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Profiting When Customers Choose Value Over Price
Abstract
Increasingly recognised by academics and practitioners as the most effective approach to pricing for companies that wish to achieve increased profitability and sustained success, value-based pricing faces numerous obstacles. But Andreas Hinterhuber and Marco Bertini say the advantages of this approach to pricing far outweigh any difficulties.
... Price management often focuses on costs since products and services can only be offered long-term if proportional (or variable) and fixed costs (full cost accounting) are covered. Accordingly, the cost-based method of price management is based on existing data and considers costs for research, Conditions of price management 8 material, production, distribution, and marketing (Hinterhuber & Liozu, 2012;Hinterhuber & Bertini, 2011). ...
... The advantage of cost-and company-oriented methods is the availability of the required data in the cost accounting system Hinterhuber & Liozu, 2012;Hinterhuber & Bertini, 2011). However, the allocation to products and services is often a challenge (Hinterhuber & Liozu, 2012;Shipley & Jobber, 2001). ...
... Diller et al., 2021, p. 204). In practice, determining price elasticity, customer value, and willingness to pay is challenging, as well as communicating product value (Hinterhuber, 2008;Hinterhuber & Bertini, 2011;Michel & Pfäffli, 2013). ...
Active price management is a central and strategic marketing instrument. It involves actively designing, steering, and developing prices. Price changes have an immediate effect and are immediately reflected in the company’s demand, sales, and profit. While the other instrumental areas create value (value creation), price captures the value of a product or service (value capture).
... Pricing strategies are means to determine relative price levels by considering factors which are influential and then realizing particular business objectives in a specific situation (Noble & Gruca, 1999).According to Hinterhuber & Bertini (2011), the main reason for pricing is to adequately cover overhead costs including work and materials costs so as to produce an adequate profit which helps to maintain growth and create sustainability in an organization. Kohli & Rajneesh, (2011) pointed out that product development, promotion and distribution are used to sow the seeds of the success of a business, and an effective pricing is the harvest. ...
... According to Hinterhuber and Bertini (2011), value-based products are more resistant to economic downturn. It is an obvious fact that people tend to watch their money closely during economic downturns, this means also that people become more interested in the value they get for their money. ...
... It was also revealed that cost based pricing have an influence on marketing performance. Hinterhuber and Bertini (2011) showed that consumers are more educated and informed in this era; this has made it easier for consumers to the cost of producing and making products available. For this reason when a price is relatively low consumers might term the product an inferior one. ...
... The emerging pricing method value-based pricing has increasingly attracted researchers' attention in recent years (e.g. Hinterhuber, 2008a;Anderson et al., 2010;Hinterhuber and Bertini, 2011;Nagle et al., 2011;Hinterhuber and Liozu, 2012;Michel and Pfäffli, 2012;Töytäri et al., 2015;Töytäri et al., 2017;Nagle and Müller, 2018;Reynolds, 2018). Particularly, the striking aspect of a low implementation rate of VBP among companies surfaced (e.g. ...
... Researchers have already found some obstacles to the implementation of VBP (e.g. Hinterhuber, 2008a;Hinterhuber and Bertini, 2011;Nagle et al., 2011;Hinterhuber and Liozu, 2012;Michel and Pfäffli, 2012;Töytäri et al., 2015;Töytäri et al., 2017;Nagle and Müller, 2018;Reynolds, 2018). According to Forbis and Mehta (1981), VBP is a highly sophisticated pricing approach but complicated because of a high customer specificity. ...
... Several researchers stated that a value-based pricing approach is by far a more complex way to price products or services in comparison to other pricing methods (Nenonen and Storbacka, 2010;Liozu et al., 2012a;Töytäri et al., 2017). Hinterhuber (2008a) and Hinterhuber and Bertini (2011) identified the main barriers in implementing VBP as the difficulties in assessing value, communicating value, market segmentation, sales force management and senior management support. Hinterhuber and Bertini (2011, p. 47) stated that "companies are frequently forced to revert to cost-based or competition-based pricing, simply because they do not have the tools to measure customer value reliably. ...
Value-based pricing (VBP) is often considered the most profitable pricing method. However, VBP is rarely implemented by companies. This research study asks the question Why? and investigates the obstacles to an implementation of VBP. The objectives of this paper are to provide an assessment of customer-based obstacles to implement VBP in four different German industries and to evaluate the degree of company-based obstacles by industry. For that purpose, 792 consumer questionnaires were collected and 20 expert interviews were conducted. The results show that the technology industry is the German industry with the lowest obstacles, while the pharmaceutical industry experiences the strongest obstacles. The degree of obstacles varies significantly by industry. This study contributes to theory by taking both a customer perspective and a business perspective towards VBP while identifying the degree of the obstacles to implement VBP by industry. This paper allows future researchers and business practitioners to assess the industry-specific obstacles and take appropriate measures to overcome them.
... Most of the Central European literature on the topic of value-based pricing has focused on definitions and identification of the difficulties with the implementation stage of this pricing method (e.g. Anderson et al., 2010;Hinterhuber, 2008a;Hinterhuber & Bertini, 2011;Hinterhuber & Liozu, 2012;Michel & Pfäffli, 2012;Nagle et al., 2011;Nagle & Müller, 2018;Töytäri et al., 2015, p. 54;Töytäri et al., 2017;Reynolds, 2018). A framework or guideline to predict the overall necessity or potential for successful implementation of value-based pricing lacks so far. ...
... Researchers identified value-based pricing as the most profitable pricing method (Hünerberg & Hüttmann, 2003;Piercy et al., 2010). However, only a small number of companies actively implemented value-based pricing (Hinterhuber & Bertini, 2011). Increased profitability and enhanced competitiveness may be generated by improving the pricing strategy and using the most profitable pricing method value-based pricing. ...
... Value-based pricing is often seen as a much more complex approach to pricing products or services than other pricing methods like cost-or competition-based pricing (Liozu et al., 2012a;Nenonen & Storbacka, 2010;Töytäri et al., 2017). Hinterhuber (2008a) and Hinterhuber and Bertini (2011) found that the main barriers in implementing value-based pricing are the difficulties in assessing value, communicating value, market segmentation, sales force management and senior management support. Dittmer (2017) mentioned that the danger of losing customers was another obstacle to the implementation of value-based pricing. ...
Several researchers suggest that value-based pricing (VBP) is one of the most profitable pricing methods for companies competing in today's business environment. Interestingly, the implementation rates of VBP are, however, rather low. Numerous barriers to the implementation of value-based pricing have been found by researchers already. Although, a theoretical model for determining whether value-based pricing may be a suitable pricing method for a business is yet to be found in the literature. This study aims to introduce a theoretical model to aid pricing executives in their pricing method selection. For this purpose, 20 semi-structured in-depth expert interviews with German pricing experts were conducted as part of qualitative data analysis. The experts were selected using a purposive selection method. Pricing experts were asked to describe the most important factors for determining whether a company may implement value-based pricing. We identified two main factors as being necessities for using VBP. The first factor named by the authors was the brand advantage (BA), and the second factor was represented by the delivered product benefits (DB) as perceived by the customer. Based on these two factors, a two-dimensional, quadrant-based theoretical model was developed and was named the VBP Determination Matrix. The matrix now evaluates a company's position within the matrix based on the factors BA and DB. It leads to direct calls-to-action for properly choosing the most suitable pricing method. This study's theoretical contribution was the development of a so far non-existing two-dimensional model for the determination of the suitability of value-based pricing. Business practitioners are now provided with an easy-to-use and highly applicable model to determine the initial suitability of implementing VBP. Senior management is given direct calls-to-action, whether an investment to implement VBP shall be made and whether to allocate resources.
... Despite the strong impact pricing has on profitability (Dutta et al, 2003) and the advantages of value-based pricing (Anderson and Narus, 1998;Hinterhuber, 2008a;Hinterhuber and Bertini, 2011), surprisingly few B2B firms succeed in developing a pricing capability that enables them to match prices with the products' customer value (Hinterhuber, 2004;Lancioni, 2005; Hinterhuber, 2008a). One reason to why few managers decides to invest resources in implementing ambitious value-based pricing strategies is the belief that prices are automatically determined by external factors, such as customers and competitors, and therefore consider price setting as a response to changes in customer and competitive situation (Dolan and Simon, 1996;Nagle and Holden, 2002). ...
... One reason to why few managers decides to invest resources in implementing ambitious value-based pricing strategies is the belief that prices are automatically determined by external factors, such as customers and competitors, and therefore consider price setting as a response to changes in customer and competitive situation (Dolan and Simon, 1996;Nagle and Holden, 2002). A second reason is difficulties in communicating the product's customer value to the customer (Hinterhuber and Bertini, 2011). Another major challenge for managers when managing the firm's pricing processes is the pricing authority delegation decision, for example, deciding who should have the authority to grant discounts. ...
Value is a key concept for researchers and practitioners in the fields of strategy, marketing, and pricing. In the strategy literature, value is closely related to competitive advantage and profit, in the marketing literature value is the cornerstone of the marketing management process, in the pricing literature value represents the customer’s willingness to pay. The aim of this article is to bridge the gap between marketing, pricing and strategy research through a compilation of five short essays that focus on value assessment and pricing capabilities. This article argues that value assessment and pricing capabilities provide the foundation for value creation and value appropriation in business-to-business markets, highlights their implications for profiting from value created and delivered, and outlines important areas for future research.
... Anderson and Narus (1998) suggest that companies should generate "a comprehensive list of value elements" to "be able to gauge more accurately the differences in functionality and performance" of the market offering in comparison to competitor's products or services. VBP is recommended especially for newly introduced products (Hinterhuber and Bertini, 2011). Product differentiation can provide a competitive advantage, especially if the product can demonstrate superior features and quality which may help justify higher prices. ...
Pricing is one of the key levers for organizations to increase profits. While the most commonly used pricing methods in practice usually are cost-based and competition-based pricing, a third pricing method, which is usually under estimated in business practice has surfaced. Value-based pricing (VBP) is a pricing method with the logic of setting prices based on the customer’s perceived value instead of organizational-oriented costs or competition. The perceived value of the product and the perceived value of the brand are the key levers for a successful determination of the customer’s perceived value and, thus, finding the value-based price. Value-based pricing is known to provide several advantages both to the seller and the customer and is, in theory, a profitable and modern pricing method. However, there are obstacles to its implementation that cannot be neglected, such as the lack of customer value understanding, the difficulties in market segmentation, or the lack of management support to implement a new and somewhat challenging pricing method. Understanding and overcoming these obstacles is the key to implementing one of the most profitable pricing methods available in business practice.
... The economic advantages of value-based pricing strategies in generating revenue compared with other pricing strategies are immense (Hinterhuber & Bertini, 2011;Ingenbleek, 2007;Liozu & Hinterhuber, 2015). This pricing strategy starts from the premise that the price of a product should align with what consumers are actually willing to pay (Armstrong, G., Adam, S., Denize, S., & Kotler, 2014). ...
The present study employed an explicit reaction time task but measured several underlying cognitive processes in an attempt to provide implicit estimates of consumers’ willingness-to-pay (WTP). Participants were asked to evaluate product-price combinations as cheap or expensive. The prices of the products ranged from very cheap to very expensive. Crucially, participants had to complete the task under time pressure while the dependent variables of interest could not be influenced deliberately. This is because we explored whether the magnitude of the price stimulus interfered with the reaction times (RTs), response force (RF) and partial responses (PRs). The results of our study demonstrated that both RTs and RF are influenced by the magnitude of the price and it is postulated that these dependent measures indeed have the potential to investigate consumers’ WTP. Future studies need to further investigate the possibilities of these implicit variables and validate eventual estimates.
... McKinsey & Company has estimated that fewer than 15% of companies do systematic research on this subject (Hinterhuber,2004). Studies have shown that small variations in price can raise or lower profitability by as much as 20% or 50% (Hinterhuber and Bertini, 2011). The persuasion knowledge model given by Friestad and Wright (1994) is used to explain and predict consumer reactions to unit price changes. ...
Price is one of the most important factors in purchase decision. Consumers interpret and rationalize marketer’s pricing and selling tactics. In due course of time customers become knowledgeable of pricing tactics as they learn from previous experiences. This knowledge helps shape their responses to subsequent persuasion attempts from same marketer or competitors. This research focuses on the study of persuasion knowledge and customers responses to persuasion attempts. Since pricing tactic persuasion knowledge is predictable of customer’s responses a research was conducted to study the pricing tactic persuasion knowledge and customers response to purchase intention for electronic products.
... Price is the value given by customers for the benefits of owning or using a product or amount of money that consumers need to obtain the desired goods (Kotler & Armstrong, 2016), (Swastha, 2014). The value is relative for each product (Hinterhuber & Bertini, 2011). Pricing requires a number of monetary units such as money, goods or services that can be exchanged for ownership and use of goods or services (Tjiptono, 2014) and consumers must pay compensation to get the goods or services they want (Faith, Dudu Oritsematosan Edwin, 2014). ...
This article aims to analyze the effect of prices, income and tastes on consumer demand for orange fruits in Pantai Buaya, Besitang District, Langkat Regency, Indonesia. A total of 80 respondents were taken by simple random sampling and then analyzed using multiple linear regression analysis techniques. The results show that partially the price influences the demand for orange fruits, while income and tastes partially do not affect the consumer demand for orange fruits in Pantai Buaya. Price, income and taste together affect the demand for orange fruits by 8.7%, the rest is influenced by other variables not included in this study. Orange traders are advised to evaluate the pricing so it is expected that with the right pricing strategy, consumers are more interested in buying. Further researchers are advised to include other variables such as promotion, distribution, product/service quality, increase the number of samples and expand the area of research so research results can be generalized.
... Furthermore, reliable WTP estimates would allow companies to adopt pricing strategies constructed around consumers' WTP. An approach that has been proven to be more effective and therefore yield competitive advantages [48][49][50][51]. ...
Explicit consumers responses are often adverse for the validity of procedures used to estimate consumers’ willingness-to-pay (WTP). This paper investigates if price evaluations occur automatically and to what extent these automatic processes can be used to implicitly estimate consumers’ WTP. An adapted version of the task-rule congruency (TRC) paradigm was used in two studies. Results of the first study provided evidence for the notion that prices are automatically evaluated. However, the used procedure had limitations that restricted its utility as an implicit WTP estimate. The procedure was adjusted, and an additional study was conducted. The results of the second study also indicated that prices were evaluated automatically. Additionally, the procedure used during the second study allowed to explore to what extent the observed TRC effects could be used to implicitly estimate consumers’ WTP. Taken together, these studies provided evidence for the notion that prices are evaluated automatically. Furthermore, the procedure has the potential to be further developed into an implicit estimate of consumers’ WTP.
... In addition, academics have suggested that suppliers should become a part of the customer's strategy (see e.g. Anderson, Narus, & Van Rossum, 2006;Hinterhuber & Bertini, 2011). Therefore, customers not only expect suppliers to cut down costs, but they also emphasize the suppliers' capability to demonstrate the financial benefits of an investment (Grönroos, 2008;Storbacka, Windahl, Nenonen, & Salonen, 2013). ...
Service delivery and solution selling both strive to achieve increased value through co-creation. However, the concept of value co-creation is a macro concept that still lacks precise empirical grounding and accurate operationalisation. To uncover the microlevel processes of co-creation, we examined 15 sales cases via the lens of uncertainty management. We used design thinking and actor-network theory to explore how certainty evolves between a seller and the buyer. We argue that the common industrial logic for addressing and tackling customer problems in solution selling, hitherto portrayed as either deductive or inductive, is incomplete. Indeed, our research shows that solution selling and value co-creation both require a different, abductive epistemology to address the uncertainty. Our study also provides an empirical extension to the value co-creation literature.
... The Economist (2013) calls the "age of austerity"-an era characterized by sales stagnation, no reasonable possibility of cutting costs further, and price as the only remaining lever. In this competitive environment, more than ever, a sound pricing strategy is required to facilitate customer value creation, structure price decisions, and earn a profit (see Lancioni, Schau, & Smith, 2005); Hinterhuber and Bertini (2011) caution that a deficient pricing strategy inhibits profitability. ...
This article investigates the development and current state of pricing strategy research by undertaking a content analysis of 515 articles published in leading academic journals between 1995 and 2016. The results suggest several developments in research focus and methodology; recent research has focused more strongly on services and applies more rigorous research designs. The results also indicate a persistent focus on consumer markets and economic theories, as well as an increasing consideration of demand-side respondents, at the expense of supply-side respondents. An important feature of this review is a set of actionable takeaways, with both theoretical and methodological implications for pricing strategy research.
... Hence, price can possibly be used as a means to better exploit the capacity in the periods with low demand during the week and over the entire season. Even small changes in the price can substantially increase or decrease company's profitability (Hinterhuber & Bertini, 2011). In addition, the powerful advances in information technology as well as emerging dynamics in customer behavior are dramatically changing what is possible in pricing (Hinterhuber & Liozu, 2014). ...
In this study, we used the hedonic price method to examine what affected one-day ski lift ticket prices in Norway in the winter season 2014/2015. The analysis was based on geographic information, supply-related characteristics and on climatic data of 83 alpine ski resorts. Additionally, we estimated which ski resorts were under- or overpriced. The results indicate that vertical drop, share of intermediate difficulty ski slopes, number of snow parks, travel distance to the nearest large ski resort in Sweden and price at the nearest ski resort in Norway positively affect prices. Travel distance to the nearest ski resort in Norway and to the nearest large urban area in Denmark or Sweden, a total lift capacity of less than 3000 persons per hour, location in western Norway and a location close to more than two other ski resorts significantly and negatively affect prices. The results suggest that, according to a price–quality relationship, the Hemsedal ski resort provided the highest quality of skiing experience. Overall, ski lift ticket prices were influenced by the pricing decisions of leading ski resorts in Norway. Managers can use the results of this study to make better pricing decisions to increase the profitability of their ski resorts.
... Business unit profit 4.65 Gross margin per cent 4.61 Pricing power (1 = worse to 7 = better) 4.52 Sample size = 144 respondents require appropriate capabilities (Hinterhuber, 2004;Hinterhuber and Bertini, 2011). Some of these capabilities relate to customer intimacy and what is critical in their daily operations, market segmentation, competitive analysis, and the ability to extract differentiation. ...
While value-based pricing remains the most talked about and taught pricing orientation, it is also the most difficult pricing orientation to deploy in organizations. For the past 5 years, scholars have continued to recommend the adoption of value-based pricing while at the same time exploring the reasons for its continued low adoption and high rate of failure. We surveyed 144 pricing professionals in 144 distinct organizations to understand the current state of the value-based-pricing practice. We explore perceptions and challenges, and further validate the impact of value-based pricing on margins. We also identify the key drivers of the impact of value-based pricing on the business unit profitability and pricing power. Our results show that we still have a long road ahead with the increased adoption of value-based pricing as a primary pricing orientation. While perceptions have improved, there remain critical difficulties in deploying this methodology in firms. With this study, we intended to continue the discussion on the necessity to pay attention to customer value and also provide additional knowledge to practitioners willing to get started on the journey toward pricing excellence.
... studies have shown that small variations in price can raise or lower profitability by as much as 20% or 50%. 5 Pricing Is a Skill over the past 18 months, we interviewed 44 managers -from Ceos and CFos to heads of business Companies differ substantially in their approach to price setting but most fall into one of three buckets: cost-based pricing, competition-based pricing or customer value-based pricing. ...
In many companies, pricing receives surprisingly little attention. Following work that included a study of pricing at 15 small and medium-sized companies, the authors conclude that most companies can improve their pricing capabilities - and thus their profitability - over time by taking a disciplined approach. The authors identify two key elements of pricing - price orientation and price getting - and five levels of pricing capabilities. They observe that the companies they studied that achieved better pricing had top managers who championed the development of pricing skills. While competition, costs and price sensitivity within a market affect the parameters within which companies set prices, superior pricing is almost always based on skill, the authors maintain. Companies differ substantially in their approach to price setting, but most fall into one of three buckets: cost-based pricing, competition-based pricing or customer value-based pricing. Customer value-based pricing uses data on the perceived customer value of the product as the main factor for determining the final selling price, and many scholars consider customer value-based pricing often to be a preferable approach to price setting for existing products. The authors argue that according to their research many companies can improve their pricing capabilities by cultivating their understanding of the value they bring their customers. But implementing customer value-based pricing is not easy, the authors caution. They find that developing and implementing a sophisticated, customer value-based pricing program is a multiyear project that demands a high degree of executive attention and requires substantial changes in processes and thinking within the company.
Price management focuses on three central determinants: costs, competition, and customer benefits (three Cs). Accordingly, a distinction is traditionally made between cost- and company-oriented, competition-oriented, and customer-oriented determinants and procedures of price management (Hinterhuber 2008; Hinterhuber and Liozu 2012; Indounas 2009).
Purpose
The optimal level of customer participation is an important factor in service design. However, researchers know little about the impact of customer participation for their willingness to pay and hence organizations’ financial outcomes. This paper examines the impact of customer participation in a pay-what-you-want (PWYW) pricing system, allowing customers to pay any price they want for a product or service.
Design/methodology/approach
This paper reports the results of three experiments, in which the authors manipulated the level of customer participation (Study 1: Low versus high, Study 2: Medium versus high, Study 3: Low versus medium versus high) and measured customers' PWYW payments (Studies 1–3), customer satisfaction (Studies 1–3), perceived equity (Study 3) and perceived enjoyment (Study 3). Studies 1 and 3 were scenario-based experiments, while study 2 was a field experiment. Study 3 was preregistered.
Findings
The results support a direct effect of customer participation in service production on customer PWYW payments, yet only when comparing low to high levels of customer participation. High levels of customer participation lead to a decrease in perceived equity and an increase in perceived enjoyment, which in turn spilled over to customer PWYW payments through customer satisfaction.
Originality/value
This research provides causal evidence at the individual level of analysis for the relationship between customer participation in service production and financial results. The paper also provides insights into its underlying mechanisms.
The adoption of new technologies generates an attractive offer of innovative products that flood the markets. Are these products perceived as expensive or cheap? What determines the price range accepted by consumers? This research identifies behavioural variables that can modify the price perception of new technological products, that is, increase or decrease critical price thresholds. As direct value-based pricing method, Van Westendorp’s price sensitivity meter is receiving increasing attention to identify critical price thresholds for new technologies. We rely on arguments from the theory of planned behaviour to explore what changes consumers’ acceptable price levels. Considering a set of disruptive technologies (augmented reality smart glasses, 3D printers, writing robots, self-driving cars, hoverboard robots), a structural approach is used to explore consumers’ perceived threshold prices. The main results sugest that social pressure increases the perceived minimum price and price sensitivity can be decreased evoking perceived ease of use.
The increasing use of digital technology‐based retail services provides new opportunities for digital marketing. In this paper, we investigate how augmented reality (AR) technology can be leveraged as part of the firm's strategy. We explore the online purchase intention through AR smart glasses (ARSG), considering consumers' value assessment through a cost–benefit analysis and the influence of technical, experiential and social AR value drivers. We develop an augmented value‐based adoption model addressing four main objectives: (1) Evaluate the effect of the perceived value of ARSG, (2) Evaluate the effect of immersion (experiential dimension), (3) Evaluate the effect of AR devices and technical complexity (technical dimension) and (4) Evaluate the importance of subjective norms (social dimension) on the online purchase intention through AR technology. Based on an ESIC Tech Lab experiment with two types of ARSG from market leaders and AR retail apps, the study uses survey data from 253 participants. The results suggest that the technical dimension has an ambiguous effect, with tech‐complexity enhancing directly the perceived value of ARSG for online purchase while reducing the net value of consumers' economic cost–benefit analysis. We find strong evidence that the experiential and social AR dimensions (in the form of immersion and subjective norm) have a significant positive influence on consumers' purchase intention online, which are better predictors than the pure economic cost–benefit assessment (through usefulness and difficulty). Furthermore, the technical innovativeness of consumers is found to increase directly the online purchase intention through ARSG.
Scientists agree on one thing; climate change is real! The average temperature is rising and was never higher than in the 20th century. Therefore, in December 2015 in Paris the United Nations Framework Convention on Climate Change (UNFCCC) have signed the Paris Climate Agreement. The goal of this agreement is to keep the global average temperature well below 2°C compared to pre-industrial levels. To reach this goal, member states declared to reduce greenhouse gas emissions by the end of the century.[1] Among all low-carbon technology options, accelerated deployment of wind power when coupled with deep electrification would contribute to more than one-quarter of the total emissions reductions needed. [2] Since that, offshore wind electricity is booming, and turbines are growing in size in order to reduce the levelized cost of energy (LCOE). [3] Previous research demonstrated an extensive research gap for accurate scaling and calculation models future offshore wind turbine CAPEX which leads to inaccurate portfolio decisions which the risk of low profit margins for the OEM´s.
Therefore, this paper provides the scientific foundation by presenting the offshore direct drive turbine cost drivers. Aiming to use the presented results in future research in order to create accurate cost calculation models for the turbine main components and with it the creation of an overall turbine CAPEX scaling model to improve the OEM´s future portfolio decisions.
Margin management is an important aspect of marketing mix decision-making. We argue that when production costs increase, product managers must eventually choose among three alternatives: raising selling prices, reducing pack quantities, or decreasing product quality. Thus, the purpose of this research is to ascertain consumer trade-off preferences – among product price, pack quantity and product quality – for different types of FMCG products. Adopting a choice-based conjoint analysis research design, the study used three samples of American consumers. It was found that for each of the three FMCG product categories tested, quality is the product attribute most favoured by the respondents. For two of the three products, pack quantity was rated the least important product attribute, suggesting that manufacturers may have a better chance of maximising profit by reducing pack quantity, rather than increasing price or lowering quality. In the context of margin management, this is, to our knowledge, the first study to examine consumers’ preferences related to the trade-off between product price, pack quantity and product quality.
Purpose
As franchisees are independent entrepreneurs, one important part of the business format that franchisors are not allowed to impose on their franchisees is resale prices. They are only allowed to indicate a recommended or a maximum price. This study aims to look further into the capabilities underlying the calculation of resale prices and suggests that price-setting is part of both the “business know-how” transferred to franchisees and the “organizational know-how,” that is, capabilities developed and kept at the franchisor level.
Design/methodology/approach
This study adopted a qualitative methodology with a total of 65 interviews, 19 with franchisors and 46 with franchisees, all operating in the French market.
Findings
The findings show that resale pricing is a process that involves know-how. The complexity of pricing leads to develop specialized and broad capabilities. The first type of know-how, i.e., business know-how transferred to franchisees, deals with operational implementation of recommended resale prices in the stores. The second type, i.e., organizational know-how, not transferred as a safeguard against opportunism, connects across other functions of the franchise chain such as R&D and communication.
Originality/value
This study confirms the existence and relevance of another kind of know-how apart from the business know-how that is transferred to the franchisees. Organizational know-how at the chain level, though often neglected, is a necessary determinant of sustaining a competitive advantage. This know-how is not transferred to the franchisees but contributes to the success and sustainability of the franchisor/franchisee relationship. Franchisors should thus work on improving their capabilities to better support their franchisees. Moreover, this study highlight the complexity and extreme importance of setting the right resale price.
Purpose: One major problem in evaluating the efficiencies of public institutions as pointed out by many researchers is the lack of a good estimate of the production function. There are different methodologies that are adopted to estimate relative efficiencies such as regression, ratio analysis that uses one ratio-at-a-time comparisons
to determine relative efficiencies or general performance indexes that used a-priori weighting schemes with accompanying assumptions.
Design/Methodology/Approach: However, the methodology of data envelopment analysis (DEA) is considered to be superior to the above as DEA requires no underlying assumptions for inputs and outputs or a-priori choice of weights. It further allows us to consider multiple inputs and multiple outputs of a decision making unit and provides us with a procedure to differentiate between efficient and inefficient
decision making units. DEA may be able to detect specific
inefficiencies that may not be detectable through other techniques like regression or ratio analysis.
The study reported in the paper concerns measuring the relative efficiencies of public-funded research and development laboratories in India (each laboratory being considered as a decision making unit) with data drawn from 12 such laboratories spread over different regions of the country and working on diverse fields of science, engineering and technology. The input data for the study consist of the total number of scientific personnel and the total number of technical personnel working in each laboratory and the output data consist of the number of papers published in Indian journals, the number of papers published in foreign journals, the number of patents
filed by these laboratories.
Findings: Both the global efficiency scores and the different local efficiency scores (with specific inputs and outputs) were evaluated and potential improvements were ascertained. The implications of the study results have been analyzed and discussed.
Originality: It is one of the few research studies taken in the context of Indian Research and Development units operating under Government of India.
The life sciences (LS) sector is one of the most innovative and technology-driven industries (Mroczkowski 2012). Consequently, many LS ventures face a high-tech market characterized by a high level of market uncertainty and disruptive innovations. In addition, the life sciences sector is strongly intertwined with regulatory bodies and international agencies, which again tend to increase the level of uncertainty and complexity of the market and the business models applied (Seifert et al. 2008; Jones et al. 2011). Obviously, the complexity of the LS sector also influences typical marketing and sales activities needed to commercialize new products or services and further nurture the venture. The objectives of this paper are to introduce the major challenges for LS ventures in the field of marketing and sales and indicate how best to approach and optimize the commercialization performance of LS ventures.
The health sector has undergone profound changes regarding their business model. Today there are strong pressures for lower prices, which resulted from an increasingly competitive market that seeks to optimize resources. The service provided by a medical professional has undergone major transformations, supported in the past by social, ethical values, quality of care, humanization and optimization of labor, and quality of life, and are recently turned into a mercantilist model focused on the production scale, mass care, and profit. This article discusses about the variables that influence the pricing of medical services and the various issues involved in quality and perceived value of these services by the customer. This knowledge is extremely useful to help medical professionals in formatting price in its different services.
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