The Antecedents of Strategic Pricing and its Effect on Company Performance

Abstract

A number of different authors have stressed the importance of treating pricing from a strategic point of view if effective pricing decisions are to be made (e.g., Smith, 1995; Monroe, 2003). Strategic orientation of price management relates to a systematic planning process where price decision making is derived from the overall corporate goals and strategy and is strongly associated with the company’s marketing strategy (Nagle and Holden, 2001). However, strategic pricing orientation has not been discussed extensively in the existing literature so far, either from a theoretical or an empirical point of view. In response to this identified topic of neglect, the focus of the current paper is to provide insights regarding the notion of strategic pricing. More specifically, the present research sets out to investigate the role of strategic pricing in the services sector by intending to a) measure the extent to which selected contextual variables have an impact on the adoption of strategic pricing, and b) determine the effect of the adoption of strategic pricing on company performance. The rationale for focusing on services rather than physical products relates to the fact that the empirical research that has been undertaken in the field of service pricing is limited when compared to product pricing (Docters et al., 2004).