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discussion of a new study titled "Store Choice and Shopping Behavior: How Price Format Works."; Research on retailing typically attributes the success of a store to its location. At the same time, marketing experts have focused a great deal of attention on the role of pricing in store performance, but without considering location. In this recent study, Bell, Ho and Tang provide managers with a new shopping framework that takes both criteria into account.

And customers couldn't be happier. Why flat rates and fixed prices rule.

Article argues that pricing has traditionally played a tactical rather than a strategic role. Most companies based their prices on cost-plus considerations or competitive comparisons, not concrete strategic goals. But the role of pricing is rapidly changing. To take advantage of these changes, CEOs and managers should consider the following five steps:
1 Link pricing more closely to shareholder value
2. Give pricing more power in the corporate hierarchy
3. Avoid aggressive pricing
4. Remember that Internet pricing favors the buyer rather than the seller
5. Treat pricing as a "science" similar to finance

Companies are fine-tuning their price strategies - and it's paying off.

With the click of a mouse, the ability of consumers to compare prices for everything from a new car to a new condo to a new coat has been dramatically transformed. Businesses in turn have had to throw out old, static pricing models and find new ways to respond to customers' digital dexterity. Results have been mixed.

The goal of this paper is to explain some of the changes under way in online pricing and consider the implications for companies selling over the Internet. It will examine three areas:
- Pricing in multiple channels
- Global pricing
- Dynamic pricing

"The Internet makes it easy for everyone to compare prices - not just the buyers, but sellers, too. Businesses check prices with search engines that are just as good as any consumer's, and they probably use the tools more often. Once businesses see competitors' pricing, they may react instantly - but not necessarily in ways that will lead to price cuts. Instead, businesses with great knowledge of each other often engage in what economists call 'tacit collusion.' The concept states that companies come to recognize how intertwined they are with one another, especially when they interact over and over. The belief is that businesses will maintain noncompetitive prices, even if they don't explicitly collude . . . Sure, some small, new competitor can come in and undercut the bigger producers or retailers for a while. But the leading players, those with a strong customer base and brand name, behave as though they believe in the Cold War doctrine of 'mutually assured destruction.'"

Two widely disparate approaches to pricing have dominated the sale of goods and services on the Internet.

Editor's Note: although written in 2001 (a lifetime ago in the "Internet age"), much of the suggestions are of long-lasting value...

Differences in local preferences require organizations to adapt pricing policies when appealing to international markets. In Japan, for example, status, quality and price are so deeply linked that price reductions often have the surprising effect of reducing sales. This paper seeks to discuss the factors that must be taken into account when determining the international pricing of a product. It also seeks to identify ways in which international pricing can be used to gain a competitive advantage.

Note: Older EBF articles are not currently online. I'm not sure if this is temporary or permanent. If you click you will be taken to the Archive.org site to find an archived copy.

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Werner Reinartz describes how the online world has increased the opportunities to pursue customised pricing strategies. But there are also risks. Also includes 'In my opinion…' where Orestis Terzidis of SAP, Germany, says technology is no limitation to dynamic pricing, while Carl-Erik Schelleman of KLM describes the airline's new approach.

Note: you can read the article on the web page, but for a bigger font and to get the graphics referenced, read the .pdf version instead (link on the right side of page).

The Cap Gemini Ernst & Young Center for Business Innovation has researched more than 60 new business drivers and examined more than 50 company examples to determine which dynamic pricing model best supports the external environment and business strategy of a particular business. From this extensive research they have developed a dynamic pricing methodology for successful pricing. This white paper provides an overview of their findings, the methodology, and suggests how it can be applied to business.

Editor's Note: see related Business Finance article, "What Traffic Will Bear"
http://www.businessfinancemag.com/magazine/archives/article.html?articleID=13725&Print=Y

Hammered by competitive thrusts and pressured by customer demands for lower prices, companies are increasingly finding prices in a downward spiral. But price problems are rarely pricing problems! Value pricing provides the alternative!

Not every industry or company can benefit from performance-based pricing. But where there is a fit, PBP can be a powerful tool that merges the interests of buyers and sellers, says Harvard Business School professor Benson Shapiro.

In trying to assess consumer attitudes towards pricing, marketing professor Lisa Bolton and two other researchers conducted experiments designed to measure whether shoppers feel they get a fair shake from the businesses they regularly patronize. The answer, it turns out, is no. Consumers in fact routinely assume that companies gouge them and reap large profits. The results of this research are summarized in a new paper entitled, "Consumer Perceptions of Price (Un)Fairness."

Note: Business 2.0 is now part of CNNmoney and some older articles are no longer available

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New software calculates precisely how much you should charge to squeeze maximum profit from every product, at any time.

Though a bit topical, this short piece offers some useful general pricing observations.

When to charge for a product or service can be more important than how much to charge, says Harvard Business School professor John Gourville. If you want to build long-term loyalty with customers, you better understand the difference.

Pricing decisions can become significantly more manageable when supported with effective pricing research. The key to it, like with any research, is designing it right and executing it effectively. This article offers a framework, entitled the "5 Cardinal Rules of Pricing Research", that will help your company make those critical pricing decisions, but also make you more effective in providing the answers.

Too many businesses are price takers, not price makers. That means they are willing to lower prices to capture market share or to sign up a marquee customer. But Harvard Business School professor Benson P. Shapiro says don't let your ego get in the way of good business sense. Here are seven steps toward naming your own price.

It is an urgent question: How can we increase profits if we can't raise prices? The answer demands revolutionary thinking -- new insights about strategy and human behavior, turbocharged with software, mathematics, and rapid-fire experimentation. Is your company ready to master the new era of pricing? Are you prepared to pay the price of failure?

Should your firm target your competitors' customers with lower prices than the competition charges them? When might it make sense, instead, to offer discounts to your own customers? Under what conditions might this sort of approach - known as "targeted pricing" - backfire by driving everyone's prices down too far? Recent research by Wharton marketing professor Z. John Zhang and several colleagues examines the complex dimensions of "targeted pricing" and suggests guidelines to help companies understand when "targeted pricing" might play an effective role in their marketing strategy.

Sustaining a start-up in the digital economy is a delicate balancing act that requires taking into account the perspectives of a variety of stakeholders, including customers, suppliers, shareholders, investors, competitors, government and other entities. The goal of a start-up executive should be to create a business model that attains a stable state between all of these dimensions and adapts to changing times. Pricing strategy requires a similar balance between three primary elements: the business objectives of the start-up, how much a customer is willing to pay for the value delivered, and how much a supplier is willing to pay. Pricing that has been added as a feature to a start-up business plan after the fact, without taking into account what the customers are willing to pay for, may lead to a failed business. But a pricing strategy that is acceptable to customers and also meets business plan expectations is the cornerstone to a start-up's success in the digital economy.

Learn how it's possible to significantly increase profits by raising or lowering the price of your product or service.

Ever-changing, 'dynamic' pricing may be the wave of the future, but many customers resist.

Frequently varying online prices in response to changing market conditions can maximize returns and create a potential new source of competitive advantage. So why are so few companies putting this strategy to use?

Is your store set up to reassure consumers that your prices are good value? Here's how to tell shoppers that the price you want is also the price they want.

When Wharton professor Marshall Fisher and colleague Vishal Gaur did a controlled pricing experiment in 18 stores belonging to the Zany Brainy retail toy chain, they came away with a surprising result. The experiment, which had been designed to measure how demand for three separate products varied with price, showed, among other things, that pricing is not always logical. In a paper entitled, "In-Store Experiments to Determine the Impact of Price on Sales," Fisher and Gaur discuss their findings and present a methodology that they say will improve the accuracy of in-store testing.

The two most popular approaches to pricing a new product or service are cost and competitive positioning. But it's time for a third option: an approach that focuses on value. Unlike the traditional methods, companies use value-based pricing to build a deeper understanding of their customers' business drivers, align their goals with their customers' goals, and share in each others fortunes in a way that isn't possible with more traditional pricing schemes.

This paper discusses A.T. Kearney's approach to value-based pricing. We begin by outlining the basic steps: how to determine what is valuable, what is not, and the obstacles companies may encounter. The paper discusses ways to gain a clear understanding of the customer's economic performance, and how to quantify the full value that a new offering can create. It also discusses how to "sell" value to customers and, finally, how to ensure that the value is split equitably between buyers and sellers.

Companies habitually charge less than they could for new offerings. It's a terrible habit.

Pricing, the intersection at which untold numbers of buyers and sellers meet every day, lies at the core of any business. Yet it remains misunderstood and poorly managed, according to The Price Advantage, a new book by three consultants at McKinsey & Co. Even executives at successful companies may not fully appreciate how small changes in price can lead to large changes in profitability. Wharton marketing professor David J. Reibstein spoke recently with one of the authors about the themes in their book.