Retailers' and manufacturers' price-promotion decisions: Intuitive or evidence-based?

Bogomolova, Svetlana; Szabo, Marietta; Kennedy, Rachel

doi:10.1016/j.jbusres.2016.05.020

Cited by 39 publications

(23 citation statements)

References 68 publications

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“…An avenue for future work is to explore whether certain characteristics of promotions are more strongly linked to this outcome. Such work would be well-warranted given the large sums spent on such promotions (Bogomolova et al, 2017). The potential moderating or mediating effects of factors such as brand size, price, range size and the breadth of promotions across the range could add to the initial findings from this study.…”

Section: Discussionmentioning

confidence: 85%

The long-term erosion of repeat-purchase loyalty

Dawes

Graham

Trinh

2020

EJM

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Purpose This study aims to investigate the long-term erosion of repeat-purchase loyalty among consumers who purchase brands in a one-year base period. Design/methodology/approach The study uses a five-year consumer panel of continuous reporters. This paper identifies brand buyers in a base year, then calculates the proportion that fails to buy the brand in later years. This paper analyses the top 20 brands in 10 consumer goods categories. Findings This paper finds pronounced erosion in repeat-buying over the long-term. The proportion of buyers from a base year that fails to buy the brand in a later year increases steadily over time, from 57% in year 2 to 71.5% by year 5. Moreover, this paper identifies brand and marketing mix factors linked to this over-time customer loss or erosion. Research limitations/implications The study provides evidence that consumers’ propensity to buy particular brands changes over a period of years, even though those brands continue to exhibit a stable market share. This evidence provides a different interpretation than the literature to date, which has viewed purchase propensities as fixed. Practical implications The study finds that store brands and niche brands exhibit lower levels of erosion in their buyer base that a broad range is associated with lower erosion and that high price promotion incidence is associated with lower erosion for manufacturer brands. Originality/value Loyalty erosion has been reported before (Ehrenberg, 1988; East and Hammond, 1996) but only over short periods. This study examines the phenomenon over five years, confirms that the rate of erosion does diminish over time and that it is related to category and brand characteristics, as well as marketing mix decisions.

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Section: Discussionmentioning

confidence: 85%

The long-term erosion of repeat-purchase loyalty

Dawes

Graham

Trinh

2020

EJM

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“…Hence, price setting and management was commonly characterised by institutionalised silos that were slow to adapt to the availability and potential of data and analytics, with familiar 'rules of thumb' continuing to be relied upon (cf. Bogomolova et al, 2017;Watson et al, 2015). This is not to say that managers were not cognisant of the shortfalls of their current practice -they often were and there were reported efforts to start to assess price elasticity for example, -but the focus was largely on managing or coping (similar to Herbert Simon's 'satisficing') given the challenging growth of their businesses rather than redesigning processes for pricing given the data available.…”

Section: Discussionmentioning

confidence: 99%

“…Van der Rest et al (2018, p. 39) note the role of dialogue between team members in setting prices as 'the ability to sell, negotiate and explain prices largely depends on an ability to agree internally'. Consequently, there is an appreciation of 'sticky' prices (Gorodnichenko et al, 2018) or 'pricing inertia' (Watson et al, 2015), with a tendency towards mitigating risk and thus relying on historic prices, benchmarking against a market leader competitor or intuition and untested assumptions (Benoit et al, 2020;Bogomolova et al, 2017;Ingenbleek & Van der Lans, 2013). Given this backdrop, commercial research has suggested that tactical and coping mechanisms have become more of a focus for retail executives rather than strategic actions relating to pricing: we found that merchants spent approximately two-thirds of their time gathering data, managing exceptions, "firefighting," and participating in meetings to syndicate with colleagues and only one-third of their time working on critical strategy and analytics or insights.…”

Section: Pricing Practices and Routines Within The Digital Retail Firmmentioning

confidence: 99%

Pricing in online fashion retailing: implications for research and practice

Wood

Watson

Teller

2021

Journal of Marketing Management

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Drawing on 55 interviews with executives across five online fashion retailers, this paper explores the challenges of price setting and management. We develop a descriptive model of 'locked-in' pricing practice to explain organisational routines focused on cost-plus pricing, alignment with competitor prices and historical pricing. Drivers include the complex and uncertain outcomes of pricing, and lack of investment in leading-edge pricing methodologies, together with inadequate training and pricing ownership. Outcomes comprise an aversion to price risk-taking, sees decisions guided by heuristics and a lack of openness to alternative pricing methods. We offer implications for pricing practice to overcome these locked-in behaviours and suggest that research addresses challenges encountered in the implementation of new pricing techniques in organisational settings to narrow the gap between theory and practice.

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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%

“…These managers, the authors write, base their pricing decisions on their gut feeling about what would be an appropriate price. Examining the pricepromotion decisions of small, medium, and large manufacturers and retailers, Bogomolova, Szabo, and Kennedy (2017) found that managerial pricing decisions are largely based on intuition. Similarly, Rusetski (2014) investigated pricing decisions by brand and product managers working for firms selling consumer goods and found that, with limited information, managers rely on heuristics that produce consistent results across competitive situations.…”

Section: Behavioral and Psychological Aspects Of Pricingmentioning

confidence: 99%

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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Retailers' and manufacturers' price-promotion decisions: Intuitive or evidence-based?

Cited by 39 publications

References 68 publications

The long-term erosion of repeat-purchase loyalty

The long-term erosion of repeat-purchase loyalty

Pricing in online fashion retailing: implications for research and practice

Micro-foundations of value-based pricing and selling

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