Innovation in Pricing
Contemporary Theories and Best Practices
Edited by Andreas Hinterhuber, Stephan Liozu
Routledge – 2012 – 420 pages
Pricing has a substantial and immediate impact on profitability. Most companies, however, still use costs or competition as a main basis for setting prices. Product or business model innovation has a high priority for many companies whereas innovation in pricing has received scant attention. This book examines how innovation in pricing can drive profits.
The text examines innovation in pricing from four complementary perspectives. Innovation in Pricing Strategy illustrates how companies implement innovative pricing strategies, such as customer value-based pricing. Innovation in Pricing Tactics deals with innovative tools to measure and increase customer willingness to pay and to communicate value to B2B and B2C customers. Innovation in Organizing the Pricing Function looks at state-of-the art approaches to embed the pricing function in the organization. Psychological Aspects of Pricing illustrates how companies can influence customer perceptions of value and price in their question to implement innovation in pricing.
This edited volume brings together 26 articles from academics, business practitioners and consultants. Authors are from the world’s largest companies, leading research-based universities and consulting companies specialized in pricing.
This book is the only book dedicated to innovation in pricing and an essential read for business executives and pricing managers wishing to treat innovation in pricing as seriously as they treat product or business model innovation.
'Finally, a book that gives dozens of examples of innovative pricing. Even one idea that grabs your attention can create a fortune.'
Philip Kotler, S.C. Johnson & Son Distinguished Professor of International Marketing at Kellogg School of Management, Northwestern University, USA
‘Getting a fair price for a superior offer should be value based. We at SKF believe that clearly demonstrated sustainable measured value is a cornerstone of gaining competitive advantage for industry as a whole. We want our customers to be profitable and successful. This book is a must read to those who want raise the level of performance of their enterprise to become a valuable contributor to the business sector they work in.’
Vartan Vartanian, President, Industrial Market, Regional Sales & Service of SKF, Sweden
‘The very premise of this book, that great pricing is driven by active "innovation", not passive "optimization", is itself innovative. This book is a chronology of value-based pricing innovations that have made some companies more profitable. It is both a source of inspiration and a guide to pricing more creatively and, therefore, more profitably. I hope it will prove inspirational to those who have heretofore lagged behind.’
Tom Nagle, Senior Advisor of Monitor and Author of The Strategy and Tactics of Pricing, USA
‘From historical perspectives to the latest strategies, innovations, metrics, and research, Innovation in Pricing – Contemporary Theories and Best Practices covers a wide range of important pricing topics from leaders in industry, academia, and expert content providers. It is this breadth in both subject matter and varied viewpoints that make this book a unique, valued resource for those who wish to drive results for their companies.’
Kevin Mitchell, President of The Professional Pricing Society, USA
‘An understanding of the mechanics of pricing is one of the key weak spots in the skill sets of those responsible for revenue generation – be they marketers or salespeople. I’ve waited a long time for a book that successfully opens up the mysteries of innovative pricing.’
David Thorp, Director of The Chartered Institute of Marketing, UK
‘At TrueFit, we believe that innovation is essential for people to thrive, and an essential ingredient in a thriving marketplace is a compelling value exchange. Too often, in settling for outdated or overly simplistic pricing models, we compromise the very client relationships we seek to elevate.Thank you for inspiring us to take a creative and intentional approach to our pricing and for clearly demonstrating the dramatic potential it holds to improve our client experience.’
Darrin Grove, CEO TrueFit Solutions Inc.,USA
‘A timely collection of contemporary insights about pricing’s continuing evolution. An important work helping to strengthen the bridge between academia and industry. This book offers just the right mix of pricing innovation examples from industry along with modern day academic research. A great encapsulation of current thinking new ideas and a must have for every pricing book collection.’
Richard Cardot, Simon Graduate School of Business, University of Rochester, USA
‘The brilliance of Innovation in Pricing is the ease with which Hinterhuber and Liozu bridges the vexing scholar-practitioner chasm by striping complex pricing ideas down to their pragmatic utility. By introducing innovative dimensions for thinking strategically about how components of the pricing mix can be optimized, their book is an essential read for executives and consultants in search of new combinations to revitalize the pricing function as a source of competitive advantage and value creation.’
Nnaoke Ufere, CEO of iServiceX, Inc., USA
‘Companies spent vast amount of resources in R&D, engineering and marketing while, most of the time, neglecting their pricing and value strategies. This book shows that pricing is a critical dimension of marketing strategies and that pricing innovation can bring the best out of these strategies. It also emphasizes the multi-dimensional nature of pricing which requires innovation, creativity and breakthrough thinking.’
Andreas Ising Schulze, CEO of Advanced Polymer Technology Corp., USA
‘Innovation in Pricing presents a refreshing and optimistic outlook for pricing – one that is pragmatic yet creative. The book guides innovation and related best practices based on real situations facing pricing which makes it a must-have for senior managers.’
Navdeep S. Sodhi, Sodhi Pricing and Author of Six Sigma Pricing, USA
‘Quite often, pricing discussions are simply a formality in strategic planning and budgeting sessions. But this book demonstrates the importance and value of strategic pricing initiatives. In today’s highly competitive markets, innovative pricing strategies could very well provide companies with the edge they need to succeed.’
Al Neupaver, President and CEO of Wabtec Corporation, USA
‘Our experience advising high tech startups has exposed us to innovation across the business spectrum – business models, products and technology. This book makes it clear that the often overlooked element of pricing is overdue for a bit of innovation as well. This book leaves no element overlooked – it addresses the organizational, strategic, tactical and psychological elements of pricing. It is a must have resource for both scholars and practitioners.’
Martin L. Abbott & Michael T. Fisher, AKF Partners, USA
‘Hinterhuber and Liozu represent a clear and steady voice in the movement to elevate the discipline of pricing to its rightful place…one that is strategic, with plenty of opportunity for innovation and value creation.’
Justin McElhattan, CEO of Industrial Scientific, USA
‘Andreas Hinterhuber’s and Stephan Liozu’s book Innovation in Pricing is a ground-breaking book on pricing theory and practice- a topic which influences each firm’s bottom line but rarely is addressed as a key topic in academic research in marketing or strategy.Their collection demonstrates the unique value that practitioner oriented scholarship can offer to the management theory and practice. It highlights well how the best practitioner scholars now truly create new vibrant interdisciplinary fields that demonstrate the value of problem oriented research and yet rely on rigorous academic scholarship. It represents an example of the best research we have generated in our practitioner oriented Doctor of Management program over the last years. I warmly recommend it to anyone who is interested in learning about practitioner oriented management scholarship in general and new innovative models and competencies of pricing in particular.’
Kalle Lyytinen, Weatherhead School of Management, Case Western Reserve University , USA
‘I really enjoyed reading this book as it is one of the very few books written from a true marketing angle and giving a real attractiveness to pricing theory. Consistent with the definition of an innovation, the authors suggest to CHANGE THE RULE of pricing and display a comprehensive list of pricing strategies to align price and value. Congratulations for this revolution in pricing!’
Paul Millier, EM Lyon, France
'This book is full of the latest pricing strategies practicing executives and researchers on marketing have to know.'
Atsuo Utaka,Kyoto University, Japan
Part I: Introduction 1. Innovation in Pricing Introduction (Andreas Hinterhuber and Stephan Liozu) Part II: Innovation in Organizing the Pricing Function 2. The Organizational Design of the Pricing Function in Firms: A Center-led Management Approach (Stephan Liozu and Kellie Ecker) 3. Organizational Barriers and the Implementation of Customer Value Map Analysis: A Case Study of a Global Manufacturing Firm in the Polymer Technology Industry (Niklas Hallberg and Linn Andersson) 4. CEO Championing of Pricing and the Impact on Firm Performance (Stephan Liozu, Andreas Hinterhuber, Sheri Perelli and Toni Somers) 5. Who is in Charge of Value? The Emerging Role of Chief Value Officer (Ron Baker and Stephan Liozu) 6. B2B Pricing Systems: Proving ROI (Mark Stiving) Part III: Innovation in Pricing Strategy 7. Effective Pricing Strategies in B2B Markets (Rafael Farres) 8. Why Segmentation Matters ( Linda Trevenen) 9. The Five Fundamental Value Factors ( Ralf Drews) 10. The Journey to Pricing Excellence: The Case of a Mid-sized Manufacturing Firm (Greg Hunsicker and Mike Crouch) 11. Pricing Processes in Fast Paced Business to Business Settings (Magnus Johansson) 12. Pricing Due Diligence in the Mergers and Acquisition Process (David Dvorin, Jered Haedt and Vernon Lennon) 13. Busting the Four Fatal Myths in Pricing (Nelson Hyde) 14. Creating and Communicating Customer Value: How Companies Can Set Premium Prices that Customers are Willing to Pay (Todd Snelgrove) 15. Pricing Strategies for Recessionary Times (Fernando Resende) 16. A Zero-Based Approach to the Pricing Strategy (Roberto Bedotto) Part IV: Innovation in Pricing Tactics 17. Using Economic Value Communication to Bend Business-to-Business Buyers’ Value Perceptions (Chris Provines) 18. Value: Distilling the Essence (Harry Macdivitt) 19. Innovation in Estimating Willingness to Pay (Niels Biehn and Craig Zawada) 20. Cross Functional Collaboration in Value-Based Pricing (Steven Forth) 21. Implementing Effective Pricing Strategies: Tools for Tracking Prices (Richard Coopolse) 22. Winning on the Margin: The B2B Value Imperative (Mike Moorman) 23. The Thick and Thin Tails of Pricing (Darren Huxol) Part V: Psychological Aspects of Pricing 24. Behavioral Aspects of Pricing (Ben Lowe, Julian Lowe and David Lynch) 25. Research on Odd Prices: Dead End or Field of Potential Innovation? (Carmen Balan) 26. Consumer Psychology and Software Pricing (Anshu Jalora) Part VI: The Next Frontier 27. The Next Frontier of the Pricing Profession ( Kevin Mitchell)
Andreas Hinterhuber is a Partner of Hinterhuber & Partners, a consultancy specialized in strategy, pricing, and leadership. He is also a visiting professor at Bocconi USI Lugano and at Bocconi University, Italy
Stephan Liozu is President and CEO of ARDEX Americas, a high performance building company. He is also a PhD in Management candidate (2013) at Case Western Reserve University, USA