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Although cost-plus pricing is often used in B2B markets it has the serious drawback that it ignores both customer price sensitivity and potential competitor action. Most B2B markets are oligopolies so that there is an ever-present risk of a price-war if any of the competitors engage in aggressive price-cutting. Firms should be encouraged to think o...
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... The present research draws on the consideration that online review analytics could provide real-time, reliable, and cheap information about the value perceived by the customers in order to support the development of an effective and easy-to manage value-based price assessment. Therefore, they would help solving one of the main issues that limit a wide adoption of value-based pricing: the lack of information about the value perceived by the customer (Shipley and Jobber, 2001;Brennan et al., 2007). ...
This work introduces, develops, and empirically applies an innovative approach aimed at assessing selling prices based on the value perceived by the customers, as measured by electronic word-of-mouth (eWOM) in the guise of online reviews. To achieve this aim, it applies a constant return to scale Data Envelopment Analysis (DEA) approach where the price is the input, and the value attributes are the outputs measured through eWOM in the form of online reviews. We empirically apply the model to the hotel sector by considering both the prices and the service attributes (i.e., staff, location, cleanliness, comfort, facilities and free wi-fi) of 364 hotels based in two leading Italian tourism destinations: Milan and Rome. Our findings suggest that online review analytics can be suitably embedded into analytical models to assess prices. The index developed innovatively supports value-based pricing by means of online review analytics and it is easy-to-perform, and parsimonious as it is based on widely available information on the Internet.
... 75 Rai (2006). 76 Brennan et al. (2007). 77 Irwin (2017). ...
There is no greater leverage for revenues and profits than pricing. Unfortunately, setting prices is also one of the most difficult decisions in global marketing. This chapter considers some of the key influences on setting prices in an international arena and looks at global pricing strategies and practices. The discussed topics range from different approaches to pricing in international markets to new approaches to pricing in today’s digital environment, different forms of countertrade, and the role of Incoterms. The chapter also scrutinizes the vexing issue of standardization and differentiation in the context of global pricing and the closely related question of where price decisions should be made: centrally or locally. Other topics discussed in this chapter include transfer prices within multinational companies, dumping, gray markets, and parallel imports.
... Larger companies are expected to be key players in the market, therefore, their capacity to influence price changes is higher. On the other hand (Brennan & Canning, 2007) argue that cost plus pricing tends to create an illusion of security, where initially the company will necessarily cover its costs incurred and generate profit. However, cost plus pricing has flaws as it entirely ignores rivals and customers. ...
Emotional connection between customers and brands attracts interest of scholars and practitioners. Extending Shimp and Madden's (1988) argument, Roberts (2005) has written that behind every successful brand lies strong emotional-level relationship with consumers, as emotions provoke „loyalty beyond reason“. Drawing on Russell’s (1980) model of affect, we have developed a serial mediation framework that portraits the drivers and consequences of brand love. Developed within environmental psychology, Russell’s model posits that affect behaves as a mediator between cognition and response behavior (1980). In line with that, we have assessed an emotional attachment as a mechanism through which cognitive drivers (brand popularity, brand authenticity, social-self expressiveness and inner-self expressiveness) impact brand love. More specifically, we have delineated between emotional attachment and brand love demonstrating the difference between these constructs (e.g. Batra et al., 2012). As Thomson et al. (2005) have argued, brand love necessitates emotional attachment. This argument points to the conclusion that emotional attachment does not obligatory need to be perceived as the inseparable part of brand love, as suggested by Carrol and Ahuvia’s (2006) definition, but the “predecessor” part through which brand love could be accomplished. Furthermore, our framework aims to provide better understanding of potential outcomes of brand love identifying excessive buying and brand loyalty as important behavioral outcomes.
... On the basis of the outcomes of the approach, the company was able to focus its attention on few supply relationships (for instance only 2 DMUs in the 'Painting' category) and used the efficiency scores to negotiate acceptable prices with the existing supplier or with a new one. Furthermore, the general framework behind the approach is the required relationship between price and value, according to the value-based pricing approach (Shipley & Jobber, 2001;Brennan et al., 2007). Consequently, it enables a clear understanding of the relationship between the price requested and the value attributes of the product/service purchased. ...
In the Kraljic Portfolio Matrix (KPM), ‘leverage’ items are purchases with a strong financial impact but limited associated risk. For these items, the priority for the buyer is to exploit the full purchasing potential, purchasing the items with the lowest price compared to their value attributes, i.e. the features appreciated by the customer. Despite the financial importance of such purchases, practical approaches able to support buyers in assessing their purchasing prices in a value-based perspective are still lacking.
Therefore, this paper develops a three-step Data Envelopment Analysis-based approach (PPA-DEA) to assess the purchasing price of ‘leverage’ items according to their value attributes.
The approach is then tested on two supply categories of an Italian mechanical company. The results show that PPA-DEA is capable of providing focused insights and supporting effective managerial actions. At the same time, the most relevant issues in implementing the approach are pointed out.
From the theoretical point of view the study provides a contribution to the literature on supplier selection and assessment applied to purchasing portfolio models by developing an innovative approach to taking tactical decisions on ‘leverage’ products and services. From the practical point of view, PPA-DEA, albeit with a single case study, proves to be a “parsimonious” approach, easy to apply and able to provide concrete results.
... However, the end customer is often more concerned with the outcome rather than the processes. Brennan, Canning and McDowell (2007) highlighted that these models are not always successful when it comes to addressing customer price sensitivity and how the potential competitors would act. Therefore, it is often recommended to price such information based services based on their value as perceived by the customers (Harmon & Laird, 1997). ...
The study highlights how digital marketing is often detrimental, when it is done by unskilled service providers. It highlights how the hyped services of search engine marketing (SEM) are not as successful as they seem to be and sometimes affect firms negatively. This study uses social media analytics to derive insights from Twitter using descriptive, content and network analytics. Methods like hashtag analysis, polarity and emotion analysis, word analysis, topic modeling and other relevant approaches have been used to mine user generated content. A qualitative case study on an e-market is used for validation of findings. SEM services provided by small organizations and freelancers are not as beneficial as the ones by established players. The services provided by these firms proved detrimental for the customers based on user experiences surrounding these services in the social media and forum specific discussions. This study highlights how SEM often not only fails to provide benefits but also destructs value if not done properly. Transaction costs like agency problems, coordination costs, loss of non-contractible value and cost of fit are also identified with potential fallouts which affect the long-term benefits. Inputs will be beneficial to practice in planning SEM and outsourcing.
... IT vendors have mostly focused on cost based pricing approaches using metrics like function point count, code size, development effort, development time and development complexity (Pasura and Ryals 2005). However, although cost based pricing is often used for information goods, it is limited in addressing the customer's price sensitivity and potential competitor action (Brennan et al. 2007). Pricing literature (Goldman et al. 1995) argue that all effective pricing strategies should be mapped to the customer's value perception about the offering. ...
Today, cloud computing is transforming the consumption of IT/ITeS. Numerous vendors are offering services where computing, storage and application resources, can be dynamically provisioned on a pay per use basis, purely based on the user’s need. However, the demands and requirements of different users vary significantly. In order to maximize the revenue, a flexible pricing approach is required, which can address these diverse requirements systematically. These systemic approaches need to estimate the potential value of such services to specific users for a specific context. The tradeoffs from potential value drivers also need to be accounted for while prioritizing the value drivers. In these lines, the current study proposes a flexible pricing approach for Infrastructure as a Service (IaaS), one of the important delivery models, based on its perceived value to multiple key stake-holders. The proposed approach prioritizes and aggregates the key features of IaaS for the migration to cloud, from multiple key users’ perspective by integrating fuzzy set theory and analytic hierarchy process for group decision making under consensus. Subsequently, the prioritization is mapped with a utility function to estimate the trade-offs from each value driver. The performance of the proposed approach has also been compared with that of another flexible pricing model through a case study.
... IT vendors have mostly focused on cost based pricing approaches using metrics like function point count, code size, development effort, development time and development complexity [28]. However although cost based pricing is often used for information goods, it is limited in addressing the customer's price sensitivity and potential competitor action [5]. Pricing literature [17] argue that all effective pricing strategies should be mapped to the customer's value perception about the offering. ...
Today, cloud computing is transforming the IT industry. An increasing number of providers are offering various services where computing, storage and application resources, can be dynamically provisioned on a pay per use basis. However the demands and requirements of different users are diversifying and growing sharply. In order to maximize the revenue, a proper pricing model is re-quired. Thus systemic approaches need to be explored to estimate the potential value of such services to specific users for a specific context. The current study proposes a value based pricing approach for Infrastructure as a Service (IaaS), one of the important delivery models. The decision support approach prioritizes and aggregates the dimensions of IaaS for the migration to cloud, from the users' per-spective by integrating Fuzzy Set Theory and Analytic Hierarchy Process for group decision making.
... IT vendors have over the years focused predominantly on cost-based pricing strategies (Pasura and Ryals, 2005) focusing on metrics such as code size, function point count, development time, development effort and development complexity. Although cost-plus pricing is often used in the pricing of information goods, it has a serious drawback in addressing both customer price sensitivity and potential competitor action (Brennan et al., 2007). Goldman et al. (1995) argue that effective pricing strategy should be focused on the customer's perceived value. ...
Pricing is a major challenge in the marketing of emergent industrial technologies. Because of this challenge, a good strategy would be to price them based on the perceived value they would have to the client firm. Now often, such technologies have multiple attributes or features, the relative importance and the benefits of which would be different for each client. So the total perceived value from such technology would vary from client to client. This paper proposes a novel way to capture the perceived value an emergent technology may provide to the client by treating the problem as a multi-criteria decision making one. A multi-response fuzzy analytic hierarchy process is adapted for capturing the trade-offs amongst the multiple value drivers, to estimate the perceived value of the emergent technology with multiple attributes or features. The proposed methodology attempts to address a few limitations of regression-based techniques developed for the same purpose. The estimated perceived value is used to devise a pricing strategy. Finally, a hypothetical case has been used to demonstrate the proposed technique.
... Customers may also benefit as this stable industry structure promotes predictable pricing and ongoing product and service improvements (Porter, 1981Porter, , 1985). In contrast to the stereotype that competitors should only compete and collaboration is collusion against the customers (Brennan, Canning and McDowell, 2007; Ims and Ove, 2006; ZarkadaFraser, 2000), competitors can together improve quality, costs and customer service (Bengstsson and Kock, 2000; Jacobides, 2005; Rowley et al., 2005). For a developing economy such as China, alliances among competitors may contribute to effective industrial structures and a well-functioning market economy generally. ...
Competitors are increasingly forming partnerships to improve their capabilities to respond to customers and solve problems. This study uses research on guanxi and conflict management to identify critical conditions that facilitate effective collaboration between competitors. It theorizes that a high level of guanxi promotes cooperative and reduces competitive approaches to conflict that in turn facilitate partnership effectiveness. Data were collected from 100 paired competitors, operating in many industries in Shanghai, China. Results from the structural equation analysis indicated that a high level of guanxi reduces a competitive approach to conflict that in turn results in partnership effectiveness. These findings were interpreted as providing support that a high level of guanxi and a reduced level of the competitive approach to conflict are foundations for effective collaboration between competitors in China and perhaps in other countries as well.
... This makes the buyer more likely to purchase from the supplier and it reduces the coordination costs of the transaction for both parties [75]. A second benefit is the price-sensitive buyer can accurately weigh the supplier against potential competitors [76]. Once the buyer chooses a supplier, he might be willing to establish a collaborative relationship with the supplier. ...
The service sector is growing in importance in the US, particularly in B2B contexts. Despite this, research in these ar-eas lags behind manufacturing and B2C studies. The purpose of this article is to begin addressing this issue by looking at how information technology can improve service delivery in B2B contexts by looking at the fit between the CSLC and a mix of customer contact technology modes. Specifically, we look at how Web 2.0 technologies facilitate interorgani-zational communication even for small and medium businesses by providing a wider variety of technologies at a lower cost. This allows businesses to use technology to reduce business customer uncertainty and equivocality, hence im-proving the quality of their service delivery. Due to the increasing use of the Internet as a source of communication and the evolution of customer expectations, this is becoming an increasingly important research topic. Propositions and implications are presented.
