Behavioral issues in price setting in business-to-business marketing: A framework for analysis

a r t i c l e i n f o Keywords: Business-to-business pricing Price setting Industrial pricing decisions Behavioral bias in pricing Business-to-business pricing research has often focused on developing rational and normative frameworks and models for pricing issues, strategies and tactics. However, there has been less attention given to behavioral models that help us understand the realities of pricing and how managers actually set prices. Specifically, there has been less attention given to the various individual and group influences on the price setting process. We apply insights from a steadily increasing body of literature on behavioral decision making to identify some relevant behavioral issues that may affect managerial price setting processes in business-to-business contexts. We conclude with some implications for theory building and practice and an agenda for future research. Research on pricing in business-to-business markets is sparse, though some recent articles have shed light on various aspects of pricing , including supply chain pricing (Voeth & Herbst, 2006), price planning (Lancioni, 2005b), pricing in international markets (Forman and Hunt 2005), and pricing of integrated solutions (Sharma & Iyer, 2011). In addition, recent research has also called attention to the study of value-based pricing (Hinterhuber, 2004) as well as the need to understand the impacts and influences of key managers (Lancioni, Schau, & Smith, 2005), including the CEO (Liozu & Hinterhuber, 2013), on price setting. While normative frameworks have been suggested in the past for price setting in business-to-business contexts, research has also suggested that managers take decisions that appear to deviate from what could be considered optimal given the application of these frameworks what is " optimal " can only be determined from the idiosyncratic environmental and organizational context of the firm as well as the firm's intended pricing objectives. Moreover, while there is some research in organizational buying behavior that contends that individual managers' interpretations and cognitive processes affect purchasing decisions research on pricing in industrial markets is only in its infancy. For example , Lancioni et al. (2005) demonstrate that managers often face internal " roadblocks " from within their organizations in the price setting process. On the other hand, Liozu and Hinterhuber (2013) find from their empirical study that CEO championing of pricing activities actually enhances the firm's pricing capabilities and contributes to better firm performance. Approaching the field of business-to-business pricing from the perspective of behavioral decision making, which contends that managerial cognitive …