Pricing Capabilities: Drivers and Effects on Performance

Abstract

Pricing is the element of the marketing mix that is often overlooked in export marketing (Sousa and Bradley, 2009). However, the ability of an exporting firm to understand the value of its offering as perceived by foreign customers and set prices accordingly, is critical to its survival and success, given that the additional ramifications of the export setting (as compared to the domestic one) may challenge its ability to identify, address, and anticipate customers’ requirements and preferences (Morgan et al., 2004). This study draws on the resource-based, dynamic capabilities, and organisation learning literatures to develop and test a model that investigates how export customer orientation (the core component of market orientation) influences marketing exploitation and exploration, which in turn, give rise to superior pricing capabilities in export markets. Pricing capabilities are posited as a key determinant of export performance. The contribution of this study is threefold: (1) the examination of the drivers and outcomes of marketing exploration and exploitation; (2) the investigation of the antecedents and performance implications of pricings capabilities; and (3) the study of the role of customer orientation, marketing exploration and exploitation, pricing capabilities, and performance within the particularly relevant, but understudied, context of exporting. The findings suggest that customer orientation promotes both marketing exploration and exploitation. Marketing exploration and exploitation result in superior pricing capabilities, which in turn enhance export performance. In terms of theory development, this study adds to the resource-based view (Barney, 1991) and its dynamic capabilities extension (Vorhies and Morgan, 2005) by suggesting that resources (i.e., customer orientation) lay the foundation for higher-order capabilities (i.e., marketing exploitation and exploration), which give rise to specialized capabilities (i.e., pricing), resulting in superior performance outcomes. The key managerial implication of this study is that exporting firms need to routinely perform marketing exploitation and exploration activities in order to set prices that fit with their positioning, customers, and with evolving export market conditions.