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The theoretical foundations of value-informed pricing in the service-dominant logic of marketing
Abstract
Purpose
– In the mainstream normative pricing literature, value assessment is virtually non-existent. Although the resource-based literature recognizes that pricing is a competence, value-informed pricing practices are still weakly grounded in theory. The purpose of this paper is to strengthen the theoretical grounds of such pricing practices.
Design/methodology/approach
– The paper applies the emerging service-dominant logic of marketing to pricing. More specifically, it apples the ten foundational premises of service-dominant logic to pricing and it places pricing in the frameworks of one of the major building blocks of service-dominant logic, namely the resource-advantage theory of competition.
Findings
– From a service-dominant perspective, price is the reward for the application of specialized knowledge and skills. Pricing is an operant resource, or competence, that assesses customer value, applies it in multi-dimensional price propositions, and implements it in processes of co-creating prices with customers. Value-informed pricing is the central pricing practice within such competences.
Practical implications
– Prices vary among others between “good” and “bad”, firms generate competitive advantage not only through value creation, but also through pricing. Learning is key to develop pricing competences.
Originality/value
– This paper is the first to ground value-informed pricing at high levels of abstraction in general marketing theory.
... Therefore, the focus has shifted towards understanding how behavioral outcomes interact with other economic variables to influence profitability from various perspectives. Without this understanding, decision-making is incomplete, leading to asymmetric outcomes and hindering the integration of insights into information systems (Ahmad et al., 2021;Assaf and Magnini, 2012;Banker and Johnston, 2007;Ingenbleek, 2014;Shields and Shields, 2005;Smith and Wright, 2004). ...
... Traditional pricing and management control techniques often ignore important factors such as customer satisfaction and motivational aspects, leading to suboptimal decisions in pricing and resource allocation. Knowing the value of products to customers can help firms manage their price-demand process more profitably (Ingenbleek, 2014;Smith, 2021;Van der Rest and Roper, 2013). By exploring the interplay between pricing elements such as price, sales volume, and customer satisfaction, this study enhances our understanding of potential firmlevel financial outcomes. ...
... This was specifically the case for studies that used ACSI as a moderator of firm-level outcomes. Furthermore, marketing pricing literature presents an ongoing debate between economic rationality and the belief that satisfied customers are willing to pay more without reducing their consumption (Van der Rest and Roper, 2013;Ingenbleek, 2014;Enz et al., 2016). Based on the interactive effect of customer satisfaction on the traffic-profitability relationship, we formulate the following hypotheses: ...
This study examines the relationship between revenue and profit drivers and long-term financial performance in the hotel industry based on 17-years data (2004–2020) of six US hotel chains. The analysis creates, tests, and analyzes a cross-level model that examines the complex endogenous relationships, underlying long-term financial performance of hotels. Specifically, we examine the interaction of room price (ADR) and customer satisfaction (ACSI) within a sales-volume-driver framework that impacts financial performance through profitability, measured at both the operating and accounting levels. This study seeks to advance our understanding of these relationships, their characteristics, and their implications for long-term financial performance in the hotel industry. The findings reveal that customer satisfaction is more important than price in achieving long-term financial success in the hotel industry, whereas room nights sold is significant positive driver of all performance levels.
... PSS deliver value in use, hence customers benefit from PSS in the moment of usage, which may be decoupled from the moment of purchase [18]. This rationale draws from service-dominant logic [19], where service is the core of a company's mission and value can only be created by involving customers in a co-creation process [20]. Digital technologies' contribution to a smart service's value creation varies along a continuum. ...
... Industrial Marketing Management 15 [26], [27], [28], [29], [30], [31], [32], [33], [34], [35], [36], [37], [8], [38], [39] Journal of Revenue and Pricing Management 8 [40], [41], [11], [42], [43], [44], [45], [46] Journal of Business-to-Business Marketing 2 [17], [24] Journal of Business Research 2 [47], [48] Management Decision 2 [12], [19] Journal of Marketing 2 [49], [4] Other 1 (each) [50], [51], [52], [53], [54], [7], [55], [56], [57], [58], [10], [16], [59], [23], [60], [61], [62], [63], [64], [65], [66], [67], [6] ...
... Value-Based Pricing "Price analysis" [40] "Market conditions" [36]; "Segment market" [27] "Price definition" [40] "Pricing approach" [52]; "Pricing logic" [64]; "Pricing model" [37]; "Set pricing" [44]; "Monetary amount" [19] "Revenue model" [40] "Amount and timing of payment" [52]; "Contract model: profit gain, pricing, scope of solution" [64]; "Value sharing" [37]; "Conditions of payment" [19]; "Cash flow model" [37]; "Estimate future sales" [27] Value Communication "Selecting sales force" [32] "Sales force training and development" [53] "Customer-facing interaction" [39] "Value communication" [29,53] "Value demonstration" [7,37]; "Value evidence" [24]; "Value visualization" [23]; "Influencing the customer's value perception" [36]; "Customer value education and communication" [38]; "Credible demonstration of the offering's contribution to the customer's business profits" [29] "Value verification" [28,35] "Value documentation" [28,54]; "Valuerealized case examples" [46] ...
With digital technologies, smart services become a cornerstone of industrial product-service systems. Services are increasingly delivered by digital means and thereby become difficult to grasp for customers. For manufacturing companies, this is an opportunity to leverage value-based marketing and sales (VBMS). Despite this approach appearing promising in the age of digital technologies, no research combined so far the perspectives of VBMS, servitization and digital technologies. This paper fills this gap through a systematic literature review. We find that a limited number of authors and papers discuss this topic, but using a plethora of different terms. We consolidate the extant terminology in an overarching framework for VBMS. Furthermore, we identify four pillars of digital technologies that influence VBMS of industrial services. Finally, we suggest that in the age of digital technologies, the effectiveness of VBMS is contingent on relational rather than technological factors.
... Value-based pricing is defined as the extent to which managers' 1 pricing decisions take account of how customers perceive a product's benefits in relation to its price (Ingenbleek, 2014). In business markets, those benefits may involve cost decreases or revenue increases (see, for example, Anderson & Narus, 1998;Forbis & Mehta, 1981). ...
... This is a significant gap in the literature, given ongoing calls for a focus on customer value in business markets (e.g., Anderson & Narus, 1998;Forbis & Mehta, 1981;Hinterhuber, 2004). Value-based pricing involves searching, interpreting, and communicating information about customer value (Ingenbleek, 2014;Nagle & Holden, 2002). Given the neglect of the distinct cognitive challenges related to these activities, the present article seeks to explain how a number of cognitive biases challenge managers' use of valuebased pricing in business markets, and to propose directions for further research. ...
... As a customer-focused practice (Nagle & Holden, 2002), value-based pricing can potentially turn business relationships into win-win situations (Töytäri et al., 2015) through a better understanding of customers' perceived value (Ingenbleek, 2014), so increasing profits for both customers and suppliers (Anderson et al., 2007). However, the more common managerial view is to perceive pricing as a win-lose situation (Hinterhuber, 2004;Hinterhuber & Liozu, 2014). ...
To investigate how cognitive biases inhibit value-based pricing practices among managers in business markets, this article considers five different cognitive biases—perceived lack of control, herding, fixed-pie bias, ambiguity aversion, and egocentric fairness bias—and their effects on value-based pricing. Despite recent calls for more research on the psychological aspects of pricing, few studies have focused on business markets. Drawing on research in psychology and marketing for its theoretical foundation, this overview extends the limited body of existing research. The article's key contribution is to explain how psychological challenges affect value-based pricing practices, with implications and suggestions for further research.
... On the other hand, competition-based and value-based pricing practices are more focused on the external environment than on the internal organization and costs (Kienzler and Kowalkowski, 2017). Competition-based pricing entails taking the prices set by the competitors for similar products and services as a reference, while value-based pricing involves embedding in the price the value perceived by the customer (Ingenbleek, 2014;Kienzler, 2018). These approaches are aimed to obtain prices that can be accepted, understood, and appreciated by the market, thus leading the company to set target costs (Ahn et al., 2018) able to generate profit at the given market price. ...
... To capture customers' value perceptions, it is critical to access information on the value perceived by the customers (e.g., Guizzardi et al., 2022;Mariani and Borghi, 2022;. While information pertaining to costs is part of internal data widely available to the company and information related to competitors' prices can be obtained quite easily (especially in B2C markets), value-based pricing requires a deep knowledge of the actual and potential value perceived by the customer that is very complex to obtain and process (Guizzardi et al., 2022;Ingenbleek, 2014;Nagle and Holden, 2002). Therefore, to develop an effective and widely applicable valuebased pricing approach it is essential to collect and access data about the value perceived by the customers. ...
This work introduces, develops, and empirically applies an innovative approach aimed at assessing selling prices based on the value perceived by the customers, as measured by electronic word-of-mouth (eWOM) in the guise of online reviews. To achieve this aim, it applies a constant return to scale Data Envelopment Analysis (DEA) approach where the price is the input, and the value attributes are the outputs measured through eWOM in the form of online reviews. We empirically apply the model to the hotel sector by considering both the prices and the service attributes (i.e., staff, location, cleanliness, comfort, facilities and free wi-fi) of 364 hotels based in two leading Italian tourism destinations: Milan and Rome. Our findings suggest that online review analytics can be suitably embedded into analytical models to assess prices. The index developed innovatively supports value-based pricing by means of online review analytics and it is easy-to-perform, and parsimonious as it is based on widely available information on the Internet.
... In the second stage, we summarized the interviewees' statements into 39 more general first-order concepts, still based on the wording used by the informants. In the third stage, the data analysis turned to a more abductive approach (Dubois & Gadde, 2002, 2014, an ongoing "cycling between emergent data, themes, concepts, and dimensions and the relevant literature" (Gioia et al., 2012, p. 21). We summarized the 39 first-order-concepts into nine more abstract second-order theory-centric themes based on SDL reasoning and value literature. ...
... Although we note this behavior on the supplier side and identify connections with the concept of value-in-use, an empirical contribution that specifically focuses on the application of SDL and value-in-use to pricing is as yet nonexistent (Ingenbleek, 2014). To date, "the pricing literature has been dominated by a normative research that is strongly rooted in neoclassical economics" and therefore focuses on price as a monetary amount exchanged in a one-time transaction (Ingenbleek, 2014, p. 34). ...
This study shows that providers increasingly adapt their marketing practices to customers’ usage processes, particularly with regard to how they manage individual goal achievement, ensure continuous revenue streams, provide digitally enabled on-demand availability and guide customers’ operant resource integration. Due to its abductive research approach, this project further reveals congruences as well as ambivalences and discrepancies between theoretical suggestions in the context of service-dominant logic and value-in-use and implemented practices. In so doing, it provides a novel practice-oriented perspective on value-in-use and contributes significantly to further development of middle range theory.
... As growing numbers of companies focus on providing comprehensive industrial services and customized solutions (Raja, Bourne, Goffin, Çakkol, & Martinez, 2013;Tuli, Kohli, & Bharadwaj, 2007;Ulaga & Kohli, 2018), they also acknowledge their growing need to foster capabilities to support value-based pricing (VBP) and value-based selling (VBS) efforts. In particular, VBP implies that the seller's pricing decisions account for customers' perceptions of the offering's use value, in relation to its price (Ingenbleek, 2014;Kienzler, 2018a). ...
... Extending two-stage capability frameworks (i.e., planning and implementation; Eades, 2004;Storbacka, 2011;Terho et al., 2012), propose three adjacent VBS stages: planning, implementation, and leverage, each of which requires salient capabilities and managerial practices, such as segmentation and stakeholder identification, value analysis, value proposition development, sales tools preparation, value communication, value quantification, and value verification. Similar to VBP, which involves the extent to which a customer perceives the benefits from an offering with respect to the price (Ingenbleek, 2014;Kienzler, 2018a), a value-based selling logic requires focusing less on product and service attributes and more on understanding what customers value (Anderson & Narus, 1998), which may be manifest in their business models and processes (Frandsen, Boa, & Raja, 2019;Töytäri et al., 2017;). ...
Many manufacturers invest in advanced services and solutions to achieve superior customer value; however, research has only begun to examine capabilities for value-based pricing (VBP) and value-based selling (VBS) in relation to such offerings. This article explores (1) which capabilities firms seek to develop for VBP and VBS of industrial services and solutions and (2) how learning influences the development of these capabilities. An in-depth exploratory study of two global market leaders in their respective industries includes interviews with 66 respondents from the firms, as well as 12 interviews with customer and supplier informants, which reveal important capabilities for VBP and VBS. Higher-level learning supports value discovery, through dialogue with customers over time; this value in turn forms the basis for VBP and VBS. Higher-level learning capabilities also facilitate the adaptation and replication of the developed pricing and selling capabilities in various contexts.
... In so doing the paper answers to Cross et al. (2009) who argue that a move away from just opening and closing room rates to a deeper strategic understanding of "right pricing" is essential for hotel revenue management. As pricing in the hotel industry is inherently competitor-oriented (Enz et al., 2016), and valueinformed pricing still weakly grounded in theory (Ingenbleek, 2014), an European hotel group was investigated that was attempting to strategically change its cross-country pricing practices to a value-driven approach. In this way, the paper also answers to Ingenbleek (2002Ingenbleek ( , 2014 who calls for more qualitative research and case studies, especially detailed work on cross-national, cross-cultural differences in pricing practices, institutional barriers to pricing competence development, and industries not previously examined. ...
... As pricing in the hotel industry is inherently competitor-oriented (Enz et al., 2016), and valueinformed pricing still weakly grounded in theory (Ingenbleek, 2014), an European hotel group was investigated that was attempting to strategically change its cross-country pricing practices to a value-driven approach. In this way, the paper also answers to Ingenbleek (2002Ingenbleek ( , 2014 who calls for more qualitative research and case studies, especially detailed work on cross-national, cross-cultural differences in pricing practices, institutional barriers to pricing competence development, and industries not previously examined. The paper begins by reviewing previous research on pricing processes. ...
This paper analyzes the process of changing a competition-oriented room rate pricing approach into a company-wide value-based pricing process from the perspective of the resource-based view. From a sample of 33 hotels in 16 countries it evaluates data from 55 open-ended interviews, documentation and archival records. Employing systems methodology the study illustrates that pricing is an intra/inter-organizational activity involving cross-disciplinary processes at various hierarchical levels. It finds that changing to value-based pricing involves a remarkable level of especially intangible resources. The study identifies these resources and their impact, identifying how constraints and tensions influence the shift in pricing orientation. It suggests that pricing in a value-driven policy comprises a capability. Without this capability interpersonal realities and goal conflicts, most prominently between sales and revenue, are found to impose major effects on the alignment of functional levels, the change in pricing processes, and the degree to which these are really value-driven.
... Understanding and systemizing the value characteristics affecting memorable customer experiences in a way compatible with accounting data can help service operators develop distinct value propositions, ensuring their competitive advantage and maintaining profitability (DiPietro, 2017;Edwards & Gustafsson, 2008;Hyun, 2010;Pine & Gilmore, 2011). From a competitive advantage perspective, both enhanced customer value and proper resource utilization are paramount for profitability and sustainability (Ingenbleek, 2014;Nemeschansky, 2020;van der Rest et al., 2018). This study is the first to link cruise dining experiencescape components with EA-based experience accounts systematically, allowing their further instrumental alignment with accounting data. ...
This study examines shifts in consumer dining preferences among cruise passengers in response to the COVID-19 pandemic. Utilizing text-mining techniques applied to a collection of online reviews, the discourse analysis in this study is guided by the restaurant-management tool, Experience Accounting (EA), which represents an integrated marketing-accounting analytical framework. We further extend the experiencescape model to the cruise dining context by subcategorizing the sensory component as a more instrumental approach for the food service industry. Our findings indicate a significant shift in cruise ship passengers’ dining preferences away from utilitarian meals toward the fine-dining setup, representing significant challenges for the hospitality industry.
... Value pricing is recommended to exploit willingness to pay optimally. Here, the focus is not on the company's costs but individual customer value (Ingenbleek, 2014;Ingenbleek, 2007). Active price management is driven by demand (Hinterhuber, 2008;Nagle, Hogan & Zale, 2011). ...
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).
... Turning to the preferred price of the service from a customer perspective brings many benefits to the firm such as trust establishment and customer satisfaction. Prices themselves are influenced by various customer resources, including customers' ability to trust the firm, anticipate future transactions, price fairness and conflicts (Ingenbleek, 2014). Such processes and relationships are developed through dialogue and mutual learning (Flint and Mentzer, 2006). ...
Purpose
The purpose of this paper is to examine the influence of the dialogue, access, risk assessment and transparency model of value co-creation processes (dialogue, access, risk and transparency) on new service market performance (NSMP) with the mediating role of value-informed pricing in the context of business-to-business (B2B).
Design/methodology/approach
The data were collected through a cross-sectional survey of 230 managers of the telecommunications industry in Malaysia and analyzed through structural equation modeling using SmartPLS v.3.3.3 software.
Findings
This study found that dialogue and transparency are predictors of NSMP. The findings indicate that value-informed pricing plays a mediating role in the relationship between dialogue and transparency with NSMP.
Practical implications
Disclosing pricing related information, providing up to date information to the customers, making clear to the customers about new offerings would certainly influence value-informed pricing. Thus, managers can enhance customer engagement in the interaction processes to better understand customer expectations of new services and how the new services should be priced.
Originality/value
The link between value co-creation and value-informed pricing has been only conceptualized in literature. This study has opened a new stream of research, examining the relationship of interactional-based value co-creation process with value-informed pricing and NSMP in the context of B2B relationship from providers’ perspective.
... It occurs when mutual service exchange generates benefits from multi-actor interactions. The combined resources could entail knowledge, experience, expertise, tools (Reypens et al., 2016), capabilities (Mele et al., 2014), mechanisms (Storbacka et al., 2016), ideas (Randall et al., 2014), competency, processes (Ingenbleek, 2014), skills and information (Jaakkola and Hakanen, 2013). ...
This paper offers a new framework of value co-creation in a small-medium enterprise (SME) community in which multi-actor interaction in the community plays an important role to do collective resource integration to overcome its limitation. The findings demonstrate that collaborative networks, dynamic interaction and resource integration are proven as a valid platform of value co-creation. Collaborative networks with external actors and dynamic interaction among members within a SME community link one another and show positive influence on resource integration in the value co-creation process. A SME can adopt this value co-creation platform as a new strategy for business development and sustainability. This study conveys a different perspective for service-dominant logic concept.
... While the definition of fairness is sometimes challenging to explain because what is fair to one person can be considered unfair to another (Saulters, Hendrickson & Chaddad, 2018), and value-based fairness derived from broad participation of resort guests. Value-based fairness is the decision of top management teams after taking into account how guests perceive a product or service concerning fairness (TM Ingenbleek, 2014). However, while past studies have looked at guest facilities in terms of price such as commissions, value fairness, incentives or promotions (Amer, Busson & Lassous, 2018;Doliya & Singh, 2015;Hwang, Baloglu & Tanford, 2019;Kienzler, Koch & Vázquez, 2018). ...
A loyal guest has demanded value-based fairness at the time of purchasing a product or accommodation as a member or regular guest. The purpose of the paper is to examine the relationships between service disclosure, price fairness, problem-solving, system adaptation, guest behavioral loyalty, and value-based fairness in Malaysian five-star resorts. This study follows the questionnaire survey-based procedure to collect data from the resort's guests, and 392 valid responses were collected. The analytical technique offers SEM (Structural Equation Modelling) to test the hypotheses of the model. The results found the relationships of influencing factors of guest behavioural loyalty and value-based fairness. Furthermore, guest behavioral loyalty significantly mediates between affecting factor of guest behavioural loyalty and value-based fairness. Thus, the model synthesized the links of verifying research and providing articulation of constructs on how might apply within the resort industry context. Research findings were achieved objectives simultaneously and will, assist the resort management and implement value-based fairness for the regular guest as connecting long-term relationship.
... Results of collaborative networks and dynamic interaction are demonstrated by the occurrence of resource integration (Vargo and Lusch, 2016). Elements of resource are gathered from many publications and include integration of knowledge and skills (Vargo and Lusch, 2016;Jaakkola and Hakanen, 2013); experiences, expertise and tools (Reypens et al., 2016); concepts, capacities and methods (Storbacka et al., 2016); ideas (Randall et al., 2014); capability (Mele et al., 2014); competency and process (Ingenbleek, 2014) and information ( Jaakkola and Hakanen, 2013). Collaborative networks, dynamic interaction and resource integration in an organic community build the platform of value co-creation (Vargo and Lusch, 2016). ...
Purpose
The purpose of this paper is to explore how value co-creation in the Indonesian Organic Community overcomes the resource limitations of small enterprises through the integration of collective resources to drive innovation. A framework is derived and developed from service-dominant logic (SDL) and supported by consumer culture theory (CCT). It also offers a specific strategy that is required for the growth and sustainability of the organic-products entrepreneurship.
Design/methodology/approach
Applied thematic analysis was performed by combining observation and in-depth interviews to multi-actors in the community.
Findings
The result shows that a collaboration network with external actors and the dynamic interaction within the community drive resource integration forming value co-creation platform and lead to innovation in product, process, marketing and organization.
Originality/value
A combination of SDL and CCT provides a new marketing perspective of value co-creation concept. SDL offers an understanding of multi-actor value co-creation that is built from the knowledge and skills-based resources. CCT unveils the roles of the community in developing the positive perception of organic products in the market ecosystem.
... An explanation for the slow progress is mainly attributed to the lack of knowledge pertaining to the value-based concept. According to Ingenbleek (2014) and Hinterhuber (2008), the main obstacles are in assessing and communicating the value factors for/to the customers. ...
... Resources in the latest conception of value co-creation mostly refer to knowledge and skills (service) or operant resources (Vargo and Lusch, 2016). In other studies, resources are discussed in various forms such as experience, expertise, tools (Reypens et al., 2016), concepts, capacities, mechanisms (Storbacka et al., 2016), capabilities, ideas (Randall et al., 2014), competency, processes (Ingenbleek, 2014) and information (Jaakkola and Hakanen, 2013). Through the integration of relevant resources externally and internally, SMEs are able to perform marketing innovation (Kozlenkova et al., 2014;Sharma et al., 2014). ...
The study of value co-creation for marketing innovation in the small–medium enterprise (SME) community is still overlooked despite its contribution to economic development. This study offers a platform of value co-creation model for marketing innovation and compares its application to the green and business-as-usual SME communities. Structural equation modelling is conducted to test the hypotheses of both model applications. Key persons in the community were interviewed to enrich the quantitative results. The result shows the relationships between collaborative networks and dynamic interactions with resource integration as well as their impact on marketing innovation. Collaborative networks and dynamic interactions demonstrate significantly positive influences on marketing innovation in the business-as-usual SME community, whereas the green SME community only engages in internal dynamic interactions to build internal value co-creation. Policymakers may adopt this model to evaluate SMEs’ business performance by measuring the value co-creation effect on the community’s capacity development.
... An explanation for the slow progress is mainly attributed to the lack of knowledge pertaining to the value-based concept. According to Ingenbleek (2014) and Hinterhuber (2008), the main obstacles are in assessing and communicating the value factors for/to the customers. ...
... To set prices in line with the customer's perception of the product, value-informed pricing is highly recommended as the central pricing practice (P. T. M. Ingenbleek, 2014), rather than that product commoditization in industrial markets that tends to drive pricing toward cost-and competition-based (or marketbased) logics (Dost & Geiger, 2017;Töytäri, Keränen, & Rajala, 2017). However, as the above three types of pricing logics are identified and widely discussed by prior literature (Hinterhuber, 2008;Hinterhuber & Liozu, 2017;P. ...
Value-informed pricing strategy, which focuses on determining the price level of products based on consumer value perception, is especially suitable to be applied in digital products rather than industrial ones. By carrying out 65 in-depth interviews with people involved in the Chinese Massively Multiplayer Online Role-Playing Game (MMORPG) industry, this article explores the process through which a value-informed pricing strategy is applied to determine the price level of virtual in-game accessories—exploring pricing preference through interacting with game players, swaying pricing alternatives through managing the competitive environment, and manipulating value perception through shaping the virtual marketplace. Furthermore, this article constructs a theoretical framework of value-informed pricing, including the above process, and deciphers the linkage mechanism between different segments. The findings not only enrich the theory of value-informed pricing under the application context of virtual digital products but also have implications for the practitioners in the MMORPG industry.
... Indeed, actual price setting practices as well as pricing strategies may be very different in B2B and B2C markets. However, according to the pricing literature, B2B and B2C firms have to acquire pricing information to support organizational price decision-making within similar dynamics of external environment and market complexities (Smith 1995;Ingenbleek 2007Ingenbleek , 2014Dixit et al. 2008). Even when the scope of pricing action for a firm is limited due to, for instance, high customer power in B2B markets, research shows that firms acquire and consider cost information when setting prices (Ingenbleek et al. 2003;Totzek and Alavi 2010). ...
Purpose-This study analyses the external antecedents of pricing information acquisition in an integrative manner. The study develops understanding of determinants of information acquisition as a crucial prerequisite of successful pricing strategies within German SMEs.
Methodology-A large scale survey of sampled 2,542 SMEs was conducted. A total of 220 questionnaires were completed, reflecting a response rate of 9 per cent. This was acceptable considering the sensitivity of pricing issues. A final sample of 173 usable questionnaires obtained.
Findings-The result indicates that external antecedents of pricing information acquisition practices have a positive impact on SME pricing performance and pricing performance is positively related to firm performance. Practical implications-The study indicates that external antecedents of pricing information acquisition are strategic pricing capability, which should receive attention by SME managers.
Originality-This study bridges significant obstacle to knowledge generation and theory development of the important issues of pricing information acquisition in SMEs.
... Results of collaborative networks and dynamic interaction are demonstrated by the occurrence of resource integration (Vargo and Lusch, 2016). Elements of resource are gathered from many publications and include integration of knowledge and skills (Vargo and Lusch, 2016;Jaakkola and Hakanen, 2013); experiences, expertise and tools (Reypens et al., 2016); concepts, capacities and methods (Storbacka et al., 2016); ideas (Randall et al., 2014); capability (Mele et al., 2014); competency and process (Ingenbleek, 2014) and information ( Jaakkola and Hakanen, 2013). Collaborative networks, dynamic interaction and resource integration in an organic community build the platform of value co-creation (Vargo and Lusch, 2016). ...
This paper explores the interaction of multi-actors to co-create value in small business community. It expresses the extension and application of new fundamental premises 11 and axioms 5 in Service-Dominant Logic (SDL) combined with Consumer Culture Theory (CCT) concept that leads toward operand and operant resource integration in the community. The integration goes through dynamic service exchange as a result of interaction within and among members in the community that creates nested and interlocking service ecosystem to yield value co-creation. Small business community needs to co-create value to overcome the individual limitation to grow their business.
The interaction of main actors in optimizing value co-creation shows an important role in the innovation process. This research proposes small business community as a platform of interaction on the ecosystem. The interaction between members and community is driven by engaging, educating and enriching among others. The members will create the uniqueness and differentiation from the others while sharpening the capability and the capacity to produce dynamic interaction. The interaction leads to value co-creation that plays an important role on each step of innovation process.
This paper gives contribution to the development of collaboration between SDL-CCT. The research model will be beneficial to develop an alternative marketing and business model as well as to drive the growth and the contribution of micro, small, and medium entreprises on society, environment, and economy.
... And successful new developed service has increasingly become an important concern for service industries to achieve competitive advantage (Jaw et al., 2010;Agarwal et al., 2003;Figueroa et al., 2015;Wang et al., 2016). However, service firms should continuously develop new services to keep pace with the rapid changes in customers' needs and demands (Lusch and Nambisan, 2015;Taghizadeh et al., 2016;Ingenbleek, 2014;Vargo, 2008). Giving importance to the customer, Ingenbleek et al. (2010) have found that customer value has significant influence on new product market performance. ...
Purpose
This paper examines the influence of three dimensions of customer knowledge management—knowledge from customer, knowledge for customer, and knowledge about customer—on innovation capabilities (speed and quality) and new service market performance.
Design/methodology/approach
The model links three dimensions of customer knowledge management to two dimensions of innovation capabilities. Further, the model links two dimensions of innovation capabilities to new service market performance. Analysis was conducted through structural equation modelling using SmartPLS software, utilizing data from 253 managers representing 26 banks in Bangladesh.
Findings
The findings of this study show that knowledge from customer and knowledge for customer are the most influential predictors of new service market performance. Of the three dimensions of customer knowledge management, knowledge from customer turns out to be the strongest predictor of innovation quality and speed. Innovation quality has a greater impact on new service market performance than innovation speed. Innovation capability (quality and speed) plays a mediating role in this study.
Practical implications
Managing knowledge from, for, and about customer should be systematically considered as a synergy approach to firms’ processes and activities to co-create value with customers. In particular, managers should put more emphasis on knowledge from and for customer to enhance innovation capacity and achieve success in the development of a new service.
Originality/value
This paper empirically supports the significant influence of knowledge from, for, and about customer on innovation capabilities (quality and speed) and new service market performance. While the results provide guidance for researchers and practitioners, it also adds value to innovation-related research.
... An explanation for the slow progress is mainly attributed to the lack of knowledge pertaining to the value-based concept. According to Ingenbleek (2014) and Hinterhuber (2008), the main obstacles are in assessing and communicating the value factors for/to the customers. ...
Purpose
– The purpose of this paper is to propose the concept of higher education institutions (HEIs) offering educational services based on value for money. The value is determined based on customers’ (i.e. students) expectations of the service and the costs in comparison to the competitors. Understanding the value and creating customer value are a means to attain competitive advantage and constitute the basis of price setting. Drawing upon this belief, as an initial step towards value-based pricing method, the possible value factors are suggested for calculating educational programme prices across HEIs.
Design/methodology/approach
– This is a conceptual paper introducing the value-based pricing approach in setting HEI tuition fees. Extending prior discussion on the demand for quality education and current financial challenges faced by HEIs, it introduces the concept pricing based upon customer perceived value (student/industry). Value-based pricing is deemed appropriate in view of the value of short tangible and intangible investment by both parties (students and HEIs) to differentiate in terms of setting the right price for the right university for the right student.
Findings
– The primary aim is to suggest the applicability of value-based pricing for HEIs, which is likely to be both relevant and fruitful for the sustainability of the sector. It represents a personal point of view; building upon a review of the literature, the paper extends the established knowledge one step further in terms of setting the right price for the right university, which is deemed worthy of further study and development.
Originality/value
– The paper will be of use to the management and policymakers in the education sector in searching for a contemporary pricing mechanism for higher education.
... In a context in which consumers make fast decisions, relying on deeply rooted associations in their memory, companies that try to sell a sustainable product have a competitive disadvantage. Prices influence both the consumer's value perception of the product, as well as whether and how the costs are covered (Ingenbleek, 2014;Nagle and Hogan, 2006). Together, value perceptions and costs determine the competitive advantage of a company (Hunt and Morgan, 1995). ...
Purpose
– Sustainable products often suffer a competitive disadvantage compared with mainstream products because they must cover ecological and social costs that their competitors leave to future generations. The purpose of this paper is to identify price strategies for sustainable products that minimize this efficiency disadvantage.
Design/methodology/approach
– The strategies and their determinants from the pricing environment are derived from an inductive sequential case study of certified food products, such as organic and fair trade products. Data are collected through desk research and interviews.
Findings
– The results reveal six different strategies that build on three basic mechanisms: cost-based pricing in combination with price fairness, increasing willingness to pay through perceptions of quality and/or price, and price stability in which costs are compensated for by scale and/or learning effects.
Research limitations/implications
– The framework can help companies that offer sustainable products strengthen their market positions and it can help policy makers that partly rely on markets to achieve sustainability objectives.
Originality/value
– The existing pricing literature on sustainability predominantly takes a consumer approach. This study breaks new ground by extending this work with a strategic marketing approach offering a choice set of strategies for managers.
... The S-D logic is initiated and now widely applied in marketing area (Ingenbleek, 2014), and also has been extended to other fields, including public transport (Gebauer et al., 2010), retailing (Beitelspacher et al., 2012), procurement (Dobrzykowski et al., 2012), service innovation (Edvardsson and Tronvoll, 2013), self-service (Hilton and Hughes, 2013), tourism management (FitzPatrick et al., 2013), operations management (Smith et al., 2013); However, its application in logistics/supply chain is still at early stage (Lusch et al., 2010;Yazdanparast et al., 2010;Tokman and Beitlespacher, 2011). Particularly in managing the logistics-manufacturing interfaces, the S-D logic can serve to facilitate the value co-creation during service provision, but its implementation in this field is still scarce in current literature. ...
Purpose
– The purpose of this paper is to investigate the management of the logistics-manufacturing interface between the manufacturer and its logistics service provider from the perspective of the service-dominant (S-D) logic.
Design/methodology/approach
– The approach adopted is that of abductive reasoning through case study: data are primarily gleaned from semi-structured in-depth interviews. Field visits and secondary documentation are used to ensure data validity.
Findings
– The results show that the interface can be categorized into three levels: design interface between products and logistic services, process interface between manufacturing processes and service-offering processes, and information interface between manufacturing information systems and logistics information systems. The results also indicate that ten foundational premises of S-D logic, especially service-focussed, customer-oriented and rational views can be applied in defining and managing these interfaces.
Research limitations/implications
– This research contributes not only to the theory of S-D logic and managing interface, but also provides managers with guidelines of applying S-D logic to build a service-focussed, customer-oriented and relational logic to effectively manage the logistics-manufacturing interface. However, the research is limited to the context of automotive and logistics industries.
Originality/value
– Three levels of logistics-manufacturing interface, including design, process and information are identified, and S-D logic is applied to identify and manage the interface.
... However, recent researchers (e.g. Ingenbleek, 2014; Vargo and Lusch, 2004, 2008) proposed and discussed a service-dominant (S-D) logic according to which service should be distinguished from goods and services as a transaction outcome, that is, from the goods-dominant (G-D) logic. Vargo and Lusch (2004, 2008) also emphasised the role of customers as co-creators of value that benefits both firms and customers. ...
Purpose – The aim of this study was to explore how task- and relation-oriented customers co-create high quality services with frontline employees from the perspective of customer-dominant (C-D) logic.
Design/methodology/approach – We reviewed the service management literature and identified a number of critical components that help service providers understand the psychology and behaviour of their customers, and how their customers perceive service encounters. We tested our theoretical model by surveying 2,400 service customers of Hong Kongrandomly of which 707 returned theirquestionnaires.
Findings – We found that information sharing fully mediated the interactive effects of customer involvement and customer motivational orientation on customer perceived service quality and customer satisfaction. These findings support the C-D logic that customers as co-creators of value play a dominant role in service encounters.
Originality/value – We contribute to the existing management literature by identifying the importance of the C-D logic for service delivery and management. In particular, the involvement of customers with different motivational orientations through information sharing significantly affects customer perceived service quality and satisfaction.
... Precisely, the capabilities offered to customers and merchants by these new media, in terms of visibility, proactivity, real-time, ubiquity and social networking (Hennig-Thurau et al., 2010), are in sync with a new marketing logic that proposes more advanced forms of customer-merchant interaction (Rodríguez-Ardura, Martínez-López, and Luna, 2010) -and defends that value is co-created with customers (Vargo & Lusch, 2004). In this new context, the customer is conceived as a co-creator of value, which entails that the knowledge yielded by the customer-merchant interaction is used to create price propositions (Ingenbleek, 2014). ...
For hybrid merchants, who sell goods simultaneously through digital media and conventional channels, creating a price proposition is a major and controversial decision. We model the interaction between hybrid merchants and their customers within the context of an experience goods market; and we study how merchants and customers both learn from this interaction to make optimum decisions. The equilibrium solution of the proposed game shows that experience goods’ loyal customers tend to switch channels, make repeat purchases online, and avoid learning alternative value propositions. And the optimum strategy for hybrid merchants involves higher prices that rely on solid branding and knowledge of the clientele. The findings also yield important managerial implications.
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).
Changes in the economy and greater competition force us to adapt our business practices and to take greater account of the needs of consumers and the social problems they care about. Consumers are placing an increasing weight on the social responsibility of the organisations they choose to purchase from and associate with, and businesses must adopt corporate social responsibility (CSR) practices into their marketing strategies.
This book demonstrates the concept of CSR and how it is included as an element of value-based marketing. Using research from the Polish market, the author explores the concept of value-based marketing, how organisations are implementing CSR, and analyses the effect on consumer behaviour. It examines consumer awareness of CSR practices and the effect this has on their purchasing decisions and brand loyalty, making the argument that disregarding CSR can be detrimental to businesses success and profit.
Providing both empirical and theoretical perspectives, this book will be a useful reference for scholars and upper-level students across business disciplines including marketing, CSR, and business ethics.
An examination of the marketing and management literatures will very quickly reveal that customer value has been defined in a great many ways. As a result, it would be easy to assume this creates more problems than it solves. This chapter argues that this need not be the case. This is because the different approaches for defining customer value are much more suited to solving some customer value creation-related dilemmas and conundrums than others. With this in mind, three popular and widely employed categories of definitions of customer value are discussed to demonstrate this point: customer value is (1) the amount customers are willing to pay, (2) an equity position that customers perceive they have in an organisation and (3) an inherently multidimensional concept. An analysis of the pros and cons of each approach shows that the third approach is potentially the most enabling when systematically learning about customers, and developing and implementing the organisation’s customer value strategy, including when partnering with many external parties. To demonstrate this point, two frameworks are developed in this chapter using Woodruff’s (1997) very versatile multidimensional definition of customer value. The frameworks illustrate how this highly respected definition can be applied to build a boundary-spanning, customer value learning, co-creation and co-delivery (platform-based) system as an active participant within an institutionally complex ecosystem.
Purpose
The uncertainty of consumers' perceived value makes online education enterprises face great challenge in developing the pricing strategy. So the purpose of this paper is to research the pricing strategies of online education products by considering knowledge consumers' characteristics.
Design/methodology/approach
Considering consumer matching degree and price comparison, this study establishes the utility functions of consumers in normal sales period and discount selling period. On this basis, the research builds pricing models of the online education enterprise under the strategy of price undertaking and intertemporal pricing strategy. It further discusses the impact of consumer matching degree, consumer price sensitivity and different types of consumers on the product price and profit of online education enterprises, and reveals the optimal pricing strategy of the enterprise.
Findings
Consumer matching degree and price sensitivity coefficient have positive effects on product price and enterprise profit, but they have different effects on product demand; there are differences in the perceived value of the three types of consumers, and matching consumers are the optimal consumer group; the intertemporal pricing strategy is better than the strategy of price undertaking only when the price sensitivity coefficient is greater than a critical value.
Originality/value
This study enriches the literature on the pricing model of online education products and owns a practical significance to guide the online enterprise to make marketing strategies to increase profit.
This paper intends to explore the perception of value delivered in digital servitization in a business-to-business context of incumbent manufacturing firms. We investigate how individual entrepreneurial orientation (IEO) influence and affect the adoption of such digital servitization strategies. The observations are made through a survey and empirical assessment across a couple of large industrial organizations interested in servitization and digitalization. Findings contribute to the existing literature on digital servitization and business model innovation by suggesting that IEO influence perceived value in delivering digital service offers, whereas functional affiliation does not. Further observations suggest that digital capabilities can become a crucial enabler for the perception of value delivered in digital business models by providing swift access to data for affected stakeholders.
The purpose of this paper is to test and examine the interrelationships amongst customer satisfaction, customer service, innovation, and competitive pricing in the laundry industry in Ghana using the covariance approach of Structural Equation Modeling. Quantitative research design was adopted for this study. The data set used to meet this paper’s main objectives was collected using face to face meeting of laundry customers and requesting them to fill out a 1–5 point Likert scale questionnaire. The results demonstrate the mediating effects and moderating effects that customer service, competitive pricing, and innovation has on customer satisfaction in the laundry service industry in Ghana.
Food safety practices of food handlers play a significant role in ensuring that food is kept clean from the preparation and cooking process until it is served to customers (Mohan, 2006). This study assessed the compliance with food safety standards in the Science City of Munoz and San Jose City, both located in Nueva Ecija, Philippines with the Presidential Decree 856 Code on Sanitation of the Philippines serving as basis. The presidential degree prescribes indicators of appropriate practices in food safety and sanitation of ambulant food vendors.
Street food vendors participating in the study were randomly sampled, while street food consumers were purposely selected. Their responses in guided interviews were analyzed using descriptive statistics, Pearson product moment correlation (r), and t-test.
Results show that participating ambulant food vendors exhibited the greatest compliance as regards procurement of raw materials, congruent with the street food consumers’ perception. Compliance of ambulant food vendors with regard to general requirement, general appearance, water and ice used, preparation and handling, washing of utensils, and distribution and point of sale were generally often observed as reported by the ambulant food vendors and perceived by the street food consumers. Vendors from San Jose City showed higher degree of compliance with food safety standards as regards procurement of raw materials, distribution and point of sale and overall compliance to standards.
Given that food safety is a multi-sectoral concern, private and public sectors need to create programs, particularly on education and information dissemination, about food safety practices, including lectures and hands-on activities, for the benefit of both food vendors and consumers to help augment their knowledge on food safety practices. Regular monitoring on the part of the government must be conducted as fundamental ascendency to ensure that small- and medium-scale food handlers are primary initiators of food safety in the country.
Key Words: Food safety, food handling and practices, ambulant vendors, street food consumers, Code on Sanitation of the Philippines
Evidence from past research and insights from an exploratory investigation are combined in a conceptual model that defines and relates price, perceived quality, and perceived value. Propositions about the concepts and their relationships are presented, then supported with evidence from the literature. Discussion centers on directions for research and implications for managing price, quality, and value.
Since the introductory article for what has become known as the “service-dominant (S-D) logic of marketing,” “Evolving to
a New Dominant Logic for Marketing,” was published in the Journal of Marketing (Vargo, S. L., & Lusch, R. F. (2004a)), there
has been considerable discussion and elaboration of its specifics. This article highlights and clarifies the salient issues
associated with S-D logic and updates the original foundational premises (FPs) and adds an FP. Directions for future work
are also discussed.
KeywordsService-dominant logic-New-dominant logic-Service
To date, the discourse about service dominant (S-D) logic has been largely theoretical, with the main focus on exploring the foundations for an integrating general theory of markets and marketing. Little attention has been given to the role of theorizing, and how empirical evidence can be used to inform the theoretical development. This paper explores the bridging role of middle range theory in this process. First S-D logic is examined as a foundation for general theory. This leads to a discussion about the use of middle range theory to link general theory and empirical findings. The following sections examine the role that contemporary marketing practices (CMP) research plays in providing a bridge between S-D logic and empirical evidence. The paper concludes by considering implications for further research.
Purpose
– How do pricing methods affect firm performance? From both an academic as well as a managerial perspective this question is important. The literature is silent on the relationship between pricing approach and company performance. The aim of this paper is to address this research gap.
Design/methodology/approach
– To address this practical and theoretical deficit, the authors surveyed 1,812 professionals involved in pricing to measure the influence of pricing approach on firm performance.
Findings
– The authors find a positive relationship between value‐based pricing (but not competition‐based pricing) and firm performance. Furthermore, the authors find that the three pricing orientations differently influence firm pricing capabilities, which in turn are positively related to firm performance. This paper is thus the first paper documenting a positive relationship between value‐based pricing and firm performance through a quantitative research design.
Originality/value
– These findings have important theoretical as well as practical implications and suggest that all firms, regardless of size, industry or geography, benefit from value‐based pricing.
This commentary uses the Customer Integration—Facilities, Transformation, Use (CI-FTU) framework of Moeller as a platform for discussing two nested challenges in the development of service-dominant (S-D) logic. The first is the potency of the traditional, goods-dominant (G-D) logic paradigm, including the pitfalls of using its lexicon for describing a transcending logic. The second is the related need to develop a broader perspective for understanding value creation than is apparent in traditional conceptualizations or in the CI-FTU conceptualization. In addition, the challenge of isolating S-D logic in its rapid evolution beyond G-D logic is discussed.
To date, research on new product pricing has predominantly been approached as a choice between market skimming and penetration pricing. Despite calls for research that addresses other complexities in new product pricing, empirical research responding to these calls remains scarce. This paper examines three managerial price‐setting practices for new products, i.e., value‐informed, competition‐informed, and cost‐informed pricing. By engaging in these practices, managers can develop and compare quantifications in order to attain an introduction price for the product. The authors draw on consumer price perception literature, M onroe's pricing discretion model, and numerical cognition literature to develop hypotheses about the impact of price‐setting practices on new product market performance and price level. By studying the effects on market performance and price level, the paper provides insights that may help explain the growth of new products and address the problems of underpricing. The hypotheses are tested in a management survey of 144 production and service companies.
The results indicate which pricing practices are superior for the achievement of either higher market performance or higher prices in specific product and market conditions. Whereas value‐informed pricing has an unambiguous positive impact on relative price level and market performance, the results also suggest that in many cases engaging in value‐informed pricing is not enough. The effects of cost‐informed and competition‐informed pricing may differ depending upon the objective (market performance or higher prices), product conditions (product advantage and relative product costs), and market condition (competitive intensity). Engaging in inappropriate pricing practices leads to a decline in new product performance. Moreover, bad pricing practices make the positive effect of product advantage on the outcome variables disappear. The latter finding suggests that companies can jeopardize their efforts and investments in the new product development process if they engage in the wrong price‐setting practices.
The findings imply that managers should consider different factors in new product pricing. First, when launching a new product, they should determine their explicit pricing objective, either stressing market performance or a higher price level. To determine the most appropriate pricing practices, however, they should next assess their situation in terms of product advantage, relative product costs, and competitive intensity. Together with the pricing objective, these conditions determine the best pricing practice. On a higher level, the findings imply that companies should invest in knowledge development in order to engage in the appropriate pricing practices for each product launch.
Purpose
In the face of increased pricing pressure, managerial attention for value‐informed pricing (in which a price is based on the customer's value perception) is on the rise. Although value‐informed pricing in its organizational context received a great deal of attention, the body of literature is fragmented and insights are often not cumulative. It is the aim of this article to review and integrate the empirical literature on pricing practices in order to pave the road for future research.
Design/methodology/approach
Empirical studies on pricing practices are collected and reviewed. Building on the resource‐based view of the firm, the findings from these studies are summarized in an integrative framework that includes testable research propositions.
Findings
Value‐informed pricing is the result of the deployment of informational resources such as market research, relationships and internal knowledge on customers. Firms should not only develop these information sources, but also secure the process by which they are deployed. The latter is among others influenced by the competitive context and organizational information processing that may evolve into a routine.
Originality/value
The article integrates the insights from a stream of research that thus far has been highly fragmented. It generates insights that may help firms to establish a value‐informed pricing process and it may help to develop a more mature body of research on value‐informed pricing.
Deligonul and Cavusgil (1997) conduct a paradigm-level analysis of resource-advantage (R-A) theory. They argue that (1) Hunt and Morgan (1995) offer resource-advantage theory as a replacement for perfect competition theory (2) a successful challenger to any theory must come from a new paradigm, (3) hut both perfect competition and RA theory come from the same paradigm, Therefore, (4) the replacement thesis is dubious. We evaluate their argument.
As one of its own foundational premises implies, the value of service- dominant (S-D) logic is necessarily in its open, collaborative effort. Thus, the authors invite and welcome both elaborative and critical viewpoints. Five recurring, con- tentious issues among collaborating scholars, as they attempt to understand the full nature and scope of S-D logic, are identified. These issues are clarified and refined, as is appropriate to this co-creation of a service-centric philosophy by the worldwide marketing community. Key Wordsmarketing theoryrelationship marketing • resource integrationresource theoryservice-dominant logicS-D logic • service marketing
This article traces the development of economic activity and the sociopolitical, philosophical, and scientific agenda from which the present goods-centered paradigm of marketing emanated. The authors suggest that the services-centered model of exchange, abandoned during this development, is more appropriate for the advancement of the understanding of exchange relationships.
Evidence from past research and insights from an exploratory investigation are combined in a conceptual model that defines and relates price, perceived quality, and perceived value. Propositions about the concepts and their relationships are presented, then supported with evidence from the literature. Discussion centers on directions for research and implications for managing price, quality, and value.
Recent news coverage on pricing portrays the importance of price fairness. This article conceptually integrates the theoretical foundations of fairness perceptions and summarizes empirical findings on price fairness. The authors identify research issues and gaps in existing knowledge on buyers' perceptions of price fairness. The article con-cludes with guidelines for managerial practice.. Jennifer L. Cox is Associate Brand Man-ager, John Deere Worldwide Commercial & Consumer Equipment (e-mail: CoxJenniferL@JohnDeere.com). The authors gratefully acknowl-edge the support of the anonymous JM reviewers for their helpful sugges-tions and for their support during the development of this article. T he issue of price fairness has become newsworthy as concerns about gasoline prices, prescription drug prices, physicians' retainer fees, smart vending machines, hidden fees and charges, or Amazon.com's dynamic pricing test have become public knowledge. The uproar that occurred when an Amazon.com customer dis-covered that the price of same-title DVDs differed across purchase occasions was a public relations nightmare for the firm (Adamy 2000). This example shows that both the price offered and the rationale for offering a certain price may lead to perceptions of price unfairness. Perceptions of price unfairness may lead to negative consequences for the seller, including buyers leaving the exchange relationship, spread-ing negative information, or engaging in other behaviors that damage the seller (e.g., Campbell 1999). Why do consumers at times believe that they are being treated unfairly? Given increasing public concern, it seems appropriate to explore further the theoretical bases and empirical findings to clarify what is known about the causes of perceived price unfairness and how the perceptions influ-ence customers' behaviors. Various conceptualizations have been developed and adapted to explain the phenomenon of fairness. However, each approach tends to address a specific reason for price fairness. For example, the dual entitlement principle emphasizes the influence of supply and demand changes and the sellers' profit orientation (Kahneman, Knetsch, and Thaler 1986b). Equity theory and distributive justice emphasize the importance of equality of outcomes between two parties in an exchange (Adams 1965; Homans 1961). In contrast, procedural justice focuses on the influ-ence of the underlying procedures used to determine the outcomes on fairness perceptions (Thibaut and Walker 1975). In this article, we present a conceptual framework for price fairness that integrates the conceptualizations and organizes existing price fairness research. We then use the framework to identify gaps in existing research and to offer guidance for further research. As we proceed, we develop a set of propositions for new research. We conclude with some practical prescriptions for pricing managers.
Although the positive effect of a market orientation on new product success is widely accepted and the market orientation literature has increased its understanding of how a market orientation leads to performance, the extant literature has overlooked the role of value-informed pricing in the relationship. Value-informed pricing is a pricing practice in which the decision makers base the price of the new product on the customers' perceptions of the benefits that the product offers and how these benefits are traded by customers against the price (that has yet to be determined). Considering that pricing mistakes may hit hard on the profitability of product innovations, it is important to firms to have a good understanding of its role. This study develops a framework in which value-informed pricing is integrated in the relationship between market orientation and new product performance. A distinction is made between customer and competitor orientations, and relative product advantage is also included in the conceptual model. The model is tested on data obtained from managers based on a cross sectional sample of 144 firms. The respondents were involved in a decision-making process of the pricing of a new product. The model is tested using structural equations modeling. The results show that value-informed pricing has a strong effect on new product performance. It also reveals that each component of a market orientation fulfills a specific role in a market-oriented organization. Value-informed pricing is found to have important mediating effects in the market orientation–new product performance relationship. Results show that firms with a strong customer orientation engage in value-informed pricing and develop superior benefits to customers in an advantageous product. In turn, both value-informed pricing and relative product advantage positively affect new product market performance. However, no significant effect of competitor orientation on value-informed pricing is found. Combined with the finding that competitor orientation negatively affects relative product advantage, this suggests that competitor orientation may hurt new product performance when this orientation is not balanced with a strong customer orientation. The results also portray that value-informed pricing leads to higher product advantage. Interestingly, this relation is contingent on the degree of interfunctional coordination within the firm. This suggests that the relationship between market orientation and new product performance is strongest if firms integrate value-informed pricing in the new product development process. In this sense, a market-oriented firm mirrors the customer value perception that makes a trade-off between benefits and price.
We organize the existing theoretical pricing research into a new two-level framework for industrial goods pricing. The first level consists of four pricing situations: New Product, Competitive, Product Line, and Cost-based. The second level consists of the pricing strategies appropriate for a given situation. For example, within the new product pricing situation, there are three alternative pricing strategies: Skim, Penetration, and Experience Curve pricing. There are a total of ten pricing strategies included in the framework.
We then identified a set of cost, product, market, and information conditions which determine what pricing situation(s) a firm is facing as well as which strategies are appropriate within a given situation. Some of these determinant conditions are common to many pricing strategies (e.g., highly elastic demand) while others are unique to a given strategy within a particular pricing situation. For example, within the product line situation, the profitability of supplementary sales is a unique determinant of the Complementary Product pricing strategy (razor-and-blade pricing). Using this framework as a basis for an empirical study, we examined how well current industrial pricing practice matches the prescriptions from the existing research.
Our sample consisted of 270 respondents (27% response rate). Of these, more than 50% indicated that they used more than one pricing strategy in formulating their most recent pricing decision for a high-value industrial product sold in the United States. As in previous research, Cost-Plus pricing was the most often cited pricing strategy (56% of the respondents).
Since the respondents were able to indicate their use of more than one pricing strategy, the data are of the “pick k from n” variety. In order to model the managers' pricing strategy choices, we constructed a “stacked” binary logit with a separate observation for each strategy within a given pricing situation. The signs of the determinant variables were estimated as interaction terms.
The new product pricing strategies (skim, penetration, experience curve) were used for new models in the market. Skim pricing was used in markets with high levels of product differentiation by firms at a cost disadvantage due to scale. Penetration pricing was used by firms with a cost advantage due to scale in markets with high level of overall elasticity but low brand elasticity. Experience curve pricing was used for minor innovations by firms with low capacity utilization in markets with a high level of differentiation.
The competitive pricing strategies (Leader, Parity, and Low-price Supplier) were used in mature markets. Parity pricing was used by firms in a poor competitive situation, i.e., high costs, low market share, low product differentiation. These firms were also unable to take advantage of high levels of elasticity since their capacity utilization was high. In contrast, the low-price supplier strategy was used by firms with low costs due to scale advantages. Since they have low utilization, these firms can take advantage of elastic brand demand. None of the determinants were significantly related to the choice of leader pricing.
Product line pricing strategies (Bundling, Complementary Product, and Customer Value pricing) were more likely to be used by firms which sell substitute or complementary products. Bundle pricing was used for per-sale/contract pricing in markets with high levels of brand elasticity. Complementary product pricing (razor-and-blade) was used by firms that enjoyed high profitability on its supplementary sales. Using customer value pricing, a firm offers a stripped down version of its current products to appeal to more price sensitive segments or to leverage new distribution channels. This strategy was used to target a narrow segment in high growth markets where price changes are difficult to detect.
Cost-based pricing was more likely to be used in markets where demand is very difficult to estimate. In such a situation, cost-based pricing makes a great deal of sense.
In general, the results show that the managers' pricing strategy choices are consistent with normative pricing research. However, questions about how managers combine their strategies to arrive at a final price as well as the organizational influences on pricing strategies remain important areas for future research.
We argue that the universal role of service in the economy and firm can provide a frame of reference to help guide a management
philosophy that is more effective and better contributes to competing in the future than a frame of reference based on tangible
goods. We call this revised philosophy service-dominant logic (S-D logic) and suggest eight key behaviors that characterize
its effective implementation.
The meanings of brand and branding have been evolving over the past several decades. This evolution is converging on a new
conceptual logic, which views brand in terms of collaborative, value co-creation activities of firms and all of their stakeholders and brand value in terms of the stakeholders’ collectively perceived value-in-use. The authors argue that this new logic parallels and reflects
the related, evolving service-dominant (S-D) logic in marketing. They provide an historical account of the branding literature,
organize it into eras, and connect it to the evolution in marketing as captured by S-D logic. The analysis provides further
support for the S-D logic of marketing and suggests a related research agenda for furthering the understanding of brand and
branding. It also suggests that marketing managers might benefit from investing resources in building strong brand relationships
with all of their stakeholders and a service-dominant firm philosophy built around brand value co-creation.
Four studies were conducted to assess the accuracy with which consumers perceive objective price-quality relationships. Results across four studies indicate that, overall, consumers perceive objective price-quality relationships with only a modest degree of accuracy. However, findings also suggest that the accuracy of consumers’ perceptions is moderated by product type; that is, price-quality perceptions are more accurate for nondurable products than for durable products. The authors conclude that consumers’ price-quality perceptions appear to be a function of general or product-type-specific schemas, rather than independent evaluations of price-quality relationships for individual product categories.
Methodologies for analysis of industrial marketing decision systems are extended to allow systematic comparisons over decisions and over firms. Three such systems used by two firms to price and plan volumes for the French market are compared.
The authors respond to the thoughtful concerns raised by Dickson (1996) about the issue of path dependencies and the dynamics of resource-advantage (R-A) theory (Hunt and Morgan 1995). Rather than R-A theory and Dickson's work being inconsistent, the authors point out that Hunt and Morgan (1995) cite Dickson's (1992) work on two different occasions as support for the dynamics of R-A theory. Furthermore, because R-A theory proposes that firms seek superior financial performance, when combined with the fact that all firms cannot be superior at the same time, R-A competition necessarily is dynamic. Moreover, though the issue of path-dependencies is more contentious than Dickson suggests, R-A theory fully accommodates path dependencies, because it is an evolutionary, nonconsummatory theory.
A new theory of competition is evolving in the strategy literature. The authors explicate the foundations of this new theory, the “comparative advantage theory of competition,” and contrast them with the neoclassical theory of perfect competition. They argue that the new theory of competition explains key macro and micro phenomena better than neoclassical perfect competition theory. Finally, they further explicate the theory of comparative advantage by evaluating a market orientation as a potential resource for comparative advantage.
Pricing practice remains largely intuitive and routine. To gain insight as to why, the author examines critically some of the trends and gaps in the literature and practice. A comprehensive and systematic guide to successful price setting is offered.
In this article, the authors explore the antecedents of currency choice in export transactions by U.S., Swedish, and Finnish firms. Using a framework adapted from exporting literature and negotiation theory, the authors examine relationships between the transaction currency and three sets of constructs, predicated in negotiation and bargaining literature, as well as performance measures. Results indicate a strong relationship between currency choice and process-related and firm characteristic measures. However, situational constraint factors do not exert much influence on transaction currency. The logistic regression model confirms these results with 83% correct classification. The authors demonstrate that the use of foreign currencies is related positively to export volume and transaction value but inversely affects export profit margin.
Deligönül and çavuşgil (1997) conduct a paradigm-level analysis of resource-advantage (R-A) theory. They argue that (1) Hunt and Morgan (1995) offer resource-advantage theory as a replacement for perfect competition theory, (2) a successful challenger to any theory must come from a new paradigm, (3) but both perfect competition and R-A theory come from the same paradigm. Therefore, (4) the replacement thesis is dubious. We evaluate their argument.
Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed across firms and that these differences are stable over time, this article examines the link between firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage-value, rareness, imitability, and substitutability are discussed. The model is applied by analyzing the potential of several firm resources for generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.
Methodologies for analysis of industrial marketing decision systems are extended to allow systematic comparisons over decisions and over firms. Three such systems used by two firms to price and plan volumes for the French market are compared.
Pricing practice remains largely intuitive and routine. To gain insight as to why, the author examines critically some of the trends and gaps in the literature and practice. A comprehensive and systematic guide to successful price setting is offered.
In this article, the authors explore the antecedents of currency choice in export transactions by U. S., Swedish, and Finnish firms. Using a framework adapted from exporting literature and negotiation theory, the authors examine relationships between the transaction currency and three sets of constructs, predicated in negotiation and bargaining literature, as well as performance measures. Results indicate a strong relationship between currency choice and process-related and firm characteristic measures. However, situational constraint factors do not exert much influence on transaction currency. The logistic regression model confirms these results with 83% correct classification. The authors demonstrate that the use of foreign currencies is related positively to export volume and transaction value but inversely affects export profit margin.
Four studies were conducted to assess the accuracy with which consumers perceive objective price-quality relationships. Results across four studies indicate that, overall, consumers perceive objective price-quality relationships with only a modest degree of accuracy. However, findings also suggest that the accuracy of consumers' perceptions is moderated by product type; that is, price-quality perceptions are more accurate for nondurable products than for durable products. The authors conclude that consumers' price-quality perceptions appear to be a function of general or product-type-specific schemas, rather than independent evaluations of price-quality relationships for individual product categories.
The current literature is largely silent on how executives interpret the concept of value-based pricing. Although only a minority of companies adopts value-based pricing approaches, little is known about antecedents of alternative pricing approaches. We suggest this may be because of the fact that few professionals possess an understanding of value-based pricing, which is both academically rigorous as well as practically relevant. Our interviews with 44 executives in 15 US industrial firms show that those practicing value-based pricing interpret customer value in ways fully consistent with the current academic literature. Those practicing cost- or competition-based pricing, however, show a poor understanding of value-based pricing, which may explain why their companies practice cost- or competition-based approaches.
Purpose
This article aims to address the relationship between price strategies and price‐setting practices. The first derive from a normative tradition in the pricing literature and the latter from a descriptive tradition. Price strategies are visible in the market, whereas price‐setting practices are hidden behind the boundaries of an organization.
Design/methodology/approach
The study deals with the relationship between price strategies and price‐setting practices that refer to the use of customer value, competition, and cost information. Hypotheses are tested on survey data on 95 small and medium‐sized manufacturing and service firms in The Netherlands.
Findings
The results show that price strategies and price‐setting practices are related because strategies are implemented through price‐setting practices. However, some firms do not pursue any of the strategies indicated by pricing theory, some firms engage in practices for no clear strategic reasons, and some firms insufficiently engage in appropriate practices to implement their strategic choices.
Research limitations/implications
The results are limited to small companies. Researchers should examine why firms may not pursue any price strategy that is offered by pricing theory. They may also focus on organizational learning and pricing capabilities.
Practical implications
Managers need greater awareness about the price strategies they can use, should be cautious about a potential mismatch between price strategies and price‐setting practices, and should reassess whether their firms are capable of engaging in the appropriate practices.
Originality/value
Linking price strategies to price‐setting practices reduces conceptual confusion in the pricing literature and may help to specify the gap between pricing theory and practice.
Noble and Gruca (1999, this issue) provide useful insights into the pricing practices managers employ. Their findings indicate managerial pricing practices are heavily dominated by internal, cost-based approaches. Particularly relevant is the absence of value-based pricing practices.
Noble and Gruca's findings indicate that the emerging market orientation work has not connected to pricing practice. This work poses a significant challenge for marketing theoreticians and educators: How can managers be helped to move beyond internally focused to externally-customer-focused pricing practice?
There is a high probability of fierce price competition in depressed markets where multiple suppliers are marketing relatively undifferentiated product offerings. In such circumstances effective pricing is a paramount necessity. This article discusses findings on pricing practices by industrial distributors operating in these types of conditions. It found substantial downward price flexibility, extensive discounting, and widespread price competition. Other results discussed relate to pricing objectives, methods, and influences. A range of recommendations is offered
A new theory of competition is evolving in the strategy literature. The authors explicate the foundations of this new theory, the ''comparative advantage theory of competition,'' and contrast them with the neoclassical theory of perfect competition. They argue that the new theory of competition explains key macro and micro phenomena better than neoclassical perfect competition theory. Finally, they further explicate the theory of comparative advantage by evaluating a market orientation as a potential resource for comparative advantage.
I. INTRODUCTION AND OVERVIEW. 1. Business Market Management: Guiding Principles. II. UNDERSTANDING VALUE. 2. Market Sensing: Generating and Using Knowledge about the Marketplace. 3. Understanding Firms as Customers. 4. Crafting Market Strategy. III. CREATING VALUE. 5. Managing Market Offerings. 6. New Offering Realization. 7. Business Channel Management. IV. DELIVERING VALUE. 8. Gaining Customers. 9. Sustaining Reseller Partnerships. 10. Sustaining Customer Relationships. Index.
The authors respond to the thoughtful concerns raised by Dickson (1996) about the issue of path dependencies and the dynamics of resource-advantage (R-A) theory (Hunt and Morgan 1995). Rather than R-A theory and Dickson's work being inconsistent, the authors point out that Hunt and Morgan (1995) cite Dickson's (1992) work on two different occasions as support for the dynamics of R-A theory. Furthermore, because R-A theory proposes that firms seek superior financial performance, when combined with the fact that all firms cannot be superior at the same time, R-A competition necessarily is dynamic. Moreover, though the issue of path-dependencies is more contentious than Dickson suggests, R-A theory fully accommodates path dependencies, because it is an evolutionary, nonconsummatory theory.
The antitrust debate in the United States has been grounded and guided by principles derived from equilibrium-based economics. However, these principles mischaracterize key elements of real economies. The authors (1) explore the nature of the antitrust debate by reviewing a key component of the debate-the efficiency versus wealth transfer argument; (2) illustrate how the equilibrium-based tradition has misguided the debate; (3) sketch an alternative, process view of competition that draws heavily on evolutionary and Austrian economics (resource-advantage theory; Hunt 2000b); and (4) discuss the implications of using a process view of competition as a basis for antitrust policy.
The paper explores the usefulness of analysing firms from the resource side rather than from the product side. In analogy to entry barriers and growth-share matrices, the concepts of resource position barrier and resource-product matrices are suggested. These tools are then used to highlight the new strategic options which naturally emerge from the resource perspective.
Strategists following the resource-based view argue that firms can generate rents through value creation. To create value, firms develop and use resources and capabilities that other firms cannot imitate, trade for, or substitute other assets for. Even a firm that has created value, however, may not capture the potential rents associated with that value. To capture rents, a firm must set the right prices for what it sells. Most views of pricing assume that a firm can readily set appropriate prices. In contrast, we argue that pricing is a capability. To develop the ability to set the right prices, a firm must invest in resources and routines. We base our argument on a study of the pricing process of a large Midwestern manufacturing firm. We show that pricing resources, routines, and skills may help or inhibit a firm in setting the right price—and hence in appropriating value created. Our view of pricing as a capability contributes to the resource-based view because it suggests that strategists should consider the portfolio of value creation and value appropriation capabilities a firm uses to create competitive advantage. Our view also contributes to economics because it suggests that strategic decisions about pricing capabilities have important implications for a fundamental economic action, determining prices. Managers in firms without effective pricing processes may be unable to set prices that reflect the wishes of its customers, so the customers may misuse their resources. As a result, resources may be used ineffectively. Our view of pricing as a capability therefore takes the resource-based-view straight to the heart of what is perhaps the central economic question: the best use of resources. Copyright © 2003 John Wiley & Sons, Ltd.
When it comes to pricing, many exporters do not have the tools necessary to compete in their overseas markets. Despite warnings from a series of scholars and managers, many exporters continue to base their pricing approaches simply on costs, without committing the resources necessary to accumulate and utilize market and competition related information. Through the use of qualitative interviews and the responses of a mail survey of U.S. exporters, this study attempts to understand why managers continue to neglect the potential weapon of competitive pricing in their exporting operations. The relative importance of pricing as compared to other international marketing decision variables is discussed, as are the tools for effective pricing strategies that managers themselves believe are lacking within their firms. The study is designed to identify problematic areas which may be alleviated to enhance export pricing effectiveness.