Industrial product pricing: a value‐based approach

Abstract

Purpose

This paper seeks to examine the influence of pricing orientation on the price‐setting process in industrial firms.

Design/methodology/approach

The authors designed a qualitative inquiry based on the principles of grounded theory with 44 managers in 15 industrial firms located across ten US states. These managers included CEOs, pricing and marketing professionals, and financial professionals working in three industries (automotive, building products and chemicals).

Findings

The study's results reflect similarities and differences in the experiences of managers in industrial firms using all three pricing orientations. It reveals stark contrasts by pricing orientation with respect to how firms organize for pricing, manage the pricing process, make product pricing decisions, manage the transition to more advanced pricing orientations, and develop internal capabilities to face uncertain and ambiguous decisions. The findings also uncover contrasting price‐setting processes by pricing orientation and the balanced used of scientific versus intuitive decision‐making processes.

Practical implications

Pricing is often a neglected element of the industrial marketing mix. This study offers a variety of organizational practices by pricing orientation. The results highlight how best‐in‐class companies that adopted modern pricing practices to derive product prices are organized and how they reach pricing decisions.

Originality/value

This study studies the commonly accepted pricing orientations and links them to organizational structure and decision‐making theory. This study contributes to bridging pricing and organizational theories.

Citation

Liozu, S.M. and Hinterhuber, A. (2012), "Industrial product pricing: a value‐based approach", Journal of Business Strategy, Vol. 33 No. 4, pp. 28-39. https://doi.org/10.1108/02756661211242681