HOMBURG - HOW TO ORGANIZE PRICING

Question 1

VERTICAL DELEGATION OF PRICING AUTHORITY

Answer 1

• extent to which salespeople are independent from central sales management in pricing decisions

Question 2

HORIZONTAL DISPERSION

Answer 2

• degree to which sales, marketing and finance share influence on strategic pricing decisions
• focuses on strategic, less frequent, more long-term fundamental decisions

Question 3

MARGIN BASED INCENTIVES

Answer 3

• extent to which achieved profitability rather than sales volume drive variable pay of salespeople

Question 4

HYPOTHESES

Answer 4

1. inverted U-shape relation between vertical delegation of pricing authority and ROA
2. positive relation between horizontal dispersion of pricing authority and ROA
3. degree of horizontal dispersion positively moderates the effect of vertical delegation on ROA.
4. use of margin-based incentives positively moderates the effect of vertical delegation on ROA.
5. degree of price-related market dynamism positively moderates the effect of horizontal dispersion on ROA

Question 5

KEY FINDINGS

Answer 5

• trade-off between advantages of sales person superior specific knowledge & disadvantage of tendency to give discounts/reduce margin
• sources for pricing decision become more diverse with horizontal dispersion
• horizontal dispersion mitigates the negative consequences of high vertical delegation & enhances its advantages
• salespeople ability to react quickly and decide is more valuable under high dynamic market conditions. Dynamics create uncertainty that can be faced with horizontal dispersion

-