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Introduction
Of the three main approaches to pricing used in industrial markets - cost-based, competition-based and value-based - the third is considered superior by marketing scholars and pricing practitioners. But only a few industrial firms have adopted it: cost-based and competition-based approaches continue to play a dominant role in industrial pricing practice ([2] Coe, 1990; [24] Shipley and Bourdon, 1990; [21] Noble and Gruca, 1999).
The marketing and pricing literature is silent on how organizational and behavioral characteristics of industrial firms may affect pricing orientation ([9] Ingenbleek, 2007) and on how pricing orientations may affect the final price-setting process for industrial products. To address this phenomenological gap, we designed a qualitative inquiry based on semi-structured interviews with managers in small- and medium-sized US industrial firms that have successfully adopted value-based pricing. We also interviewed managers in similar firms that have not adopted this pricing approach. By probing the "lived worlds" of these executives, we hoped to generate a grounded theory about the organizational practices that contribute to or hinder the development and implementation of modern pricing practices and how they are used in the price-setting process in industrial markets.
Our results reflect similarities and differences in the experiences of managers in industrial firms using all three pricing orientations. They contrast firms and leaders with respect to how they organize for pricing, manage the pricing process, make product-pricing decisions, manage the transition to more advanced pricing orientations, and develop internal capabilities to face uncertain and ambiguous decisions.
Research design
Theoretical foundation
Our work was informed by two key management theories - organizational theory and the theory of the firm - as well as by pricing literature focused on firm pricing orientation. Among the vast array of derivative theories that surround organizational theory and theory of the firm, we focused, relative to the first, on organizational decision-making theory ([14] March, 1994), and, relative to the second, on the behavioral theory of the firm ([5] Cyert and March, 1992) and the resource-based view of the firm ([31] Wernerfelt, 1984).
Methodological approach
We conducted a qualitative study using semi-structured interviews to develop a grounded theory ([4] Corbin and Strauss, 2008) about how organizational factors affect the adoption of a pricing approach in industrial firms. We sought a better understanding...