Introduction

Citation

Maxwell, S. (2006), "Introduction", Journal of Product & Brand Management, Vol. 15 No. 6. https://doi.org/10.1108/jpbm.2006.09615faa.001

Introduction

As Associate Editors of the Journal of Product & Brand Management’s Special Section on Pricing, we are particularly pleased by the recent surge of interest in this vital topic. The increased interest in pricing is indicated by the more intensive pricing education programs offered by universities and industry associations, the increase in pricing research by academics and practitioners, the growing demand for exposure to pricing issues from pricing professionals, and the emergence of numerous new pricing books. Until 1995, there were only two major books on pricing:

1. 1.

   Pricing: Making Profitable Decisions, by Kent Monroe (revised 2003); and

2. 2.

   The Strategy and Tactics of Pricing, by Thomas Nagle and Reed Holden (revised 2005 with John Hogan).

Since then, however, many new pricing books have been published, indicating the underlying interest in the topic. Amazon.com lists hundreds of titles, many of them pricing in specific industries. Those that apply to marketing strategy include the following:

• •

  Pricing Strategy: An Interdisciplinary Approach, by Morris Engelson (1995);

• •

  Power Pricing, by Robert Dolan and Hermann Simon (1996);

• •

  Winning the Profit Game: Smarter Pricing, Smarter Branding, by Robert Docters et al. (2003);

• •

  The Price Advantage, by Michael Marn, Eric Roegner and Craig Zawada (2004);

• •

  How to Sell at Margins Higher than Your Competitors, by Lawrence Steinmetz and William Brooks (2005);

• •

  The Art of Pricing, by Rafi Mohammed (2005); and

• •

  Pricing on Purpose: Creating and Capturing Value, by Ronald Baker (2006).

We have also witnessed an increase in pricing submissions at the Journal of Product & Brand Management. For our special annual issue on pricing, we have selected six of these articles. They demonstrate the goals of the journal: to publish both theoretic and practical articles on pricing from international scholars.

The article by Smith, “Leveraging profitability in low-margin markets,” considers the little-researched profit concerns of managers in low-margin markets such as wholesaling, retailing and many industrial manufacturers. Smith’s basic advice for them to grow profits is first to know their true gross margins and second to use various price bundling strategies:

• •

  keep price low and expand the platform of customers – cross-sell bundles of products and services to this base;

• •

  raise price directly and cross-sell bundles of customized products and services; and

• •

  cross-sell a menu of add-on accessory products and low-cost ancillary services.

In the article “Dimensions of price differential policies and seller trustworthiness: a social justice perspective,” Guiltinan applies research developed in the management literature on fairness to the field of pricing. He shows that consumers’ judgments of whether differential pricing policies are fair depend on:

• •

  their being informed of how discounts can be obtained;

• •

  recipients being selected based on their transaction behavior, not their traits; and

• •

  consumers being allowed to influence the amount of the price differential.

In “Price endings: magic and math,” Liang and Kanetkar demonstrate that consumers process prices in two parts, with a greater weight given to digits on the left than on the right. They also show that the probability of choice increases with 0-ending prices for both soup and backpacks. Other effects, however, differed by product. The effect of 9-ending prices was significant for backpacks but not soup. Rounding was evident for soup but not backpacks.

Hunt and Forman, in “The role of perceived risk in pricing strategy for industrial products: a point-of-view perspective,” look at how individual and corporate risk affects the choice of pricing strategies. They find that outcomes that are subject to external factors are more attractive to managers because they shift responsibility away from the decision maker, even though external, uncontrollable factors increase risk for the corporation.

The study of consumer behavior is extended to the stock market in the article by Varki et al., “Pricing response biases in financial products.” They look at the price-ending phenomena in financial markets in which investors favor nickel and dime endings. This demonstrates that consumer cognitive biases affect investor behavior in the stock market just as they do in the retail environment. However, unlike retailing, 9-endings were found not to be preferred.

The final article by Méndez, Oubiña and Rubio, “Explanatory factors regarding manufacturer brand price consistency,” looks at the factors that allow Spanish manufacturers to maintain price consistency. They find that the primary factors are the consumers’ knowledge of the product category as well as levels of differentiation. High knowledge and many levels are associated with less price dispersion.

Since last year’s Special Issue devoted to pricing and price strategy, 13 additional articles on the subject have been published in the Journal of Product & Brand Management. In all, the range of topics and the international scope of the contributions reinforce the importance of pricing research today. The articles investigated price segments, service pricing, and price perceptions. They have provided pricing tools for management and methodological tools for researchers.

Three articles considered service pricing. Avlonitis and Indounas (2006) showed that in Greece, most services base prices on cost and competition. Taher and El Basha (2006) argue that service marketers have to look beyond these factors and should focus on the value of information to customers, consumer price sensitivity, and the transaction costs above and beyond the cost of search. Rosa Díaz (2006) also finds that service marketers use quantitative bases for determining price. She recommends that service marketers also conduct qualitative research.

Of the two articles that looked at price segments, the Stamer and Diller (2006) article gave strong support for five price segments – “Discount Buyers,” “Price Seekers,” “Quality Conscious Buyers,” “High Price Shoppers,” and “Optimizers” – which they demonstrated were stable across various types of consumer goods. Jarvis et al. (2006) segmented the market on four price levels and showed that the lowest and highest price tiers for wine had excessively loyal customers.

How people perceive price continues to be an area of research interest. Both the Aalto-Setala (2005) and the Gaston-Breton (2006) papers studied how the euro affected Europeans’ price perceptions. Aalto-Setala (2005) concludes that the shorter prices of the euro are more attractive than the longer prices with the former Finish markka. Gaston-Breton (2006) shows that when prices are in euros as opposed to the previous French francs, the difference in price between two products is perceived to be less when in euros than when in francs.

The concern of Kim and Kachersky (2006) was how the four basic dimensions of price salience – visual, semantic, computational, and magnitude – each influence price perceptions. And Maxwell (2005) showed that three or seven choices are perceived to be more fair than one, but consumers demonstrate confusion with 11 choices and balk at 22.

Finally, two pricing tools were published in the past year: Martínez-Ruiz et al. (2006) provided a tool to assess the set price of promotional periods in grocery stores, and Wagner and Beinke (2006) tested the tool of regression splines to identify thresholds. He showed that retailers are not maximizing profits because they are not taking advantage of the different thresholds for different products.

As always, as Associate Editors we would like to take this opportunity to thank the many people, including our managing editor Richard Whitfield, who have helped us develop the Journal of Product & Brand Management. Our Review Board is invariably willing to review articles and do so in a remarkably timely and thoughtful fashion. We thank them and we are certain that all our authors thank them as well. The support of the following reviewers is therefore gratefully acknowledged.

Review Board for Special Section on Pricing Strategy and Practice

• •

  Fabio Ancarani (SDA Bocconi Graduate School of Management);

• •

  Sundar Balakrishnan (University of Washington);

• •

  Margaret Campbell (University of Colorado, Boulder);

• •

  Rajesh Chandrashekaran (Fairleigh Dickinson University);

• •

  Amar Chema (Washington University, St Louis);

• •

  Keith Coulter (Clark University);

• •

  Ellen Garbarino (Case Western University);

• •

  Eric Greenleaf (New York University);

• •

  David Hardesty (University of Kentucky);

• •

  Kostis Indounas (Athens University of Economics and Business);

• •

  Sharan Jagpal (Rutgers University);

• •

  Frédéric Jallat (Paris Graduate School of Business);

• •

  Biljana Juric (University of Auckland);

• •

  Monika Kukar-Kinney (University of Richmond);

• •

  Rob Lawson (University of Otago);

• •

  Joan Lindsey-Mullikin (Babson College);

• •

  Rajesh Manchanda (University of Manitoba);

• •

  Kenneth Manning (Colorado State University);

• •

  Pete Nye (University of Washington);

• •

  David Sprott (Washington State University);

• •

  Rajneesh Suri (Drexel University); and

• •

  Lan Xia (Bentley College).

Our Advisory Board has also provided a vital service in providing direction and offering advice so that the Journal of Product & Brand Management continues to provide pricing research relevant to the needs of pricing managers as well as scholars today. Their support and thoughtful engagement is also greatly appreciated.

Advisory Board to Special Section on Pricing Strategy and Practice

• •

  William Bearden (University of South Carolina);

• •

  Dipankar Chakravarti (University of Colorado);

• •

  Dhruv Grewal (Babson College);

• •

  Sunil Gupta (Harvard University);

• •

  Donald Lehmann (Columbia University);

• •

  Kent Monroe (University of Richmond);

• •

  Robert Schindler (Rutgers University – Camden);

• •

  Joe Urbany (University of Notre Dame); and

• •

  Russell Winer (New York University).

We are also thankful to the readers of the Journal whose study and citation of the published articles has helped elevate JPBM’s profile as a forum for the dissemination of behavioral pricing research worldwide.

Sarah Maxwell, Hooman EstelamiFordham University, New York, New York, USA