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Customer value‐based pricing strategies: why companies resist

Andreas Hinterhuber (Hinterhuber and Partners, Innsbruck, Austria)

Journal of Business Strategy

ISSN: 0275-6668

Article publication date: 4 July 2008

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Abstract

Purpose

Customer value‐based pricing is increasingly recognised by academics and practitioners as the most effective approach to pricing for companies wishing to achieve increased profitability and sustained success. However, despite this apparent support for the implementation of value‐based pricing, the practical reality is that more than 80 percent of companies continue to price their products and services primarily on the basis of costs and/or competitive price levels. The present study investigates this phenomenon and identifies the main reasons for this gap between aspiration and reality.

Design/methodology/approach

A two‐stage empirical approach is employed: first, in a qualitative research, the phenomenon of implementation of value‐based strategies with groups of business executives participating in pricing workshops is explored. The result of this qualitative stage was then used to develop a questionnaire which was tested upon a significantly larger and more stratified population. Finally cluster analysis to summarize the results of this quantitative research stage was employed.

Findings

Based on a survey of 81 executives representing a wide range of B2B and B2C industries in Germany, Austria, China, and the USA, five main obstacles to the implementation of value‐based pricing strategies have been identified: deficits in value assessment; deficits in value communication; lack of effective market segmentation; deficits in sales force management; and lack of support from senior management. The paper also provides a range of remedies to overcome these obstacles.

Originality/value

In extant literature there exists a gap between: the widespread understanding of the superiority of customer value‐based pricing strategies; and the circumstance that customer value‐based pricing strategies are currently the least widely diffused major pricing approach. We cover thus gap by highlighting which obstacles exist to the implementation of value‐based pricing strategies and provide a series of remedies to overcome these obstacles.

Keywords

Citation

Hinterhuber, A. (2008), "Customer value‐based pricing strategies: why companies resist", Journal of Business Strategy, Vol. 29 No. 4, pp. 41-50. https://doi.org/10.1108/02756660810887079

Publisher

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Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited