Micro-foundations of value-based pricing and selling

Abstract: 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 heterogeneity— explain 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.