Reinaldo Guerreiro and Juliana Ventura Amaral
While the gap between economic theory and companies’ practice, regarding to the pricing setting, has been extensively explored and explained, the new gap between the marketing…
Abstract
Purpose
While the gap between economic theory and companies’ practice, regarding to the pricing setting, has been extensively explored and explained, the new gap between the marketing normative view and companies’ practice needs further clarification. In this way, the paper aims to investigate whether marketing researchers’ claim that the use of cost-based price approach prevails over the use of value-based price approach is pertinent.
Design/methodology/approach
The paper is guided by the following research question: “Does price-setting based on cost plus margin go against the value-based price approach?” The answer to this question is grounded in reflections on results of previous research studies and in a case study conducted in an industrial company. Because of the qualitative focus of the present study, hypotheses are not established, but rather the following proposition: certain companies use the mechanics of cost plus margin in the sale price-setting process, but it does not necessarily mean that these companies set prices based on cost.
Findings
The arguments, propositions and the case study findings provide the logical sequence and the support required to conclude that price-setting based on cost plus margin does not always conflict with the value-based price approach. As a result, it may be claimed that the general proposition established is theoretically valid, i.e. using a price formula that contains the elements cost and margin does not necessarily mean that the company sets prices based on cost.
Originality/value
The key contribution of this paper is demonstrating that in certain business environments, such as, B2B, using the price formation mechanics based on cost plus margin is the way found by companies to enable the approach adopted. The approach may be cost-based or value-based price. This is the first study that explicitly reveals how B2B companies may set prices based on value while simultaneously preserving the simplicity of cost plus margin formulas. Researchers have significant misconceptions about these formulas: in previous studies, they classified all price-making companies as those adopting the cost-based price approach simply because they used formulas containing the element cost.
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George J. Avlonitis and Kostis A. Indounas
The purpose of this research paper is to investigate the pricing policies that service companies adopt in order to set their prices along with the service, organizational and…
Abstract
Purpose
The purpose of this research paper is to investigate the pricing policies that service companies adopt in order to set their prices along with the service, organizational and environmental characteristics that influence these policies. Moreover, the extent to which these policies and characteristics are varied across different service industries is also examined.
Design/methodology/approach
In order to achieve the research objectives, data were collected from 170 companies operating in six different service sectors in Greece through personal interviews. Moreover, a qualitative research through 38 in‐depth interviews was also conducted.
Findings
The study found that the pricing policies tend to be influenced by a number of different service, organizational and environmental characteristics, while different patterns of pricing behavior were clearly identified across different service industries.
Research limitations/implications
The practical implications of the findings refer to the fact that there does not seem to be a “one and only” recipe for pricing decisions, which can be applied to all circumstances and service contexts. Formulating the pricing strategy seems to be a “situation specific” business activity. The significance of these findings notwithstanding, the context of the study (Greece) is the most important caveat, since it limits the ability to generalize the results to other countries.
Originality/value
The contribution of the paper lies in the fact that it presents the first attempt to empirically examine the potential impact of the aforementioned characteristics on the pricing policies used especially across different service contexts.
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George J. Avlonitis and Kostis A. Indounas
The purpose of this paper is to explore the pricing policies that service companies adopt along with the pricing information that they gather to set their prices. Despite previous…
Abstract
Purpose
The purpose of this paper is to explore the pricing policies that service companies adopt along with the pricing information that they gather to set their prices. Despite previous authors' suggestions regarding the need for a coherent process when setting prices, there seems to be a lack of empirically‐based theory on how pricing policies and pricing information might be interrelated.
Design/methodology/approach
Following 26 in‐depth exploratory interviews, additional personal interview data were collected from 170 companies operating in six different services sectors in Greece.
Findings
The paper finds that “list pricing” is the only policy that is adopted by the majority of the surveyed companies. Further, they tend to collect more than one type of information giving particular emphasis on market‐based information. The “customer‐based” information was found to be associated positively with the policy of “cash discounts”, while the “competition‐based” information with the policies of “trade discounts” and “differentiated pricing”. Moreover, the “cost‐based information” is associated positively with the “cash discounts” and “efficiency pricing” policies and negatively with the “loss leader pricing” policy.
Research limitations/implications
The findings refer to the need for a “balanced” market‐oriented and “situation‐specific” approach when setting prices The significance of these findings notwithstanding, the context of the study (Greece) is the most important caveat since it limits the ability to generalize the results in other countries.
Originality/value
The paper represents the first attempt to examine empirically the potential relationship between pricing policies and pricing information.
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George J. Avlonitis, Kostis A. Indounas and Spiros P. Gounaris
To explore the pricing objectives that service companies pursue along with the extent to which these objectives are influenced by the stage of the services' life cycle.
Abstract
Purpose
To explore the pricing objectives that service companies pursue along with the extent to which these objectives are influenced by the stage of the services' life cycle.
Design/methodology/approach
Reviews the existing literature and analyzes data from 170 companies operating in six different services sectors in Greece in order to achieve the research objectives.
Findings
The literature on pricing of services reveals the complete lack of any previous work endeavoring to examine empirically this potential influence. The study concludes that the objectives are mainly customer oriented aimed at improving the companies' financial performance in the market. Furthermore, the stage of these services' life cycle along with the sector of operation seems to have an influence on the pricing objectives pursued.
Research limitations/implications
The context of the study (Greece) is an obvious caveat to the research findings suggesting the need for further replication of the current study in different national contexts.
Practical implications
The practical implications of the findings refer to the fact that managers might have much to gain by adopting a “situation specific approach” when setting prices. Thus, different pricing objectives should be set as a service passes from one stage of its life cycle to another, while different services necessitate also a different pricing approach.
Originality/value
The value of the paper lies in the fact that it presents a first attempt to investigate empirically this issue.
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George J. Avlonitis and Kostis A. Indounas
The purpose of this research paper is to explore the pricing objectives that service companies pursue to set their prices and to examine the impact of market structure. An…
Abstract
The purpose of this research paper is to explore the pricing objectives that service companies pursue to set their prices and to examine the impact of market structure. An extensive review of the literature revealed the complete lack of any previous work aiming to empirically investigate the impact of market structure on the company's pricing behavior and pricing objectives. Thus, the value of the paper lies in the fact that it presents the first attempt to empirically examine this issue from a marketing perspective. In order to achieve research objectives, data were collected from 170 companies operating in six different services sectors in Greece through personal interviews. The findings of the study show that the companies seem to follow a hierarchy of pricing objectives where their main focus is on the maintenance of the existing customers and the attraction of new ones, in order to ensure their long‐term position in the market without, however, disregarding financial considerations.
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Thanos Skouras, George J. Avlonitis and Kostis A. Indounas
The purpose of this general review paper is to provide a comparison and evaluation of the treatment of pricing by the disciplines of economics and marketing.
Abstract
Purpose
The purpose of this general review paper is to provide a comparison and evaluation of the treatment of pricing by the disciplines of economics and marketing.
Design/methodology/approach
It is from three perspectives that the marketing and economics approaches to pricing are reviewed, namely, buyers' response to price, firm's determination of price, and industry‐ or economy‐wide role of price.
Findings
A comparative review of the relevant marketing and economics literature shows that there are important differences between the two disciplines in their treatment of pricing. Marketing demonstrates a richer and more empirically based treatment of the pricing issue from the buyer's perspective, while economics is unchallenged from the economy‐wide perspective. The differences found between the marketing and economics approaches to pricing are mostly due to their different historical origins, primary concerns and doctrinal evolution. In contrast, interdisciplinary loans especially from behavioral science have made possible considerable advances in marketing, particularly in the understanding of the buyer's perspective.
Originality/value
Previous reviews of the pricing literature do not attempt to provide a direct comparison and evaluation and offer no explanation for the observed differences among the economics and the marketing disciplines regarding their treatment of the pricing issue. The value and originality of the current paper lies in the fact that it represents the first attempt to provide such a comparison and evaluation.
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George J. Avlonitis and Kostis A. Indounas
The purpose of this research paper is to explore the pricing objectives that service companies pursue along with the pricing methods that they adopt in order to set their prices.
Abstract
Purpose
The purpose of this research paper is to explore the pricing objectives that service companies pursue along with the pricing methods that they adopt in order to set their prices.
Design/methodology/approach
An extensive review of the literature revealed the complete lack of any previous work aiming to investigate the potential association between these two important elements of a company's pricing strategy. Thus, the value of the paper lies in the fact that it presents the first attempt to examine this issue empirically. In order to achieve the research objectives, data were collected from 170 companies operating in six different services sectors in Greece through personal interviews.
Findings
The findings of the study reveal that the objectives, which are pursued, are fundamentally qualitative rather than quantitative in their nature with a particular emphasis given on the companies’ customers. However, the pricing methods, which are adopted by the majority of the companies, refer to the traditional cost‐plus method and the pricing according to the market's average prices. The study also revealed that the pricing objectives are, as should be expected, associated with the pricing methods.
Practical implications
The practical implications of the findings refer to the fact that managers might gain a lot by placing their emphasis on an integrated pricing approach and implement pricing methods that are in line with the pricing objectives that have been initially set. However, the context of the study (Greece) is an obvious limitation to the ability to generalize these findings, suggesting the need for future research that replicates the current study in other countries.
Originality/value
Managers might gain a lot by placing their emphasis on an integrated pricing approach and implement pricing methods that are in line with the pricing objectives that have been initially set.
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The purpose of this paper is to investigate the pricing objectives that business-to-business (B2B) service companies pursue to set their prices and to examine the impact of market…
Abstract
Purpose
The purpose of this paper is to investigate the pricing objectives that business-to-business (B2B) service companies pursue to set their prices and to examine the impact of market structure on these objectives.
Design/methodology/approach
To achieve the research objectives, data were collected from 193 companies operating in four different B2B service industries.
Findings
The findings of the study indicate that, in the current study, the companies investigated seem to follow various pricing objectives with a particular emphasis being placed on customer-related ones. The study also reveals that the market structure does have an impact on the pricing objectives pursued because different market conditions are found to lead to different pricing objectives.
Practical implications
The above findings indicate that the managers responsible for setting prices within their firms should follow a “situation-specific approach” and be guided by the unique characteristics of their markets.
Originality/value
Given the lack of similar studies in the existing B2B services literature, the value of the paper is that it represents one of the first attempts to empirically examine this issue.
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The purpose of this paper is to investigate the characteristics that lead to the adoption of the three new business-to-business (B2B) product pricing strategies, namely, skimming…
Abstract
Purpose
The purpose of this paper is to investigate the characteristics that lead to the adoption of the three new business-to-business (B2B) product pricing strategies, namely, skimming pricing (i.e. a high initial price), penetration pricing (i.e. a low initial price) and pricing similar to competitive prices.
Design/methodology/approach
To achieve the study’s research objectives, data were collected through a mail survey from 116 B2B firms, operating in four different sectors.
Findings
The adoption of skimming pricing and penetration pricing is triggered by company-related factors that are associated with the company’s corporate and marketing strategy and the product characteristics, while the adoption of pricing similar to competitive prices is influenced by market-related factors that are associated with customers’ and competitors’ characteristics.
Practical implications
The above findings indicate that the managers responsible for setting prices for new B2B products should follow a “situation-specific approach” and be guided by the unique characteristics of their internal and external environment.
Originality/value
Its contribution lies on the fact that, building upon quests within the existing literature, it constitutes one of the first attempts to examine empirically the aforementioned issue.
Details
Keywords
The purpose of this paper is to investigate the pricing objectives (e.g. customer-related objectives, sales-related objectives, profit-related objectives) that service companies…
Abstract
Purpose
The purpose of this paper is to investigate the pricing objectives (e.g. customer-related objectives, sales-related objectives, profit-related objectives) that service companies pursue to set their prices and to examine the impact of market structure on these objectives.
Design/methodology/approach
To achieve the research objectives, data were collected from 184 companies operating in four different service industries, namely, logistics companies, financial services providers, information technology companies and airlines.
Findings
The findings indicate that the companies that were investigated in the current study seem to follow a hierarchy of pricing objectives, in which their main focus is on the maintenance of the existing customers and the attraction of new ones to ensure their long-term survival in their market without, however, disregarding financial issues and objectives. The study also revealed that the market structure, along with the sector of operation, has an impact on the pricing objectives pursued, as different market conditions were found to lead to different pricing objectives.
Practical implications
The above findings indicate that managers responsible for setting prices within their firms should be guided by the unique characteristics of their markets.
Originality/value
Given the lack of similar studies within the existing services sector literature, the originality/value of the paper lies in the fact that it presents one of the first attempts to empirically examine this issue from a marketing point of view.