European Journal of Business Science and Technology 2021, 7(1):27-46 | DOI: 10.11118/ejobsat.2021.004

Industry-Specific Factors Impeding the Implementation of Value-Based Pricing

Florian Steinbrenner1, Jana Turčínková1
1 Mendel University in Brno, Czech Republic

Value-based pricing (VBP) is often considered the most profitable pricing method. However, VBP is rarely implemented by companies. This research study asks the question Why? and investigates the obstacles to an implementation of VBP. The objectives of this paper are to provide an assessment of customer-based obstacles to implement VBP in four different German industries and to evaluate the degree of company-based obstacles by industry. For that purpose, 792 consumer questionnaires were collected and 20 expert interviews were conducted. The results show that the technology industry is the German industry with the lowest obstacles, while the pharmaceutical industry experiences the strongest obstacles. The degree of obstacles varies significantly by industry. This study contributes to theory by taking both a customer perspective and a business perspective towards VBP while identifying the degree of the obstacles to implement VBP by industry. This paper allows future researchers and business practitioners to assess the industry-specific obstacles and take appropriate measures to overcome them.

Keywords: value, pricing, implementation, obstacles, strategy
JEL classification: D46, L11

Received: August 22, 2020; Revised: March 5, 2021; Accepted: March 28, 2021; Published: August 9, 2021  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Steinbrenner, F., & Turčínková, J. (2021). Industry-Specific Factors Impeding the Implementation of Value-Based Pricing. European Journal of Business Science and Technology, 7(1), 27-46. doi: 10.11118/ejobsat.2021.004
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Adams, W. C. 2015. Conducting Semi-Structured Interviews. In Newcomer, K. E., Hatry, H. P. & Wholey, J. S. (eds.). Handbook of Practical Program Evaluation, chapter 19, 492-505. DOI: 10.1002/9781119171386.ch19. Go to original source...
    2. Anderson, J. C., Wouters, M. & van Rossum, W. 2010. Why the Highest Price isn't the Best Price? MIT Sloan Management Review, 51 (2), 69-76.
    3. Baker, W. L., Marn, M. V. & Zawada, C. C. 2010. Building a Better Pricing Infrastructure. McKinsey Quarterly [online]. Available at: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/building-a-better-pricing-infrastructure.
    4. Blois, K. J. & Ramírez, R. 2006. Capabilities as Marketable Assets: A Proposal for a Functional Categorization. Industrial Marketing Management, 35 (8), 1027-1031. DOI: 10.1016/j.indmarman.2006.06.004. Go to original source...
    5. Bruck, L. 2010. The Price is Right ... Or is it? Manufacturers are Using Value-Based Pricing and Customer Choice to Generate Profits. EHS Today, 3 (10), F-2.
    6. Cannon, H. M. & Morgan, F. W. 1990. A Strategic Pricing Framework. Journal of Services Marketing, 4 (2), 19-30. DOI: 10.1108/EUM0000000002508. Go to original source...
    7. Ceylana, H. H., Koseb, B. & Aydin, M. 2014. Value Based Pricing: A Research on Service Sector Using van Westendorp Price Sensitivity Scale. Procedia - Social and Behavioural Sciences, 148, 1-6. DOI: 10.1016/j.sbspro.2014.07.013. Go to original source...
    8. Codini, A., Saccani, N. & Sicco, A. 2012. The Relationship Between Customer Value and Pricing Strategies: an Empirical Test. Journal of Product & Brand Management, 21 (7), 538-546. DOI: 10.1108/10610421211276321. Go to original source...
    9. Collins, M. & Parsa, H. G. 2006. Pricing Strategies to Maximize Revenues in the Lodging Industry. International Journal of Hospitality Management, 25 (1), 91-107. DOI: 10.1016/j.ijhm.2004.12.009. Go to original source...
    10. Danzon, P. M. 2018. Affordability Challenges to Value-Based Pricing: Mass Diseases, Orphan Diseases, and Cures. Value in Health, 21 (3), 252-257. DOI: 10.1016/j.jval.2017.12.018. Go to original source...
    11. Ding, W. 2007. Services Pricing through Business Value Modeling and Analysis. In IEEE International Conference on Services Computing (SCC), pp. 380-386. DOI: 10.1109/SCC.2007.107. Go to original source...
    12. Dittmer, D. 2017. Krebsmittel werden für viele unerschwinglich. [online]. Available at: https://www.n-tv.de/wirtschaft/Krebsmittel-werden-fuer-viele-unerschwinglich-article20202573.html
    13. Dixit, A. & Nalebuff, B. 2019. Game Theory. [online]. Available at: https://www.econlib.org/library/Enc/GameTheory.html.
    14. Drummond, M. & Towse, A. 2019. Is Rate of Return Pricing a Useful Approach when Value-Based Pricing is Not Appropriate? The European Journal of Health Economics, 20 (7), 945-948. DOI: 10.1007/s10198-019-01032-7. Go to original source...
    15. Dutta, S., Bergen, M., Levy, D., Ritson, M. & Zbaracki, M. J. 2002. Pricing as a Strategic Capability. MIT Sloan Management Review, 43 (3), 61-66.
    16. Dutta, S., Zbaracki, M. J. & Bergen, M. 2003. Pricing Process as a Capability: A Resource-Based Perspective. Strategic Management Journal, 24 (7), 615-630. DOI: 10.1002/smj.323. Go to original source...
    17. Eggert, A., Ulaga, W. & Schultz, F. 2006. Value Creation in the Relationship Life Cycle: A Quasi-Longitudinal Analysis. Industrial Marketing Management, 35 (1), 20-27. DOI: 10.1016/j.indmarman.2005.07.003. Go to original source...
    18. Flick, U., von Kardorff, E. & Steinke, I. (eds.). 2008. Qualitative Forschung. Ein Handbuch. Tenth Edition. Reinbek: Rowohlt. ISBN 978-3499556289.
    19. Flint, D. J., Woodruff, R. B. & Gardial, S. F. 2002. Exploring the Phenomenon of Customers' Desired Value Change in a Business-to-Business Context. Journal of Marketing, 66 (4), 102-117. DOI: 10.1509/jmkg.66.4.102.18517. Go to original source...
    20. Forbis, J. L. & Mehta, N. T. 1981. Value-Based Strategies for Industrial Products. Business Horizons, 24 (3), 32-42. Go to original source...
    21. Frohmann, F. 2018. Digitales Pricing. Strategische Preisbildung in der digitalen Wirtschaft mit dem 3-Level-Modell. Springer Gabler. DOI: 10.1007/978-3-658-22573-5. Go to original source...
    22. Garner, S., Rintoul, A. & Hill, S. R. 2017. Value-Based Pricing: L'Enfant Terrible? PharmacoEconomics, 36, 5-6. DOI: 10.1007/s40273-017-0567-4. Go to original source...
    23. Garrison, L. P. & Towse, A. 2017. Value-Based Pricing and Reimbursement in Personalised Healthcare: Introduction to the Basic Health Economics. Journal of Personalized Medicine, 7 (3), 10. DOI: 10.3390/jpm7030010. Go to original source...
    24. Garrison, L. P., Jackson, T., Douglas, P. & Kenston, M. 2019. Value-Based Pricing for Emerging Gene Therapies: The Economic Case for a Higher Cost-Effectiveness Threshold. Journal of Managed Care + Specialty Pharmacy, 25 (7), 793-799. DOI: 10.18553/jmcp.2019.18378. Go to original source...
    25. Gosselin, D. P. & Bauwen, G. A. 2006. Strategic Account Management: Customer Value Creation Through Customer Alignment. Journal of Business & Industrial Marketing, 21 (6), 376-385. DOI: 10.1108/08858620610690137. Go to original source...
    26. Guerreiro, R. & Amaral, J. V. 2018. Cost-Based Price and Value-Based Price: Are They Conflicting Approaches? Journal of Business & Industrial Marketing, 33 (3), 390-404. DOI: 10.1108/JBIM-04-2016-0085. Go to original source...
    27. Harmon, R., Demirkan, H., Hefley, B. & Auseklis, N. 2009. Pricing Strategies for Information Technology Services: A Value-Based Approach. In 42nd Hawaii International Conference on System Sciences, pp. 1-10. DOI: 10.1109/HICSS.2009.350. Go to original source...
    28. Harris, G. 1994. International Advertising Standardization: What Do Multinationals Actually Standardize? Journal of International Marketing, 2 (4), 13-30. DOI: 10.1177/1069031X9400200402. Go to original source...
    29. Harvey, M. G. 1993. Point of View: A Model to Determine Standardization of the Advertising Process in International Marketing. Journal of Advertising Research, 33 (4), 57-64.
    30. Hinterhuber, A. 2008a. Customer Value-Based Pricing Strategies: Why Companies Resist. Journal of Business Strategy, 29 (4), 41-50. DOI: 10.1108/02756660810887079. Go to original source...
    31. Hinterhuber, A. 2008b. Value Delivery and Value-Based Pricing in Industrial Markets. Advances in Business Marketing and Purchasing, 14 (8), 381-448. DOI: 10.1016/S1069-0964(08)14011-X. Go to original source...
    32. Hinterhuber, A. & Bertini, M. 2011. Profiting When Customers Choose Value Over Price. Business Strategy Review, 22 (1), 46-49. DOI: 10.1111/j.1467-8616.2011.00727.x. Go to original source...
    33. Hinterhuber, A. & Liozu, S. M. 2012. Is it Time to Rethink Your Pricing Strategy? MIT Sloan Management Review, 53 (4), 69-77.
    34. Horngren, C. T. & Foster, G. 1991. Cost Accounting: A Managerial Approach. New Jersey: Upper Saddle River Prentice Hall.
    35. Hünerberg, R. & Hüttmann, A. 2003. Performance as a Basis for Price-setting in the Capital Goods Industry: Concepts and Empirical Evidence. European Management Journal, 21 (6), 717-730. DOI: 10.1016/j.emj.2003.09.014. Go to original source...
    36. Hung, W.-T., Shang, J.-K. & Wang, F.-C. 2010. Pricing Determinants in the Hotel Industry: Quantile Regression Analysis. International Journal of Hospitality Management, 29 (3), 378-384. DOI: 10.1016/j.ijhm.2009.09.001. Go to original source...
    37. Indounas, K. 2009. Successful Industrial Service Pricing. Journal of Business & Industrial Marketing, 24 (2), 86-96. DOI: 10.1108/08858620910931703. Go to original source...
    38. Ingenbleek, P., Debruyne, M., Frambach, R. T. & Verhallen, T. M. M. 2003. Successful New Product Pricing Practices: A Contingency Approach. Marketing Letters, 14 (4), 289-305. DOI: 10.1023/B:MARK.0000012473.92160.3d. Go to original source...
    39. Jommi, C., Armeni, P., Costa, F., Bertolani, A. & Otto, M. 2020. Implementation of Value-Based Pricing for Medicines. Clinical Therapeutics. 42 (1), 15-24. DOI: 10.1016/j.clinthera.2019.11.006. Go to original source...
    40. Kienzler, M. 2018. Value-Based Pricing and Cognitive Biases: An Overview for Business Markets. Industrial Marketing Management, 68, 86-94. DOI: 10.1016/j.indmarman.2017.09.028. Go to original source...
    41. Kowalkowski, C. 2011. Dynamics of Value Propositions: Insights from Service-Dominant Logic. European Journal of Marketing, 45 (1/2), 277-294. DOI: 10.1108/03090561111095702. Go to original source...
    42. Kurz, W. & Többens, T. 2012. Global Pricing Survey: Managing Global Pricing Excellence. [online]. Available at: https://www2.deloitte.com/content/dam/Deloitte/de/Documents/strategy/C-studie-b2b-pricing_122012.pdf
    43. Liinamaa, J., Viljanen, M., Hurmerinta, A., Ivanova-Gongne, M., Luotola, H. & Gustafsson, M. 2016. Performance-Based and Functional Contracting in Value-Based Solution Selling. Industrial Marketing Management, 59, 37-49. DOI: 10.1016/j.indmarman.2016.05.032. Go to original source...
    44. Likert, R. 1932. A Technique for the Measurement of Attitudes. Archives of Psychology, 22 (140), 5-55.
    45. Lindgreen, A. & Wynstra, F. 2005. Value in Business Markets: What Do We Know? Where Are We Going? Industrial Marketing Management, 34 (7), 732-748. DOI: 10.1016/j.indmarman.2005.01.001. Go to original source...
    46. Liozu, S. M. 2017. State of Value-Based-Pricing Survey: Perceptions, Challenges, and Impact. Journal of Revenue and Pricing Management, 16 (1), 18-29. DOI: 10.1057/s41272-016-0059-8. Go to original source...
    47. Liozu, S. M., Hinterhuber, A., Boland, R. & Perelli, S. 2012a. The Conceptualization of Value-Based Pricing in Industrial Firms. Journal of Revenue and Pricing Management, 11 (1), 12-34. DOI: 10.1057/rpm.2011.34. Go to original source...
    48. Liozu, S. M., Hinterhuber, A., Perelli, S. & Boland, R. 2012b. Mindful Pricing: Transforming Organizations Through Value-Based Pricing. Journal of Strategic Marketing, 20 (3), 197-209. DOI: 10.1080/0965254X.2011.643916. Go to original source...
    49. Mayring, P. & Brunner, E. 2009. Qualitative Inhaltsanalyse. In Buber, R. & Holzmüller, H. H. (eds.). Qualitative Marktforschung: Konzepte - Methoden - Analysen, pp. 669-680. Wiesbaden: Gabler. Go to original source...
    50. Michel, S. & Pfäffli, P. 2012. Obstacles to Implementing Value-Based Pricing. [online]. Available at: https://pdfs.semanticscholar.org/d4de/3547d8efc9a9326728e0dd9c20f97510b571.pdf
    51. Nagle, T. T. & Hogan, J. E. 2007. Is Your Sales Force a Barrier to More Profitable Pricing ... Or Is It You? Business Strategy Series, 8 (5), 365-368. DOI: 10.1108/17515630710684484. Go to original source...
    52. Nagle, T. T. & Müller, G. 2018. The Strategy and Tactics of Pricing. A Guide to Growing More Profitably. 6th ed. Routledge. Go to original source...
    53. Nagle, T. T., Hogan, J. E. & Zale, J. 2011. The Strategy and Tactics of Pricing: A Guide to Growing More Profitably. 5th ed. Prentice Hall, New Jersey.
    54. Nenonen, S. & Storbacka, K. 2010. Business Model Design: Conceptualizing Networked Value Co-Creation. International Journal of Quality and Service Sciences, 2 (1), 43-59. DOI: 10.1108/17566691011026595. Go to original source...
    55. Noble, P. M. & Gruca, T. S. 1999. Industrial Pricing: Theory and Managerial Practice. Marketing Science, 18 (3), 435-454. DOI: 10.1287/mksc.18.3.435. Go to original source...
    56. Parmar, A., Jiao, T., Saluja, R. & Chan, K. K. W. 2019. Value-Based Pricing: Toward Achieving a Balance between Individual and Population Gains in Health Benefits. Cancer Medicine, 9 (1), 94-103. DOI: 10.1002/cam4.2694. Go to original source...
    57. Piercy, N. F., Cravens, D. & Lane, N. 2010. Thinking Strategically about Pricing Decisions. Journal of Business Strategy, 31 (5), 38-48. DOI: 10.1108/02756661011076309. Go to original source...
    58. Provines, C. D. 2010. Overcoming Organizational Barriers to Implementing Value-Based Pricing in the Medical Devices & Diagnostics Industry. Journal of Medical Marketing: Device, Diagnostic and Pharmaceutical Marketing, 10 (1), 37-44. DOI: 10.1057/jmm.2009.47. Go to original source...
    59. Ramírez, R. 1999. Value Co-Production: Intellectual Origins and Implications for Practice and Research. Strategic Management Journal, 20 (1), 49-65. DOI: 10.1002/(SICI)1097-0266(199901)20:1<49::AID-SMJ20>3.0.CO;2-2. Go to original source...
    60. Reinecke, S., Mühlmeier, S. & Fischer, P. M. 2009. Die van Westendorp-Methode: Ein zu Unrecht vernachlässigtes Verfahren zur Ermittlung der Zahlungsbereitschaft? WiSt - Wirtschaftswissenschaftliches Studium, 38 (2), 97-100. DOI: 10.15358/0340-1650-2009-2-97. Go to original source...
    61. Reynolds, H. 2018. Advantages and Disadvantages of Value-Based Pricing. [online]. Available at: http://saasbrand.com/advantages-value-base-pricing/
    62. Roll, O., Pastuch, K. & Buchwald, G. 2012. Praxishandbuch Preismanagement. Strategien - Management - Lösungen. Weinheim: Wiley.
    63. Rosenbloom, B., Larsen, T. & Mehta, R. 1997. Global Marketing Channels and the Standardization Controversy. Journal of Global Marketing, 11 (1), 49-64. Go to original source...
    64. Saunders, M. N. K. & Tosey, P. 2013. The Layers of Research Design. Rapport, 58-59.
    65. Shaker, M. & Greenhawt, M. 2018. Association of Fatality Risk With Value-Based Drug Pricing of Epinephrine Autoinjectors for Children With Peanut Allergy. A Cost-effectiveness Analysis. JAMA Network Open, 1 (7), 1-10. DOI: 10.1001/jamanetworkopen.2018.4728. Go to original source...
    66. Shipley, D. & Jobber, D. 2001. Integrative Pricing via the Pricing Wheel. Industrial Marketing Management, 30 (3), 301-314. DOI: 10.1016/S0019-8501(99)00098-X. Go to original source...
    67. Simon, H. & Dolan, R. J. 1997. Profit durch Power Pricing: Strategien aktiver Preispolitik. Frankfurt a. M.: Campus.
    68. Simon, H. & Fassnacht, M. 2008. Preismanagement: Strategie - Analyse - Entscheidung - Umsetzung. 3rd ed. Wiesbaden: Gabler.
    69. Simon, H. & Fassnacht, M. 2016. Preismanagement: Strategie - Analyse - Entscheidung - Umsetzung. 4th ed. Wiesbaden: Gabler. Go to original source...
    70. Slywotzky, A. J. 1996. Value Migration. Boston, MA: Harvard Business School Press.
    71. Steinbrenner, F. 2020. Implementing Value-Based Pricing - New Barriers and How to Overcome Them. Journal for Advanced Research in Applied Sciences, 7 (11), 1-5. ISSN 2394-8442.
    72. Strauss, A. & Corbin, J. 1994. Grounded Theory Methodology. An Overview. In Strategies of Inquiry, chapter 17, pp. 273-285. [online]. Available at: http://www.depts.ttu.edu/education/our-people/Faculty/additional_pages/duemer/epsy_5382_class_materials/Grounded-theory-methodology.pdf.
    73. Tacke, G., Vidal, D. & Ehrhardt, A. 2012. The Key to Higher Profits: Pricing Power. [online]. 27 pp. Available at: http://www.nelsonpricing.com.ar/biblioteca_pricing/2013_04_The_key_to_higher_profits_Tacke_G.pdf.
    74. Terho, H., Haas, A., Eggert, A. & Ulaga, W. 2012. It's Almost Like Taking the Sales Out of Selling - Towards a Conceptualization of Value-Based Selling in Business Markets. Industrial Marketing Management, 41 (1), 174-185. DOI: 10.1016/j.indmarman.2011.11.011. Go to original source...
    75. Tohamy, N. & Keltz, H. 2008. Building a Bulletproof Business Case for Pricing Improvement Initiatives. [online]. Available at: http://www.accenture.com/Global/Consulting/Strategy/Pricing_and_Profit_Optimization/R_and_I/AMRInitiatives.htm.
    76. Töytäri, P., Keränen, J. & Rajala, R. 2017. Barriers to Implementing Value-Based Pricing in Industrial Markets: A Micro-Foundations Perspective. Journal of Business Research, 76 (C), 237-246. DOI: 10.1016/j.jbusres.2016.04.183. Go to original source...
    77. Töytäri, P., Rajala, R. & Alejandro, T. B. 2015. Organizational and Institutional Barriers to Value-Based Pricing in Industrial Relationships. Industrial Marketing Management, 47, 53-64. DOI: 10.1016/j.indmarman.2015.02.005. Go to original source...
    78. van Westendorp, P. H. 1976. NSS Price Sensitivity Meter (PSM): A New Approach to Study Consumer Perceptions of Prices. In Proceedings of the 29th ESOMAR Congress, Venice, Italy, pp. 139-167.
    79. Vargha, A. & Delaney, H. D. 1998. The Kruskal-Wallis Test and Stochastic Homogeneity. Journal of Educational and Behavioral Statistics, 23 (2), 170-192. DOI: 10.3102/10769986023002170. Go to original source...
    80. Vargo, S. L. & Lusch, R. F. 2004. Evolving to a New Dominant Logic for Marketing. Journal of Marketing Research, 68 (1), 1-17. DOI: 10.1509/jmkg.68.1.1.24036. Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-ShareAlike 4.0 International License (CC BY-SA 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content