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Micro-foundations of value-based pricing and selling
Linköping University, Department of Management and Engineering, Industrial Economics. Linköping University, Faculty of Science & Engineering. (JEDI Lab)
2018 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Enabling customer value creation is central to marketing theory and practice. Yet, doing so does not ensure that supplier firms profit from it. Value-based pricing and selling come with the prospect of translating customer value creation into greater profits for suppliers. However, despite sustained interest, only a limited number of firms emphasize value-based pricing and selling. Existing research has highlighted organizational challenges as potential reasons. Unfortunately, this focus on organizational challenges obscures the role of individuals within organizations (i.e., its micro-foundations), such as the fact that managers and salespeople determine and realize prices. The purpose of this thesis is thus to describe and analyze the micro-foundations of value-based pricing and selling in business markets.

The thesis’ conceptual framework introduces bounded rationality and heterogeneity—two overlooked forces—to investigate the affective, cognitive, and motivational micro-foundations of value-based pricing and selling. The thesis’ empirical foundation consists of five papers that investigate the microfoundations suggested by the framework.

The findings indicate that research would benefit from a wider variety of research approaches. Currently, insights into micro-foundations are lacking, in part due to the focus on research designs and theories aimed at the organizational level; experimental designs and theories from psychology would allow amendments to prior research. Furthermore, individual rationality and individual differences play a role. In this regard, managers’ cognitive biases impact upon the extent to which firms focus on value-based pricing. Moreover, price presentation impacts managers’ value perception and purchase intention. The findings also suggest that managers’ personalities and salespeople’s experience and learning orientation are important individual differences affecting the emphasis on valuebased pricing and selling. Consequently, affective, cognitive and motivational micro-foundations—arising due to bounded rationality and heterogeneity— explain some of the challenges associated with value-based pricing and selling.

This thesis contributes with insights into several micro-foundations affecting value-based pricing and selling. In so doing, the thesis belongs to a growing stream of research that is shifting the focus from organizational processes to the individual foundations of value-based pricing and selling. The thesis also provides suggestions on how managers can use micro-foundations to the advantage of their firms.

Abstract [sv]

Att möjliggöra värdeskapande för kunder är centralt för marknadsföringsteori och -praktik. Detta är dock ingen garanti för att leverantörsföretaget kommer att kunna få del av värdet. Värdebaserad prissättning och försäljning ses i detta sammanhang som sätt på vilka leverantörer kan ta del av kundens ökade värdeskapande. Trots ett ökat intresse för koncepten i näringslivet är antalet företag som systematiskt arbetar med värdebaserad prissättning och försäljning begränsat. Anledningen till detta tillskrivs ofta de organisatoriska utmaningar som företagen ställs inför. Fokus på de organisatoriska utmaningarna skymmer dessvärre individens roll inom organisationen (dvs. dess mikrofundament), såsom att chefer och säljare bestämer och realiserar priser. Syftet med denna avhandling är således att beskriva och analysera mikrofundamenten av värdebaserad prissättning och försäljning på företagsmarknader.

Avhandlingens konceptuella ramverk introducerar begränsad rationalitet och heterogenitet—två förbisedda faktorer—för att undersöka affektiva, kognitiva och motiverande mikrofundament av värdebaserad prissättning och försäljning. Avhandlingens empiriska grund består av fem papper som undersöker mikrofundamenten som föreslås av ramverket.

Resultaten tyder på att fortsatt forskning skulle gynnas av en bredare mängd olika forskningsmetoder. För närvarande saknas insikter om mikrofundament delvis på grund av fokus på metoder och teorier som huvudsakligen undersöker organisationsnivån. Genom mer forskning som bygger på teorier hämtade från psykologi samt experimentella metoder skulle forskningsfältet kunna utvecklas. Dessutom spelar individuell rationalitet och individuella skillnader en roll. I detta avseende påverkar beslutsfattares kognitiva biaser i vilken utsträckning företaget fokuserar på värdebaserad prissättning. Vidare påverkar prispresentation beslutsfattares värdeuppfattning och köpintention. Resultaten visar även att chefers personlighet och säljares erfarenhet och inlärningsorientering är viktiga individuella skillnader som påverkar företagets fokus på värdebaserad prissättning och försäljning. Affektiva, kognitiva och motiverande mikrofundament som har sin grund i begränsad rationalitet och heterogenitet kan därmed förklara några av de utmaningar som är förknippade med värdebaserad prissättning och försäljning.

Avhandlingen bidrar med insikter kring flera av de mikrofundament som påverkar värdebaserad prissättning och försäljning. Den sällar sig således till den växande forskningsström som skiftar fokus från organisationsprocesser till individnivå för att bättre förstå värdebaserad prissättning och försäljning. Avhandlingen ger även ett praktiskt bidrag genom förslag på hur beslutsfattare kan använda mikrofundament till fördel för sina företag.  

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2018. , p. 102
Series
Linköping Studies in Science and Technology. Dissertations, ISSN 0345-7524 ; 1941
Keywords [en]
Micro-foundations, value-based pricing, value-based selling, managerial psychology, business markets
National Category
Economics and Business Production Engineering, Human Work Science and Ergonomics
Identifiers
URN: urn:nbn:se:liu:diva-148881DOI: 10.3384/diss.diva-148881ISBN: 9789176852828 (print)OAI: oai:DiVA.org:liu-148881DiVA, id: diva2:1222186
Public defence
2018-09-21, ACAS, A-huset, Campus Valla, Linköping, 10:15 (English)
Opponent
Supervisors
Available from: 2018-06-21 Created: 2018-06-21 Last updated: 2019-02-27Bibliographically approved
List of papers
1. Pricing strategy: A review of 22 years of marketing research
Open this publication in new window or tab >>Pricing strategy: A review of 22 years of marketing research
2017 (English)In: Journal of Business Research, ISSN 0148-2963, E-ISSN 1873-7978, Vol. 78, p. 101-110Article, review/survey (Refereed) Published
Abstract [en]

This article investigates the development and current state of pricing strategy research by undertaking a content analysis of 515 articles published in leading academic journals between 1995 and 2016. The results suggest several developments in research focus and methodology; recent research has focused more strongly on services and applies more rigorous research designs. The results also indicate a persistent focus on consumer markets and economic theories, as well as an increasing consideration of demand-side respondents, at the expense of supply-side respondents. An important feature of this review is a set of actionable takeaways, with both theoretical and methodological implications for pricing strategy research.

Place, publisher, year, edition, pages
Elsevier, 2017
Keywords
Pricing strategy; Literature review; Content analysis; Marketing; Takeaways
National Category
Business Administration
Identifiers
urn:nbn:se:liu:diva-137345 (URN)10.1016/j.jbusres.2017.05.005 (DOI)000405053800010 ()
Funder
Torsten Söderbergs stiftelse, E24/14
Note

Funding agencies: Torsten Soderbergs Stiftelse, Sweden [E24/14]

Available from: 2017-05-13 Created: 2017-05-13 Last updated: 2018-06-21Bibliographically approved
2. Does managerial personality influence pricing practices under uncertainty?
Open this publication in new window or tab >>Does managerial personality influence pricing practices under uncertainty?
2017 (English)In: Journal of Product & Brand Management, ISSN 1061-0421, Vol. 26, no 7, p. 771-784Article in journal (Refereed) Published
Abstract [en]

Purpose - While marketing and management research suggests that managers individual characteristics influence pricing decisions, the influence of personality traits in this context remains unclear. This study aims to explore the relationship between the five basic personality traits of the five-factor model (extraversion, conscientiousness, openness to experience, agreeableness and neuroticism) and three basic pricing practices (value-, competition- and cost-informed). Design/methodology/approach - On the basis of a non-experimental decision-making scenario, the analysis examines the pricing decisions of 57 managers in relation to a new business service. Findings - The results suggest that managers conscientiousness and openness to experience are positively related to preference for value- informed pricing. Similarly, managers agreeableness is positively related to preference for competition- informed pricing and managers openness to experience and agreeableness are positively related to preference for cost-informed pricing. Research limitations/implications - The cross-sectional study design does not support causal inference, and the modest sample size may limit the external validity of the findings. Practical implications - By increasing awareness of the influence of personality on pricing preferences, the findings are of relevance to managers who are directly involved in pricing decisions. Additionally, the findings are informative for managers who must assign responsibility for pricing authority within firms. Originality/value - This empirical exploration of the relationship between certain personality traits and specific pricing practices contributes to the literature on psychological aspects of pricing theory by showing how managerial personality influences pricing preferences under uncertainty.

Place, publisher, year, edition, pages
EMERALD GROUP PUBLISHING LTD, 2017
Keywords
Personality; Pricing; PLS modelling; Judgement and decision making
National Category
Business Administration
Identifiers
urn:nbn:se:liu:diva-143961 (URN)10.1108/JPBM-11-2016-1352 (DOI)000417505100009 ()
Note

Funding Agencies|Torsten Soderbergs Stiftelse, Sweden [E24/14]

Available from: 2017-12-29 Created: 2017-12-29 Last updated: 2018-06-21
3. Value-based pricing and cognitive biases: An overview for business markets
Open this publication in new window or tab >>Value-based pricing and cognitive biases: An overview for business markets
2018 (English)In: Industrial Marketing Management, ISSN 0019-8501, E-ISSN 1873-2062, Vol. 68, p. 86-94Article in journal (Refereed) Published
Abstract [en]

To investigate how cognitive biases inhibit value-based pricing practices among managers in business markets, this article considers five different cognitive biases—perceived lack of control, herding, fixed-pie bias, ambiguity aversion, and egocentric fairness bias—and their effects on value-based pricing. Despite recent calls for more research on the psychological aspects of pricing, few studies have focused on business markets. Drawing on research in psychology and marketing for its theoretical foundation, this overview extends the limited body of existing research. The article's key contribution is to explain how psychological challenges affect value-based pricing practices, with implications and suggestions for further research.

Place, publisher, year, edition, pages
Elsevier, 2018
Keywords
Value-based pricing; Cognitive bias; Debiasing; Business market; Managerial decision-making
National Category
Business Administration Applied Psychology
Identifiers
urn:nbn:se:liu:diva-141951 (URN)10.1016/j.indmarman.2017.09.028 (DOI)000424310200008 ()2-s2.0-85031322039 (Scopus ID)
Funder
Torsten Söderbergs stiftelse, E24/14
Available from: 2017-10-14 Created: 2017-10-14 Last updated: 2018-06-21Bibliographically approved

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