Beruflich Dokumente
Kultur Dokumente
Department of Marketing, Fox School of Business and Management, Temple University, Philadelphia, PA 19122, United States
b
Fox School of Business, Temple University, Philadelphia, PA, United States
Accepted 31 July 2004
Abstract
Historically, researchers have addressed pricing issues from many different perspectives, including the firms business model (cost
structure, experience curve), stakeholders (customers and channel partners), competition (market structure and intensity), and macroeconomic
issues (interest rates, economic growth). An important dimension of organizational price setting that has been neglected is the impact that the
firms internal political system, reflected in interdepartmental coordination and rivalry, has upon price setting. A study of managers who are
influential in shaping the firms pricing strategy was conducted to identify intraorganizational issues and their relative impact on the firms
pricing strategy. The results of the study provide important implications for the development and execution of a firms pricing strategy.
D 2004 Elsevier Inc. All rights reserved.
Keywords: Pricing strategy; Intraorganizational influence; Business-to-business pricing strategies
1. Introduction
How a firm assigns value to its boutputQ through its
pricing strategy has implications for stakeholders both within
and outside of the firm, such as employees, competitors,
suppliers, customers, government, and third party service
providers like transportation contractors. From a demand
side perspective, a firms pricing strategy is essentially a
quantification of the perceived value that the firm creates for
its customers. From a supply side perspective, pricing is a
strategic and tactical expression of how the firm wishes to
compete to generate revenues and, in light of its business
model, realizes a profit. Several seminal review articles
(Monroe & Della Bitta, 1978; Rao, 1984; Gijsbrechts, 1993)
on pricing have recognized the importance of understanding
the dynamics of developing a pricing strategy, as well as the
complexity inherent in such a task.
A firms pricing strategy may have a substantial
economic impact on the firm in contrast to other financial
* Corresponding author. Tel.: +1 215 204 8885.
E-mail address: Lancioni@aol.com (R. Lancioni).
0019-8501/$ - see front matter D 2004 Elsevier Inc. All rights reserved.
doi:10.1016/j.indmarman.2004.07.010
124
2. Background
2.1. Political economy framework
Price setting has long been a difficult process in businessto-business marketing. The complexity inherent in developing and modifying pricing strategies can be seen in the
plethora of internal and external economic and political
influences that shape a firms pricing decisions. One
framework that may be useful for identifying these various
influences is a variation on the political economy approach
that was applied to the study of distribution channels by
Stern and Reve (2000). The application of this framework
will be modified with the individual firm, as opposed to a
collective of firms, as the focus. Furthermore, since we are
applying this framework to broadly address managerial
price-setting considerations, we will not discriminate
between process and structure within the economic or
political dimensions. The political economy framework, as
applied here, is not intended as a means to structure an
extensive literature review on pricing, which has been
admirably done elsewhere (Gijsbrechts, 1993; Nagle &
Holden, 2002). Our purpose is to demonstrate the contribution of this research study, given the work on pricing to date,
and to propose a line of managerial research that complements existing research in pricing.
2.1.1. External economic considerations
Firms interact within a network of other firms that
comprise an industry or set of industries within a national
and global economy. The external economy shapes the firms
125
3. Research study
To understand the potential impediments to the development of a firms pricing strategy, the Department of
Marketing, Fox School of Business and Management at
Temple University, conducted a study of 125 companies
listed in the Fortune 1000 group of firms. The sample
represented companies from more than 30 different US
industries, including retailing, manufacturing, chemical,
steel, oil, aluminum, building and construction, wholesale
distribution, semiconductor, software, food processing,
transportation, agricultural equipment, energy exploration,
residential and commercial construction, retail goods
manufacturing, computer equipment part manufacturing,
forestry and timber, electrical component manufacturing and
distribution, highway construction and maintenance, gasoline distribution and retailing, publishing, household product manufacturing, textile manufacturing, drug wholesaling
and distribution, and farm and agricultural equipment
manufacturers. Given the sensitive nature of the pricing
information provided by the survey respondents, the
researchers were restricted to the reporting of general results
only. The study queried the firm respondents using the
Zoomerang Internet survey service. The study examined
several critical organizational issues that related to price
setting and pricing management including:
(1) the departments in companies that make pricing
strategy development difficult and present the most
roadblocks to the implementation of a pricing strategy;
(2) the impact that senior, middle, field, and sales
management groups have on price setting and strategy
implementation;
(3) the effects that customer service has on price setting
and price management in firms;
(4) the extent to which sales departments affect the
industrial price-setting process; and
(5) identifying potential courses of action to overcome the
obstacles to price setting in firms.
3.1. Research methodology
The respondents were asked to complete and submit an
on-line questionnaire that consisted of several Likert-type
questions addressing the managerial concerns with regard to
intrafirm price setting. The data were summarized and
tabulated with the mean values used to rank order the
relative position of the items for each of the managerial
issues addressed in the study. The questionnaire was
subdivided into three areas:
(1) the organizational obstacles presented by individual
departments to developing and implementing a pricing strategy;
(2) the obstacles that senior, middle, and lower management present in developing and implementing a
pricing strategy; and
126
(3) the success strategies that were used to over come the
obstacles to developing and implementing a pricing
strategy.
3.2. Research study results
3.2.1. Industrial departments and management groups
The first area examined in the study was the general
departments in industrial firms that were the most difficult
to deal with when trying to implement a pricing strategy. As
shown in Table 1, the finance department was ranked as the
most difficult to work with in developing a comprehensive
pricing policy for a firm. It was followed by accounting,
sales, production, marketing, and customer service that was
ranked as sixth by the respondent firm. There were several
general reasons mentioned for the rank order. The specific
problems that the individual departments presented to price
setting and policy implementation are discussed in subsequent sections of the paper.
Overall, finance departments were considered to be the
most difficult ones to deal with when a trying to develop
pricing strategies because of the departments general
inclination to want to control the price setting and planning
process in the firm. Accounting departments ranked second
because of the delays they caused in providing accurate cost
data for the overall price-setting process. Sales ranked third in
overall difficulty because it often acted independently and
did not follow company price setting and price quoting
procedures. The production or manufacturing groups in
industrial firms often insisted on large quantity purchases that
limited the firms flexibilities in designing special promotional programs for their customers. Marketing was ranked
fifth due to its tendency to not respond quickly to competitive
market changes. Finally, the customer service department
was ranked last because of the confusion often caused by its
practice of frequently misquoting prices to customers.
The management groups analyzed in the study were
classified as senior management, middle management, and
field and sales management. Senior management was defined
as any manager with a vice president, executive vice
president, or president or chief executive title. The middle
management group was defined as any person in the firm that
had an assistant VP, director, or manager in their title. The
lower level management group was defined as any person in
Table 2
Industrial management groups resisting the development of a pricing
strategy
Management groups
Senior management (a manager
with a vice president, executive
vice president, or president or
chief executive title)
Middle management (a manager
that had an assistant VP, director,
or manager title)
Field management (a manager that
had field manager, supervisor,
sales person, or customer service
representative title)
Total
(No. of firms
ranking)
Order of
difficulty
77
26
22
125
Table 1
Industrial organizational departments presenting the greatest roadblocks to
the development of general pricing strategies in firms
Table 3
Obstacles presented by the finance department in the development of an
industrial pricing strategy
Major departments
(No. of firms
ranking)
Order of
difficulty
Obstacles
(No. of firms
ranking)
Order of
difficulty
Finance
Accounting
Sales
Production
Marketing
Customer service/relations
Total
45
37
20
12
6
5
125
1
2
3
4
5
6
47
26
14
12
9
6
125
1
2
3
4
5
6
(No. of firms
ranking)
Order of
difficulty
83
28
9
5
125
1
2
3
4
127
(No. of firms
ranking)
Order of
difficulty
41
33
25
14
12
125
128
Table 6
Obstacles presented by the marketing department in the development of an
industrial pricing strategy
Table 7
Obstacles presented by the production department in the development of an
industrial pricing strategy
Obstacles
Order of
difficulty
Obstacles
45
29
1
2
26
24
125
(No. of firms
ranking)
(No. of firms
ranking)
Order of
difficulty
41
31
1
2
26
18
3
4
9
125
(No. of firms
ranking)
Order of
difficulty
45
31
1
2
28
21
125
129
Table 9
Strategies for overcoming departmental obstacles to the development of an
industrial pricing strategy: finance
Table 11
Strategies for overcoming departmental obstacles to the development of an
industrial pricing strategy: production
Success strategies
Order of
effectiveness
Success strategies
(No. of firms
ranking)
67
38
20
Table 10
Strategies for overcoming departmental obstacles to the development of an
industrial pricing strategy: accounting
Order of
effectiveness
74
33
18
125
125
Success strategies
(No. of firms
ranking)
(No. of firms
ranking)
49
Order of
effectiveness
Table 12
Strategies for overcoming departmental obstacles to the development of an
industrial pricing strategy: customer service
Success strategies
36
22
18
125
Develop an integrated
marketing/pricing plan
Quote only list prices
to customers
Improve coordination with
the sales department and
the field sales force
Provide sufficient lead times
on price promotions, discounts,
and rebate programs
Total
(No. of firms
ranking)
Order of
effectiveness
55
38
20
12
125
130
References
Avila, R., Dodds, W., Chapman, J., Mann, K., & Wahlers, R. (1993).
Importance of price in industrial buying. Review of Business, 15(2),
34 48.
Bernstein, Jerry, & Macias, David (2002). Engineering new-product
success. Industrial Marketing Management, 31(1), 51 64.
Dolan, Robert J., & Jeuland, Abel P. (1981, Winter). Experience curves and
dynamic demand models: Implications for optimal pricing strategies.
Journal of Marketing, 45, 52 62.
Dolan, Robert J., & Simon, Herbert (1996). Pricing power: How managing
price transforms the bottom line. New York, NY7 The Free Press.
Gijsbrechts, Els (1993). Prices and pricing research in consumer marketing:
Some recent developments. International Journal of Research in
Marketing, 10, 115 151.
Gox, Robert F. (2000). Strategic transfer pricing, absorption costing, and
observability. Management Accounting Research, 11(3), 327 348.
Hinterhuber, Andreas (2004). Towards value-based pricingAn integrative
framework for decision making. Industrial Marketing Management,
1722.
Mansfield, Edwin (1986). Economics (p. 5e). New York7 W.W. Norton & Co.
Monroe, K. B., & Della Bitta, A. J. (1978, August). Models for pricing
decisions. Journal of Marketing Research, 15, 413 428.
Monroe, Kent B., & Zoltners, Andris A. (1979, Summer). Pricing the product
line during periods of scarcity. Journal of Marketing, 43, 49 59.
Nagel, Thomas, & Holden, Reed (2000). The strategy and tactics of
pricing: A guide to profitable decision making(p. 3e). Inglewood Cliffs,
NJ7 Prentice-Hall.
Oxenfeldt, Alfred (1960, JulyAugust). Multistage approach to pricing.
Harvard Business Review, 125 133.
Oxenfeld, Alfred R. (1973, January). A decision-making structure for price
decisions. Journal of Marketing, 37, 48 59.
Perrien, Jean, & Ricard, Line (1995). The meaning of a marketing
relationship: A pilot study. Industrial Marketing Management, 24(1),
37 43.
Porter, Michael E. (1980). Competitive strategy. New York7 The Free Press.
Rao, V. R. (1984). Pricing research in marketing: The state of the art.
Journal of Business, 57(1), S39 S60.
Rao, Ram C., & Bass, Frank M. (1985, August). Competitive strategy and
price dynamics: A theoretical and empirical investigation. Journal of
Marketing Research, 22, 283 296.
Reibstein, David, & Gatignon, Herbert (1984, August). Optimal product
line pricing: The influence of elasticities and cross-elasticities. Journal
of Marketing Research, 21, 259 267.
Roger, David L., & Whetten, David A. (Eds.) (1982). Interorganizational
coordination: Theory, research and implementation (pp. 15 19).
Ames, IA7 Iowa State University Press.
Shipley, David, & Jobber, David (2001, April). Integrative pricing via the
pricing wheel. Industrial Marketing Management, 301 314.
Shipley, Davis, & Bourdon, Elizabeth (1990). Distributor pricing in
very competitive markets. Industrial Marketing Management, 19(3),
215 224.
Simon, Hermann (1979, November). Dynamics of price elasticity and brand
life cycles: An empirical study. Journal of Marketing Research, 16,
439 452.
Stern, J., & Reve, B. (2000). Issues in Channel Structure. Business
Management Journal (pp. 1519). Chilton Publishing Co., NY.
Tellis, Gerald J. (1986, October). Beyond the many faces of price: An
integration of pricing strategies. Journal of Marketing, 50, 146 160.
Richard Lancioni is currently Chair and Professor of Marketing, Fox
School of Business and Management, Temple University. He has published
in a variety of marketing and business journals. His research interests
include pricing and pricing management, marketing strategy, and supply
chain management. He is a member of the American Marketing
Association, Council of Supply Chain Management Professionals, and a
Board Member of the Professional Pricing Society.
131