TÖYTÄRI - BARRIERS TO VALUE BASED PRICING

Question 1

CUSTOMER PERCEIVED VALUE

Answer 1

= difference between perceived benefits & perceived sacrifices

1. operational value = organizational performance of the company
2. strategic value = leveraging existing capabilities or developing new ones through learning, know-how exchange or innovation
3. social value = supplier relationship or network - improved legitimacy
4. symbolic value = internal motivation pride & job satisfaction

Question 2

ACTIONS/SOLUTIONS TO VALUE BASED PRICING

Answer 2

1. Understanding and influencing customer desired value
   = analyze customer value & proactive marketing and sales at an early stage of buying process
2. Influencing CPV by qualifying and communicating value
   = identify salient dimensions of value
3. Sharing the value
   = capturing a fair share of the value created

Question 3

BARRIERS TO VALUE BASED PRICING

Answer 3

1. • no access to influence buyers (buyers focus on initial price only)
     - limited receptivity (focus on price only)
     - goal conflict (organization incentives to encourage price savings)
     - too late to influence ( buyers in the beginning of the selection process)
2. • difficult to obtain essential data to define CPV
     - lack of trust (sharing data)
     - reluctance to quantify value (could be used by sellers to increase prices)
     - value function (not known)
3. • established cost based pricing and perceived fairness -> not deviating from the norm
     - value at risk - risk of failure

Question 4

CUSTOMER PERCEIVED NET BENEFITS

Answer 4

• limit of customers WTP
• customer-perceived value = net benefit-price
  = price determines how value is shared
  -> no value for supplier if price is lower than costs