Thinking strategically about pricing decisions

Author： Piercy Nigel F. Cravens David W. Lane Nikala

ISSN： 0275-6668

Source： Journal of Business Strategy, Vol.31, Iss.5, 2010-09, pp. : 38-48

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Abstract

Purpose - Harsh economic conditions have put pricing higher on the agenda but responses to pricing challenges have frequently been tactical. The intent is to build on basic pricing principles to emphasize a strategic perspective on pricing built around opportunities to deliver superior customer value. Design/methodology/approach - Our logic is drawn from the observation of company pricing practices and interesting moves from conventional to innovative pricing strategies. Findings - Our observations underline the need for executives to adopt a more strategic view of price and to examine the scope for raising prices, especially in a post-recession economic scenario. Practical implications - Our action agenda addresses: why there is an urgent need to make pricing decisions strategically, particularly as economic recovery occurs, with important insights coming from innovative pricing models designed to deliver superior customer value; the role of price in strategic positioning - key management considerations are whether price is to play an active or passive role in marketing the product or service, and whether price is high or low compared to alternatives; the challenges of raising prices in recession and recovery conditions, where analysis underlines the importance of considering product differentiation from a customer perspective and comparing this with how strongly the customer needs the product; and the need to design a value-based pricing strategy which integrates the conclusions reached about the strategic role of price. Originality/value - Viewing pricing as a "quick fix" and the only route to maintaining sales or protecting market share underplays the strategic importance of pricing and its long-term strategic implications. We propose a management action agenda for making pricing decisions strategically.