Obstacles when implementing a value-based pricing strategy : A case study – Volvo Construction Equipment

Abstract: Pricing is a complex yet important process that has a large influence on profitability; however few managers utilize pricing as a strategy to increase competitive advantage. The potential of pricing based on specific customer’s needs should be acknowledged, since it is beneficial for the customers by allowing them to recognize the true value of a product. It is also beneficial for marketers since they can present the price in the content of a total solution tailored for those customer needs. Even though a value-based pricing strategy is considered superior to alternative pricing strategies, few companies practice it. The limited amount of researches that has been conducted in the field of value-based pricing strategies has revealed various obstacles in the implementation phase. However, it is still not proved that these obstacles can be found in all industries. The purpose of this thesis is to present research in the field of pricing, by adding to prior research, practical observations on obstacles when implementing a value-based pricing strategy. A qualitative case study at Volvo Construction Equipment in Sweden was conducted and the results show similarities with prior researches. However additional obstacles were identified and further evidence from this study stresses the importance of possessing fundamental knowledge about value-based pricing strategies; as it impacts a company’s ability to implement it successfully and entirely. Therefore this thesis includes the fundamental knowledge and describes how obstacles connected to the concept are perceived in practice. Further a managerial framework is provided to help companies interested in implementing value-based pricing strategies.