Firm Pricing Orientation And Pricing Decisions In Industrial Markets

Abstract

Of three main orientations to pricing in industrial markets - cost-based, competition-based and customer value-based - most marketing and pricing scholars consider the latter superior - but few firms use it. The literature is silent about how organizational and behavioral characteristics of industrial firms may affect pricing orientation and, more specifically, how managers integrate cost, competitive and value information in their decision-making process. Semi-structured interviews with 44 managers of small to medium size U.S. industrial firms yielded insights into firm pricing orientations, processes and decision making patterns. We identified the organizational characteristics influencing the pricing decision making process: the existence and locus of a pricing function in the organization; firm’s ability to diffuse organizational capabilities, and center-led pricing process specialization. Our data demonstrates that pricing orientation in firms strongly influence the decision-making process. The adoption and internalization of a modem pricing orientation such as value-based pricing requires a long, tenuous and deep transformation process supported by experiential and transformative learning.