Skip to main content
SpringerLink
Log in

Price optimization – How to win a strategic whole

  • Original Article
  • Published:
Journal of Marketing Analytics Aims and scope Submit manuscript

Abstract

Tradition pricing efforts without specifying time span often attempt a short-term solution. A price optimization model factored in a customer lifetime value (LTV) study recently becomes a keen interest to many businesses striving for a long-term success. This article will discuss how to advance pricing models from a tactic focus to a strategic win. As such, two modeling steps will be covered thereby: (i) an intrinsic link between profit and price is first established with a contribution of LTV, particularly in direct marketing (DM) arena; (ii) a rigorous price equation is then migrated into a tabular simulation so that practitioners can alternatively resolve an optimization in either way.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Figure 1
Figure 2

Similar content being viewed by others

References

  • Balakrishnan, R. and Sivaramakrishnan, K. (2002) A critical overview of the use of full-cost data for planning and pricing. Journal of Management Accounting Research 14 (3): 29–43.

    Google Scholar 

  • Banker, R.D. and Potter, G. (1993) Economic implications of single cost driver systems. Journal of Management Accounting Research 3 (5): 15–24.

    Google Scholar 

  • Corry, E.R. (1982) Price Management, Cambridge, MA: Harvard Business School Press.

    Google Scholar 

  • Dolan, R.J. (1995) How do you know when the price is right? Harvard Business Review 73 (5): 174–182.

    Google Scholar 

  • Dolan, R.J. and Simon, H. (1996) Power Pricing: How Managing Price Transforms The Bottom Line, New York: The Free Press.

    Google Scholar 

  • Feldman, D.F. (2002) The pricing puzzle. Marketing Research 14 (4): 14–19.

    Google Scholar 

  • Florissen, A., Vahlenkamp, T., Maurer, B. and Schmidt, B. (2001) The race to the bottom, The McKinsey Quarterly.

  • Friedman, L.S. (1984) Microeconomic Policy Analysis, New York: McGraw-Hill, Inc.

    Google Scholar 

  • Hahn, A. (2002) ‘Stupid price tricks’, Service Revenue, American Marketing Association, 1 July.

  • Hansotia, B.J. and Wang, P. (1997) Analytical challenges in customer acquisition. Journal of Direct Marketing 11 (2): 7–19.

    Article  Google Scholar 

  • Hughes, A.M. (1994) ‘How to calculate your base lifetime value’, DM News 23 May: 26, 82.

  • Hughes, A.M. (2002) The value of the name. Journal of Database Marketing 10 (2): 159–175.

    Google Scholar 

  • Jackson, D.R. (1989) Determining a customer’s lifetime value. Direct Marketing 123 (March): 60–66.

    Google Scholar 

  • Jain, D. and Singh, S.S. (2002) Customer lifetime value research in marketing: A review and future directions. Journal of Interactive Marketing 16 (2): 34–45.

    Article  Google Scholar 

  • Kuenne, R.E. (1968) Microeconomic Theory of the Market Mechanism: A General Equilibrium Approach, New York; London: The Macmillian Company; Collier-Macmillian.

    Google Scholar 

  • Mohn, C.N. (1995) Pricing research for decision making. Marketing Research 7 (1): 10–19.

    Google Scholar 

  • Nagle, T.T. (1987) The Strategy and Tactics of Pricing – A Guide to Profitable Decision Making, Englewood Cliffs, NJ: Prentice Hall.

    Google Scholar 

  • Nagle, T.T. and Smith, G.E. (1994) Financial analysis for profit-driven pricing. Sloan Management Review 35 (3): 71–84.

    Google Scholar 

  • Robinson, M. (2003) ‘Measure with both LTV and ROI’, DM News 13 October: 44, 68.

  • Simon, H. (1992) Pricing opportunities – And how to exploit them. Sloan Management Review 33 (2): 55–66.

    Google Scholar 

  • Simon, H. and Munack, U. (2000) Setting the right price, at internet speed. Brandweek 41 (33): 28–29.

    Google Scholar 

  • Trivieri, L.A. (1996) Test Yourself – Business Calculus, Linconwood, IL: NTC Learning Works.

    Google Scholar 

  • Urbany, J.E. (2001) Justifying profitable pricing. The Journal of Product and Brand Management 10 (33): 141–150.

    Article  Google Scholar 

  • Venkatesan, R. and Kumar, V. (2004) A customer lifetime value framework for customer selection and resources allocation strategy. Journal of Marketing 68 (4): 106–125.

    Article  Google Scholar 

  • Weber, A. (1996) Using lifetime value to prospect. Target Marketing 19 (4): 20–22.

    Google Scholar 

  • Wheaton, J. (1998) Prospecting’s lifetime value equation. Catalog Age 15 (8): 75–78.

    Google Scholar 

  • Yang, A.X. (2004) Using lifetime value to gain long-term profitability. Journal of Database Marketing & CSM 12 (2): 142–152.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Product Mgmt/Bus Analysis, Active Network, 717 N Harwood St, Dallas, 75201, TX, USA

    Amoy X Yang

Authors
  1. Amoy X Yang
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Amoy X Yang.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Yang, A. Price optimization – How to win a strategic whole. J Market Anal 3, 235–243 (2015). https://doi.org/10.1057/jma.2015.18

Download citation

  • Received:

  • Revised:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/jma.2015.18

Keywords

Search

Navigation