Abstract
In an era of declining pricing power and increased global competition, customized solutions appear to be an effective way to build competitive advantages without the debilitating effects of price competition. Solutions involve provision of an integrated combination of goods and services that are designed to meet a business customer's specific needs. Premium prices and higher margins can be extracted by solution providers, who now have considerable incentives to design and market innovative solutions for their customers. We examine the applicability of various pricing frameworks and pricing practices in the context of two industries - business process outsourcing and power generation equipments. Our interviews suggest that firms predominantly use traditional pricing strategies; new strategies for solution pricing are only emerging; and, successful firms are currently using hybrid pricing models. We find that the solutions that we observed among practitioners are not what theory would suggest as true solutions but what would be described by theory as bundled products. We also find that solutions are in the eye of the beholder, i.e., if customers can de-bundle offerings, they are not true solutions. We extend our findings to academic theory and to the practice of developing and pricing solutions.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 723-729 |
| Number of pages | 7 |
| Journal | Industrial Marketing Management |
| Volume | 40 |
| Issue number | 5 |
| DOIs | |
| State | Published - Jul 1 2011 |
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Keywords
- Buyer-seller relationships
- Customer solutions
- Pricing solutions
- Value pricing
ASJC Scopus subject areas
- Marketing
Cite this
Are pricing policies an impediment to the success of customer solutions? / Sharma, Arun; Iyer, Gopalkrishnan R.
In: Industrial Marketing Management, Vol. 40, No. 5, 01.07.2011, p. 723-729.Research output: Contribution to journal › Article
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TY - JOUR
T1 - Are pricing policies an impediment to the success of customer solutions?
AU - Sharma, Arun
AU - Iyer, Gopalkrishnan R.
PY - 2011/7/1
Y1 - 2011/7/1
N2 - In an era of declining pricing power and increased global competition, customized solutions appear to be an effective way to build competitive advantages without the debilitating effects of price competition. Solutions involve provision of an integrated combination of goods and services that are designed to meet a business customer's specific needs. Premium prices and higher margins can be extracted by solution providers, who now have considerable incentives to design and market innovative solutions for their customers. We examine the applicability of various pricing frameworks and pricing practices in the context of two industries - business process outsourcing and power generation equipments. Our interviews suggest that firms predominantly use traditional pricing strategies; new strategies for solution pricing are only emerging; and, successful firms are currently using hybrid pricing models. We find that the solutions that we observed among practitioners are not what theory would suggest as true solutions but what would be described by theory as bundled products. We also find that solutions are in the eye of the beholder, i.e., if customers can de-bundle offerings, they are not true solutions. We extend our findings to academic theory and to the practice of developing and pricing solutions.
AB - In an era of declining pricing power and increased global competition, customized solutions appear to be an effective way to build competitive advantages without the debilitating effects of price competition. Solutions involve provision of an integrated combination of goods and services that are designed to meet a business customer's specific needs. Premium prices and higher margins can be extracted by solution providers, who now have considerable incentives to design and market innovative solutions for their customers. We examine the applicability of various pricing frameworks and pricing practices in the context of two industries - business process outsourcing and power generation equipments. Our interviews suggest that firms predominantly use traditional pricing strategies; new strategies for solution pricing are only emerging; and, successful firms are currently using hybrid pricing models. We find that the solutions that we observed among practitioners are not what theory would suggest as true solutions but what would be described by theory as bundled products. We also find that solutions are in the eye of the beholder, i.e., if customers can de-bundle offerings, they are not true solutions. We extend our findings to academic theory and to the practice of developing and pricing solutions.
KW - Buyer-seller relationships
KW - Customer solutions
KW - Pricing solutions
KW - Value pricing
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U2 - 10.1016/j.indmarman.2011.06.002
DO - 10.1016/j.indmarman.2011.06.002
M3 - Article
AN - SCOPUS:79960390178
VL - 40
SP - 723
EP - 729
JO - Industrial Marketing Management
JF - Industrial Marketing Management
SN - 0019-8501
IS - 5
ER -