fee plus a variable usage fee. For example, telephone users pay a monthly fee plus charges for calls beyond a certain numbers. One problem the service firms face in this pricing method is the decision with regard to the proportion of each part of the pricing i.e., how much to charge for the basic service and how much for the variable usage. The fixed fee should be low enough to induce purchase of the service; the profit can then be made on the usage fee.