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Performance-based pricing of integrated solutions
Linköping University, Department of Management and Economics. Linköping University, The Institute of Technology.
(English)Manuscript (preprint) (Other academic)
Abstract [en]

As manufacturing fmns are moving towards integrated solutions, they may find themselves in need of new capabilities. Developing and maintainutg these is expensive and for the supplier, innovative pricing models are needed to cover these excess costs. Although pricing of integrated solutions can be designed in various ways, performance-based pricing remains one of the most effective ways to create an incentive for optimal performance, and also to cover the 'hidden' cost of developing capabilities. The paper maps some performance-based pricing models as has been found in two case studies of manufacturing firms. Furthermore, an investigation of how the design of these pricing models is affected by different contextual factors is also carried out. The results show that viable performance-bases are availability of supplied function or the change of profitability for the customer.

Keyword [en]
Integrated solutions, performance-based pricing, business offering
National Category
Engineering and Technology
URN: urn:nbn:se:liu:diva-102029OAI: diva2:667680
Available from: 2013-11-27 Created: 2013-11-27 Last updated: 2013-11-27
In thesis
1. The Business of Integrated Solutions
Open this publication in new window or tab >>The Business of Integrated Solutions
2005 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

The after-sales market is increasing in importance for many manufacturing firms. Sales of spare-parts and services is at the same time facing stiffer competitions from third-party suppliers. For many of these companies, the answer to this development has been to engage in the sales of integrates solutions, an offering that allows manufacturing firms to add customer value by including sophisticated products and services, activity specific knowledge and/or resources, and incentives based on successful customer operations. However, not all firms have succeeded in this endeavor and the main research question investigated in this licentiate thesis is: when and under which circumstances are certain integrated solutions preferable options to traditional sales of products and services?

The thesis is constituted of one cover paper and four appended papers. Although the individual aims of each paper vary, they all work together towards answering the main research question. The results of each have been synthesized and analyzed for this purpose in the cover paper. Paper 1 investigates three cases and highlights some important implications for firms moving towards integrated solutions. Among the implications identified is the need of an extended set of new competencies. The need for an increased customer-centric orientation is also acknowledged. Paper 2 suggest that the one of the important challenges facing these mentioned firms is creating value-adding offerings based on deepened relationships with their customers. Paper 3 expand on the discussion of the offering by providing a tentative conceptual model for buying ,integrated solutions. The paper is written from a customer perspective rather than taking the view of the supplier, which have been the most common perspective in the academic area of integrated solutions until now. Paper 4 addresses the issue of pricing the solution based on the performance of the supplying firm, the intent of this pricing model being increased performance and better cost coverage. A contingency framework is suggested as a way to analyze integrated solutions from this perspective. The cover paper gives special attention to the importance of supplier-customer relationships. It also returns to the main research question by suggesting that integrated solutions as a concept may be viewed from several perspectives and each perspective brings forth various organizational and offering options which may or may not be applicable under certain circumstances.

Place, publisher, year, edition, pages
Linköping: Linköpings universitet, 2005. 38 p.
Linköping Studies in Science and Technology. Thesis, ISSN 0280-7971 ; 1151
National Category
Social Sciences
urn:nbn:se:liu:diva-24473 (URN)6589 (Local ID)91-85297-52-6 (ISBN)6589 (Archive number)6589 (OAI)
Available from: 2009-10-07 Created: 2009-10-07 Last updated: 2013-11-27

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Andersson, Pierre
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Department of Management and EconomicsThe Institute of Technology
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