Pricing by intuition: Managerial choices with limited information

Rusetski, Alexander

doi:10.1016/j.jbusres.2014.02.020

Cited by 26 publications

(20 citation statements)

References 43 publications

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“…In line with the idea of matching strategy to the environment, Hogarth and Karelaia (2007) found that take the best was the best-performing strategy in noncompensatory environments. More generally, lexicographic strategies have also been found to guide managerial pricing strategies for certain consumer products (Rusetski, 2014) and also decision making on the consumer side particularly for complex products (Ford, Schmitt, Schechtman, Hults, & Doherty, 1989;Kohli & Jedidi, 2007;Yee, Dahan, Hauser, & Orlin, 2007).…”

Section: Lexicographic Strategiesmentioning

confidence: 99%

Heuristics as adaptive decision strategies in management

et al. 2014

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SummaryIn the management literature, heuristics are often conceived of as a source of systematic error, whereas logic and statistics are regarded as the sine qua non of good decision making. Yet, this view can be incorrect for decisions made under uncertainty, as opposed to risk. Research on fast and frugal heuristics shows that simple heuristics can be successful in complex, uncertain environments and also when and why this is the case. This article describes the conceptual framework of heuristics as adaptive decision strategies and connects it with the managerial literature. We review five classes of heuristics, analyze their common building blocks, and show how these are applied in managerial decision making. We conclude by highlighting some prominent opportunities for future research in the field. In the uncertain world of management, simple heuristics can lead to better and faster decisions than complex statistical procedures.

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Section: Lexicographic Strategiesmentioning

confidence: 99%

Heuristics as adaptive decision strategies in management

et al. 2014

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“…Candogan et al , 2012; Krishnan et al , 1999). Consequently, pricing decisions are characterized as a step-by-step process that includes clarification of the goal, followed by comparing all applicable pricing options (Drummond, 1996; Estelami and Nejad, 2017; Kienzler, 2017; Rusetski, 2014). Akçay et al (2010) point out that with increased data availability and computerized modeling, established firms can even use information about market and customer behavior to adjust prices dynamically.…”

Section: Marketing Decisions and Heuristics In An Entrepreneurial Contextmentioning

confidence: 99%

Inexperienced decision-makers' use of positive heuristics for marketing decisions

Gilbert-Saad

McNaughton

Siedlok

2021

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PurposeResearch has reliably demonstrated that decision-makers, especially expert ones, use heuristics to make decisions under uncertainty. However, whether decision-makers with little or no experience also do, and if so, how? is unknown. This research addresses this issue in the marketing context by studying how a group of young and generally inexperienced entrepreneurs decide when asked to set a price and choose a distribution channel in a scenario involving a hypothetical firm.Design/methodology/approachThe authors used think-aloud protocols to elicit data and then used inductive procedures to code the data for analysis.FindingsThe inexperienced entrepreneurs in the sample used three types of heuristics in their decision-making, forming a structured process that narrows in scope. First, metacognitive heuristics, which specify a decision-making approach, were used, followed by heuristics representing the criteria they considered, and finally, heuristics detailing the execution of a selected option. The authors also found that heuristics relating to a market orientation, especially customer-centric criteria, were the most common, but these were balanced with ones representing an internal orientation or growth.Research limitations/implicationsThe generally inexperienced decision-makers the authors’ studied used heuristics in a structured way that helped them to select and balance several potentially conflicting decision-making criteria. As with most research using qualitative research designs, the generalizability of these findings is unclear. Further research on the mechanisms by which relatively inexperienced decision-makers learn the heuristics they use is recommended.Originality/valueThis research's novelty lies in its focus on heuristic use by nonexpert decision-makers under conditions of uncertainty and the findings about their scope and the order they are used. As the authors collected data from think-aloud protocols with relatively young entrepreneurs with limited experience, they also offer a description of the heuristics used by nascent entrepreneurs when making marketing decisions about pricing and channels. The most surprising conclusion is that even without relevant domain-specific knowledge, decision-makers can use heuristics in an ecologically rational way (i.e. structured to match the environment).

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“…Intuition in managerial decision-making has been among the topics frequently investigated in previous pricing literature (e.g., Bogomolova, Szabo, & Kennedy, 2017;Carson et al, 1998;Estelami & Nejad, 2017;Rusetski, 2014). Intuition can be defined as "affectively charged judgments that arise through rapid, nonconscious, and holistic associations" (Dane & Pratt, 2007, p. 40).…”

Section: Behavioral and Psychological Aspects Of Pricingmentioning

confidence: 99%

“…For example, he writes, managers may always set prices in relation to rivals. Indeed, Rusetski (2014) shows empirically that some of the surveyed managers use such simple heuristics that 15% consistently match competitors' prices, for example. Iyer et al (2015) highlight the representativeness and the anchor-and-adjustment heuristic; two of the original mechanisms described by Tversky and Kahneman (1974).…”

Section: Behavioral and Psychological Aspects Of Pricingmentioning

confidence: 99%

“…They impact upon the influence of determinants (Paper II and Paper III), the selling process (Paper IV) and the judgment of prices (Paper V). Hence, the papers are in good company with recent research on pricing (e.g., Hallberg, 2017aHallberg, , 2018Hinterhuber, 2015;Iyer et al, 2015;Monroe, Rikala, & Somervuori, 2015;Rusetski, 2014;Töytäri, Keränen, & Rajala, 2017) and selling (e.g., Hinterhuber, 2017;Terho et al, 2017;Ulaga & Loveland, 2014) that considers individual factors.…”

Section: Commonalities and Contrasts: A Brief Summary And Integrationmentioning

confidence: 99%

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Micro-foundations of value-based pricing and selling

Kienzler¹

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Enabling customer value creation is central to marketing theory and practice. Yet, doing so does not ensure that supplier firms profit from it. Value-based pricing and selling come with the prospect of translating customer value creation into greater profits for suppliers. However, despite sustained interest, only a limited number of firms emphasize value-based pricing and selling. Existing research has highlighted organizational challenges as potential reasons. Unfortunately, this focus on organizational challenges obscures the role of individuals within organizations (i.e., its micro-foundations), such as the fact that managers and salespeople determine and realize prices. The purpose of this thesis is thus to describe and analyze the micro-foundations of value-based pricing and selling in business markets. The thesis' conceptual framework introduces bounded rationality and heterogeneity-two overlooked forces-to investigate the affective, cognitive, and motivational micro-foundations of value-based pricing and selling. The thesis' empirical foundation consists of five papers that investigate the microfoundations suggested by the framework. The findings indicate that research would benefit from a wider variety of research approaches. Currently, insights into micro-foundations are lacking, in part due to the focus on research designs and theories aimed at the organizational level; experimental designs and theories from psychology would allow amendments to prior research. Furthermore, individual rationality and individual differences play a role. In this regard, managers' cognitive biases impact upon the extent to which firms focus on value-based pricing. Moreover, price presentation impacts managers' value perception and purchase intention. The findings also suggest that managers' personalities and salespeople's experience and learning orientation are important individual differences affecting the emphasis on valuebased pricing and selling. Consequently, affective, cognitive and motivational micro-foundations-arising due to bounded rationality and heterogeneityexplain some of the challenges associated with value-based pricing and selling. This thesis contributes with insights into several micro-foundations affecting value-based pricing and selling. In so doing, the thesis belongs to a growing stream of research that is shifting the focus from organizational processes to the individual foundations of value-based pricing and selling. The thesis also provides suggestions on how managers can use micro-foundations to the advantage of their firms.

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Pricing by intuition: Managerial choices with limited information

Cited by 26 publications

References 43 publications

Heuristics as adaptive decision strategies in management

Heuristics as adaptive decision strategies in management

Inexperienced decision-makers' use of positive heuristics for marketing decisions

Micro-foundations of value-based pricing and selling

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