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Pricing in a VUCA World: How to Optimize Prices, if the Economic, Social and Legal Framework Changes Rapidly

  • Andreas KrämerEmail author

Abstract

Typically, three parameters (cost, competitors and customers) are seen as pivotal, when determining the optimal price for a product. While a focus on the cost of production leads to a cost-plus pricing and a focus on competition leads to a price matching, a value-based pricing is derived from the customer perspective.

In a world characterized by uncertainties and rapid structural changes, these landmarks only have a limited value. It is an illusion and rather naïve to assume the maximum willingness to pay for individual decision makers is robust and remains unchanged over a long period of time. In addition, modern IT-systems allow a fast reaction of the competition on individual pricing-decisions taken by a company. Against this background, the author recommends, when deriving the value-based pricing from the customer perspective, to use an extended holistic approach. This “pricing-in-3-D” approach takes into account different decision criteria: (1) the customers’ willingness to pay for the product or service, (2) psychological factors influencing the customer decision and (3) impact of price decisions on the long-term customer relationship.

Keywords

Price elasticity Cost-plus-pricing Value-based pricing Behavioral pricing “Pricing-in-3-D” 

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Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  1. 1.Business and Information Technology SchoolIserlohnGermany

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