Business analyst Niklas Hallberg of Lund University in Sweden shows that individual associates, price experts, are a strong factor for accurate pricing. If this is left to the sales staff, the price tends to be too low.
Selling their products at the right price is often put forward as something that is extremely important for maximizing the long-term profits of companies. At the same time, pricing capability is regarded as a light-weight component of the company's overall strategy. The researcher Niklas Hallberg, School of Economics and Management , Lund University, finds in his study of strategy and pricing in five packaging companies in the Nordic countries, Central Europe, and the U.K. that pricing is an incredibly complex story. Price is a major strategic consideration and a matter for top management.
"This is about a long-term strategy for the company that is difficult to purchase. If you are successful in your pricing, you gain an advantage over your competitors that they can't make up for even if they try. The right experience, a well-established IT system, and the proper overall organizational structure all take time to create, and there's no quick fix," he says.
To find the right price, companies need to invest in three overarching areas involving, people, systems, and organization.
"It is clearly a factor of success to have people in key positions who have the communicative or business sense required to gather the right information in customer-specific pricing situations. This is silent knowledge that companies can't acquire quickly. It's a matter of having individuals with the right experience. All the companies I studied have a 'price guru' like this."
Functioning technical systems are a neglected area:
"I was surprised how little investment the companies put into IT systems and strategic control systems for market information. This is because these decisions are largely based on perceptions and experience. Owing to the complexity of the decisions, with perhaps some thousand products and hundreds of different customers every year, system capital is replaced with human capital."
Companies find it difficult to make rational calculations:
"A good calculation requires correct information about what it costs to produce a product. This sounds trivial, but I'm seeing that companies have rather poor control over what it costs to develop a product, to produce and transport a product, and then place that cost in relation to what the competition is offering."
Control over organization plays a role in coordinating pricing decisions:
"Different decision-makers in the organization are driven by different interests. For instance, salespeople have a natural tendency to want to sell, and they often have a close and personal relationship with their customers. Salespeople want as little hassle as possible, and the customers press the price downward. In other words, it's convenient for the sales staff to sell at a price that is lower than optimal for the company's profitability."
Niklas Hallberg relates that it is relatively common for pricing decisions to be controlled by making sure that the information the salespeople receive shows that the cost of a product is higher than it really is. This prevents the sales staff from lowering the price too much.
"Generally speaking, I would say that pricing decisions need to be made high up in the organization. The advantage of having salespeople set the price is that the company can avoid losing an order, even though the average price is lower. But many companies want to sell based on customer value, that is, the value the buyer feels a product has, rather than simply being the cheapest product."
Contact Niklas Hallberg at cell phone: +46 (0)734-43 40 59 or firstname.lastname@example.org
Pressofficer Kristian Rörström, Kristina.Rorstrom@ehl.lu.se; +46-706047 037
Krisitina Rörström | idw
Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik
RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung
So-called quantum many-body scars allow quantum systems to stay out of equilibrium much longer, explaining experiment | Study published in Nature Physics
Recently, researchers from Harvard and MIT succeeded in trapping a record 53 atoms and individually controlling their quantum state, realizing what is called a...
The historic first detection of gravitational waves from colliding black holes far outside our galaxy opened a new window to understanding the universe. A...
A team led by Austrian experimental physicist Rainer Blatt has succeeded in characterizing the quantum entanglement of two spatially separated atoms by observing their light emission. This fundamental demonstration could lead to the development of highly sensitive optical gradiometers for the precise measurement of the gravitational field or the earth's magnetic field.
The age of quantum technology has long been heralded. Decades of research into the quantum world have led to the development of methods that make it possible...
Cardiovascular tissue engineering aims to treat heart disease with prostheses that grow and regenerate. Now, researchers from the University of Zurich, the Technical University Eindhoven and the Charité Berlin have successfully implanted regenerative heart valves, designed with the aid of computer simulations, into sheep for the first time.
Producing living tissue or organs based on human cells is one of the main research fields in regenerative medicine. Tissue engineering, which involves growing...
A team of scientists of the Max Planck Institute for the Structure and Dynamics of Matter (MPSD) at the Center for Free-Electron Laser Science in Hamburg investigated optically-induced superconductivity in the alkali-doped fulleride K3C60under high external pressures. This study allowed, on one hand, to uniquely assess the nature of the transient state as a superconducting phase. In addition, it unveiled the possibility to induce superconductivity in K3C60 at temperatures far above the -170 degrees Celsius hypothesized previously, and rather all the way to room temperature. The paper by Cantaluppi et al has been published in Nature Physics.
Unlike ordinary metals, superconductors have the unique capability of transporting electrical currents without any loss. Nowadays, their technological...
02.05.2018 | Event News
13.04.2018 | Event News
12.04.2018 | Event News
18.05.2018 | Power and Electrical Engineering
18.05.2018 | Information Technology
18.05.2018 | Information Technology