Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Price gurus bear great responsibility for company strategies

13.10.2008
Determining the right price for their goods is an important strategic advantage for companies, quite the opposite of the conventional thinking that market prices set themselves.

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 niklas.hallberg@fek.lu.se

Pressofficer Kristian Rörström, Kristina.Rorstrom@ehl.lu.se; +46-706047 037

Krisitina Rörström | idw
Further information:
http://www.vr.se

More articles from Business and Finance:

nachricht RWI/ISL-Container Throughput Index ending 2017 on a positive note
24.01.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

nachricht Uncovering decades of questionable investments
18.01.2018 | University of Texas at Austin, Texas Advanced Computing Center

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: In best circles: First integrated circuit from self-assembled polymer

For the first time, a team of researchers at the Max-Planck Institute (MPI) for Polymer Research in Mainz, Germany, has succeeded in making an integrated circuit (IC) from just a monolayer of a semiconducting polymer via a bottom-up, self-assembly approach.

In the self-assembly process, the semiconducting polymer arranges itself into an ordered monolayer in a transistor. The transistors are binary switches used...

Im Focus: Demonstration of a single molecule piezoelectric effect

Breakthrough provides a new concept of the design of molecular motors, sensors and electricity generators at nanoscale

Researchers from the Institute of Organic Chemistry and Biochemistry of the CAS (IOCB Prague), Institute of Physics of the CAS (IP CAS) and Palacký University...

Im Focus: Hybrid optics bring color imaging using ultrathin metalenses into focus

For photographers and scientists, lenses are lifesavers. They reflect and refract light, making possible the imaging systems that drive discovery through the microscope and preserve history through cameras.

But today's glass-based lenses are bulky and resist miniaturization. Next-generation technologies, such as ultrathin cameras or tiny microscopes, require...

Im Focus: Stem cell divisions in the adult brain seen for the first time

Scientists from the University of Zurich have succeeded for the first time in tracking individual stem cells and their neuronal progeny over months within the intact adult brain. This study sheds light on how new neurons are produced throughout life.

The generation of new nerve cells was once thought to taper off at the end of embryonic development. However, recent research has shown that the adult brain...

Im Focus: Interference as a new method for cooling quantum devices

Theoretical physicists propose to use negative interference to control heat flow in quantum devices. Study published in Physical Review Letters

Quantum computer parts are sensitive and need to be cooled to very low temperatures. Their tiny size makes them particularly susceptible to a temperature...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

2nd International Conference on High Temperature Shape Memory Alloys (HTSMAs)

15.02.2018 | Event News

Aachen DC Grid Summit 2018

13.02.2018 | Event News

How Global Climate Policy Can Learn from the Energy Transition

12.02.2018 | Event News

 
Latest News

Researchers invent tiny, light-powered wires to modulate brain's electrical signals

21.02.2018 | Life Sciences

The “Holy Grail” of peptide chemistry: Making peptide active agents available orally

21.02.2018 | Life Sciences

Atomic structure of ultrasound material not what anyone expected

21.02.2018 | Materials Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>