Oded Koenigsberg

London Business School · Department of Marketing

Best Practices in Value Based Selling and Pricing Imagine that burst of enthusiasm when a senior executive unveils a plan that promises a significant and lasting impact on the organization’s financial performance. “Our new product creates more value for our customers than anything else on the market, and we should get paid accordingly,” they prou...

Over the past decade, an increasing number of firms have delegated pricing decisions to algorithms in consumer markets such as travel, entertainment, and retail; business markets such as digital advertising; and platform markets such as ride-sharing. This trend, driven primarily by the increased availability of digital data and developments in info...

Innovations embody novel features or cutting-edge components aimed at delivering desired customer benefits. Oftentimes, however, we observe the need to recall new products shortly after their introduction. Indeed, a firm may rush an innovation to market in an attempt to pre-empt rivals and capture early demand, yet in so doing forgo rigorous testin...

Customers ultimately want to pay for meaningful outcomes, not the products and services that presumably deliver them. Today, companies can be increasingly accountable for those outcomes with three kinds of technologically-enhanced revenue models. Adopt one to better align your company’s success with your customers’ satisfaction.

How some firms are rewriting the rules of commerce by pursuing “ends”—actual outcomes—rather than selling “means”—their products and services. Would you rather pay for health care or for better health? For school or education? For groceries or nutrition? A car or transportation? A theater performance or entertainment? In The Ends Game, Marco Bertin...

Since its launch in 1998 as "the Amazon.com of DVDs," Netflix had evolved from a DVD rental company to a video streaming platform and producer of original films and television shows. As the company matured, it regularly increased prices and adjusted its product offerings while continuing to add new subscribers. However, between late 2019 and mid-20...

We present a theory of price and quality decisions by managers who are self-serving. In the theory, firms stress the price or quality of their products, but not both. Accounting for this, managers exploit any uncertainty about the cause of market outcomes to credit positive results to the dominant, “strategic” factor and blame negative results on t...

We present a theory of price and quality decisions by managers who are self-serving. In the theory, firms stress the price or quality of their products, but not both. Accounting for this, managers exploit any uncertainty about the cause of market outcomes to credit positive results to the dominant, “strategic” factor and blame negative results on t...

Driven by the low transaction costs and interactive nature of the internet, customer participation in the price-setting process has increased. Today, platforms such as eBay have popularized online auctions on a global scale, Priceline has made headlines with its name-your-own-price (NYOP) business model, and Humble Bundle has enabled independent mu...

Driven by the low transaction costs and interactive nature of the internet, customer participation in the price-setting process has increased. These changes were first brought about by the rise of online auctions in the early 2000s, followed by the emergence of newer participative mechanisms. Today, platforms such as eBay have popularized online au...

Should a provider deliver a reliable service or should it allow for occasional service failures? This paper derives conditions under which randomizing service quality can benefit the provider and society. In addition to cost considerations, heterogeneity in customer damages from service failures allows the provider to generate profit from selling d...

Service providers, such as cell phone carriers, often offer three-part tariff plans that consist of three levers: A fixed fee, an allowance of free units, and a price per unit above the allowance. In previous studies the optimal three-part tariff contract was characterized using the standard first-order conditions approach. Because this optimizatio...

Some firms use a curious pricing mechanism called “pay as you wish” pricing (PAYW). When PAYW is used, a firm lets consumers decide what a product is worth to them and how much they want to pay to get the product. This practice has been observed in a number of industries. In this paper, we theoretically investigate why and where PAYW can be a profi...

Service providers, such as cell phone carriers, often offer three-part tariff plans that consist of three levers: A fixed fee, an allowance of free units, and a price per unit above the allowance. In previous studies the optimal three-part tariff contract was characterized using the standard first-order conditions approach. Because this optimizatio...

To many managers, the idea of involving customers in pricing decisions seems counterproductive. For most companies, pricing is a sensitive, private affair. But it may be time to reexamine those ideas. Letting customers have input on prices provides opportunities for customization and can promote greater customer engagement. Opening up customer part...

Impartial decisions in the best interests of the organisation are more elusive than you might think

This article presents a model of the design and introduction of a product line when the firm is uncertain about consumer valuations for the products. We find that product line introduction strategy depends on this uncertainty. Specifically, under low levels of uncertainty the firm introduces both models during the first period; under higher levels...

This paper studies the strategic interaction between firms producing strictly complementary products. With strict complements, a consumer derives positive utility only when both products are used together. We show that value-capture and value-creation problems arise when such products are developed and sold by separate firms “nonintegrated” produce...

Oded Koenigsberg, Eyal Biyalogorsky, Elie Ofek and Taylan Yalcin, “Complementary Goods: Creating, Capturing, and Competing for Value.”

This paper studies content strategies for online publishers of digital information goods. It examines sampling strategies and compares their performance to paid content and free content strategies. A sampling strategy, where some of the content is offered for free and consumers are charged for access to the rest, is known as a "metered model" in th...

Advertising supported content sampling is ubiquitous in online markets for digital information goods. Yet, little is known about the profit impact of sampling when it serves the dual purpose of disclosing content quality and generating advertising revenue. This paper proposes an analytical framework to study the optimal content strategy for online...

This article outlines recent methods and applications directed at understanding the profit and consumer welfare implications of increasingly prevalent price discrimination strategies in the service sector. These industries are typically characterized by heterogeneity in consumers’ valuation and usage of the service, resale constraints, and a focus...

Firms are increasingly seeking to harness the potential of social networks for marketing purposes. Therefore, marketers are interested in understanding the antecedents and consequences of relationship formation within networks and in predicting interactivity among users. The authors develop an integrated statistical framework for simultaneously mod...

The use of a durable good is limited by both its physical life and usable life. For example, an electric-car battery can last for 5 years (physical life) or 100,000 miles (usable life), whichever comes first. We propose a framework for examining how a profit-maximizing firm might choose the usable life, physical life, and selling price, of a durabl...

This paper analyzes optimal sampling and pricing of paid content for publishers of news websites. Publishers offer free content samples both to disclose journalistic quality to consumers and to generate online advertising revenues. We examine sampling where the publisher sets the number of free sample articles and consumers select the articles of t...

In many industries firms have to make quantity decisions before knowing the exact state of demand. In such cases, channel members have to decide which firm will own the units until demand uncertainty is resolved. The decision about who should retain ownership depends on the balance of benefit and risk to each member. Ownership, after all, is costly...

One of the major impacts of the Internet has been the vast increase in the amount of information that became available "for free". The provision of free information, or more specifically how much information to give away for free as a viable business model, has puzzled many observers as well as managers. To study this problem, we address two relate...

We describe a model examining how a firm might choose the package size and price for a product that deteriorates over time. Our model considers four factors: (1) the usable life of the product, (2) the rates at which consumers use the product, (3) the relation between package size and the variable cost of the product, and (4) the minimum quantities...

Conventional wisdom in marketing holds that retailer forward buying (1) is a consequence of manufacturer trade promotions and (2) stockpiling units helps the retailer but hurts the manufacturer. This paper provides a deeper understanding of forward buying by analyzing it within the context of manufacturer trade promotions, competition and demand un...

In many industries firms have to make quantity decisions before knowing the exact state of demand. In such cases, channel members have to decide which firm will own the units until demand uncertainty is resolved. The decision about who should retain ownership depends on the balance of benefit and risk to each member. Ownership, after all, is costly...

Users in online social networks ostensibly have relationships with a large number of other users. This has prompted many to comment that the nature of friendship in the online world is different from the offline world. However, even though a user may connect with many others, a majority of such connections become inactive after a period of time, an...

Firms selling goods whose quality level deteriorates over time often face difficult decisions when unsold inventory remains. Since the leftover product is often perceived to be of lower quality than the new product, carrying it over offers the firm a second selling opportunity and an ability to price discriminate. By doing so, however, the firm sub...

Firms are increasingly becoming interested in harnessing the potential of online social networks for marketing purposes. Marketers are therefore interested in understanding the antecedents and consequences of relationship formation within such social networks and in predicting the interactivity among users. In this paper we develop an integrated st...

easyJet, one of Europe’s most successful low-cost short-haul airlines, has a simple pricing structure. For a given flight, all prices are quoted one-way, a single price prevails at any point, and, in general, prices are low early on and increase as the departure date approaches. We observe from these policies and from the empirical section of this...

Firms often have to make their production decisions under conditions of demand uncertainty. This is especially true for product categories such as automobiles and technology goods where the lead time needed for manufacturing forces firms to make production decisions well in advance of the selling season. Once the firm has produced the goods, the av...

Abstract Production lead time forces companies,to make production decisions before the realization of demand. These decisions thereafter constrain the firms’ reactions to changes in demand. Channel members’ decisions depend,on the initial production decisions made by manufacturersand on stocking decisions by retailers. In this study, we analyzed ho...

In this paper, we show that under certain conditions, strategic decentralization through the addition of a retailer in the distribution channel can increase a manufacturer's profits. The specific case on which we focus is the quantity coordination (double marginalization) problem for a manufacturer selling durable goods in a two-period se...

A large literature in economics and marketing studies the problem of manufacturer's designing contracts that give a retailer appropriate incentives to make decisions that are optimal from the manufacturer's point of view (see, for example, Spengler 1950, Jeuland and Shugan 1983, McGuire and Staelin 1983, Lal 1990, Rao and Srinivasan 1995, Desai 199...

This paper presents a model of the introduction of a product line that consists of a high-end model and a low-end model, under conditions of demand uncertainty. The firm is a-priori uncertain about consumers' eventual perceptions of the quality of the product line, which can turn out to be either high or low. The firm learns of the exact consumer p...