Summary
The discussed article is focused on the pricing for value in information and communication technologies. The first part of the article is devoted to prices based on cost-plus and customer value-based pricing approaches, their definition, advantages and disadvantages. The second part of the article is the crucial one as it introduces the research, where the cost-plus and customer value-based approaches are related to information and communication technologies. In more detail, the second part of the article develops the topic of research carried out on pricing models used in information and communication technologies industry and reveals nine major assumptions that drive pricing policies of the ICT companies among which there are involvement of customers and other key stakeholders in pricing decision-making, consideration of all pricing forming factors, the reduction of levels of the customer price sensitivity, and communicating value to the customers. The conclusion of the article is that the commonly used cost-plus price approach is not perfect and that customer value-based pricing, especially in the information and communication technologies field could bring more profit to the companies.
Relation
Pricing is the essential part of managers’ work, as its management’s responsibility to provide the company with supportive arguments about what pricing politics to choose in order to present the customers with the qualitative products/services by the relevant price. The methods, which should be used in the price creation is the core, as it directs the whole financial politics of the company in general. As well, pricing relates to the customers of the company and its other key stakeholders. Customers are affected by pricing policies of the companies in the sense of their increased or decreased ability to buy goods and/or services of this company. Moreover, customer loyalty is often strengthened by including customers to the company’s pricing decision-making. The same is true about other key stakeholders, like suppliers, business partners, and investors, who also benefit from valuing the role in the company and making pricing policies more stakeholder-oriented and value-based.
Reaction
The research, which was provided in the article, used effective methodology, that is why the results appeared to be strong and supported by great many of other supportive facts. The investigation proved that cost-plus price creation is not as productive as the customer value-based pricing is. This is explained by the fact that when the cost-plus pricing model is used, the interests of the customers are not investigated, their preferences are not included. Consequently, the price becomes separated from demand and supply that leads, in its turn, to disorientation of the pricing market. One of the most interesting implications of the investigation reported by Pasura & Ryals (2005) is that the customer value in the modern information and communication technologies (ICT) field plays a small role in decision-making process. As a result, the low participation of the customers in the decision making concerned with pricing leads to the reduction of the incomes of the business companies. Finally, the credibility of the analyzed research is increased by the directions for further investigation that, according to Pasura & Ryals (2005), include the research of effects of value-based pricing and reasons for rejecting this pricing model.
Reference
Pasura, A. & Ryals, L. (2005). Pricing for Value in ICT. Journal of Targeting, Measurement and Analysis for Marketing, Vol. 14, Iss. 1. pp. 47-61.