Citation
(2014), "Executive summary of "The antecedents of strategic pricing and its effect on company performance in the case of industrial service firms", Journal of Services Marketing, Vol. 28 No. 5. https://doi.org/10.1108/JSM-06-2014-0221
Publisher
:Emerald Group Publishing Limited
Executive summary of "The antecedents of strategic pricing and its effect on company performance in the case of industrial service firms"
Article Type: Executive summary and implications for managers and executives From: Journal of Services Marketing, Volume 28, Issue 5
This summary has been provided to allow managers and executives a rapid appreciation of the content of the article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefit of the material present.
Setting a price for what you are selling is a difficulty which every business faces, whether it is sweets at a corner shop which is trying to survive against the bulk-buying power of a nearby supermarket, or a multinational giant competing for government contracts in power supplies or railway infrastructure.
For industrial services, it is suggested that the adoption of a strategic perspective toward pricing decisions leads to better financial results. Strategic pricers realize increased profitability because they tend to avoid myopic practices such as very low prices that may increase sales temporarily but might lead to unnecessary price wars that could jeopardize their market’s climate in the long run. Treating pricing as a strategic tool can lead to sustainable competitive advantage that competitors cannot easily copy.
Strategic pricing gives the firm the opportunity to develop a coherent set of pricing policies and procedures that are in line with both the marketing goals and strategy and the overall corporate objectives and strategies. Also, strategic pricing implementation involves finding a balance between the industrial service firm’s different departments and functions (e.g. marketing, finance), as it places its emphasis on both company (e.g. costs) and market-related factors (e.g. customers, competitors) that may affect pricing strategy formulation.
Growing industrial service markets are characterized by high demand, high profit margins, increased number of existing competitors and low barriers for new competitors to enter the market. These markets leave room for innovation and, contrary to mature or declining markets, give the opportunity to compete on a non-price basis (e.g. improved customer service, customization, effective targeting and positioning strategies) to survive in the long run.
In "The antecedents of strategic pricing and its effect on company performance in the case of industrial service firms", Dr Indounas examines the impact of a number of variables on the adoption of strategic pricing by industrial service firms and the effect of this adoption on company performance. One of the conclusions is that strategic pricing is a "good" business practice that improves price decision-making in the long run. Effective price setting has long been recognized as one of the marketing tools that can have a positive impact on marketing performance specifically and company performance in general.
As an industrial service firm grows larger and is, therefore, likely to have more potential to adopt and apply the principles of strategic pricing, the author felt that company size would be positively related to the adoption of strategic pricing, but this was not found to be the case. It seems that the adoption of strategic pricing is unrelated to company size and the company’s position in the market. In other words, irrespective of its size, any industrial service firm can still apply the notion of strategic pricing.
Similarly, market leaders were expected to adopt strategic pricing to a greater extent than other companies, but this also was found not to be the case. Regardless of the company’s position in the market, managers responsible for setting prices could follow the principles of this practice no matter if their companies are leaders, challengers, followers or nichers. This finding suggests that placing equal importance to pricing in comparison to other managerial activities, monitoring and reviewing prices on a regular basis, planning price decision-making and having a top management that has understood the significance of treating pricing as a strategic tool can take place within various types of industrial service firms.
To this end, within any industrial service firm, endeavoring to apply the four key dimensions of strategic pricing (importance of pricing compared to other managerial activities, continuous monitoring of prices, planning of prices, top management’s attitudes) might be an issue of re-examining and moving away from existing pricing practices and trying to understand the merits of strategic pricing.
Managers wishing to imbue a strategic orientation to their pricing decisions may find value in appreciating that their efforts should be directed at different levels. First, it seems that benefits will be gained if they try to adopt a market-oriented perspective toward price decision-making. The importance of market orientation is also reflected on the fact that it may reduce the effect of turbulence in the market and help the company to apply strategic pricing even in turbulent environments. Such environments may lead to those short-term myopic pricing practices that are in contrast with the basic principles of strategic pricing. Especially for industrial service firms that are applying this practice for the first time, the best option might be to choose more stable and balanced markets with a growth potential.
To read the full article enter 10.1108/JSM-02-2013-0031 into your search engine.
(A précis of the article "The antecedents of strategic pricing and its effect on company performance in the case of industrial service firms". Supplied by Marketing Consultants for Emerald.)