The confidence factor in pricing: driving firm performance

Abstract

PurposeThe purpose of this paper is to identify a set of specific activities and a set of competencies associated with above‐average firm performance.Design/methodology/approachQuantitative survey of 748 respondents.FindingsIt was found that four key competencies differentiate high performing from low performing companies: organizational confidence; pricing capabilities; organizational change capacity; and championing behaviors by top management. The research also identifies a set of specific activities that are linked with superior firm performance: activities directed at the improvement of pricing effectiveness (e.g. trainings, pricing tools; pricing performance reviews); improvements in product differentiation and product quality (e.g. through innovation and research aimed at identifying and creating customer value); increased sense of organizational confidence (e.g. optimism, resilience, “can do”‐attitude); improved support of top management; improved ability to stick to list prices and minimization of discounting behaviors; and finally, enhanced cultural adaptability to respond to changing market conditions.Research limitations/implicationsThrough a quantitative research design, the authors document the link between pricing capabilities, organizational confidence and superior firm performance.Practical implicationsThe authors identify both specific activities, as well as higher order competencies, practising managers need to develop in order to increase firm performance via pricing. Taking a hypothetical company as example, the authors' data show that, on average, a one point improvement on a seven‐point scale in organizational confidence leads to a 4 per cent improvement in return on sales.Originality/valueOur research highlights which organizational competencies drive firm performance. Specifically this research is the first quantitative survey which documents a positive relationships between organizational confidence and firm performance.