Marketing‐orientated pricing

Abstract

PurposeThe paper aims to test seven marketing‐orientated factors that have the potential to discriminate between the setting of successful high and low prices. The significant factors are then applied by means of a decision support model that can be used by managers to aid their price decision‐making.Design/methodology/approachFollowing exploratory research, a mail survey was conducted using a questionnaire based on the dual scenario technique.FindingsSix marketing‐orientated factors – i.e. ability of customers to pay, brand value, degree of competition, price acting as a barrier to entry, demand compared to supply, and the use of a building market share objective – significantly discriminated between the use of successful high versus low price strategies. Using these variables, a highly statistically significant model was developed based on discriminant analysis.Research limitations/implicationsThe sample excludes services and is based on responses from managers. Cost‐orientated factors were excluded from investigation to provide focus. The study demonstrates the potential for using the dual scenario technique in survey research, provides measures for seven constructs and highlights the dangers of using reverse‐polarity items to measure constructs.Practical implicationsThe decision support model can be used by managers to aid their price decision‐making. The significant factors can also be helpful in market segmentation and targeting analysis.Originality/valueThe study supports a marketing‐orientated theory of price determination based on market, customer and competitor factors. It is the first to provide a systematic and cogent analysis of marketing‐orientated variables that have the potential to affect the high versus low pricing decision. By applying these variables in a decision support model, marketers have access to a tool that can aid their marketing decision‐making.