Transforming pricing strategy with a systems engineering approach: the case of a global manufacturing company

Abstract

Triggered by commoditization, companies are searching for new ways to differentiate their product offering through value added services and providing complimentary solutions. The customers are at the core of the initiatives as the need to understand customers’ perceived value and satisfy their needs is growing. Consequently, dynamic markets and sophisticated customers demand continuous development of pricing strategies. Simultaneously, in the era of ongoing data-driven transformation, companies are realizing the potential of utilizing the growing amount of data. Increased attention is observed towards customer-centric pricing approaches and the development of analytics to support data-driven decisions. Considering the dynamism and complexity of the pricing process, there is reason to examine the topic from the perspective of systems thinking. Systems thinking has found its application in the context of organizations. However, the research in the context of pricing remains scarce. This research addresses the gap in the current knowledge on customer-centric pricing and analytics by a qualitative in depth micro-foundation study on the single case of a global manufacturing company. The findings of the study shed light on the current pricing needs and barriers in pricing strategy transformation. The potential of analytics and how to leverage value from data are analyzed with a systems engineering approach. Further, suggestions are given on how to overcome the identified barriers. In addition, the research reveals new barriers in the implementation of customer-centric pricing: availability (i.e. lack of time and high labor turnover) and organizational setup (i.e. lack of collaboration, insufficient support and limited involvement of frontlines).