The conceptualization of value‐based pricing in industrial firms

The current literature is largely silent on how executives interpret the concept of value‐based pricing. Although only a minority of companies adopts value‐based pricing approaches, little is known about antecedents of alternative pricing approaches. We suggest this may be because of the fact that few professionals possess an understanding of value‐based pricing, which is both academically rigorous as well as practically relevant. Our interviews with 44 executives in 15 US industrial firms show that those practicing value‐based pricing interpret customer value in ways fully consistent with the current academic literature. Those practicing cost‐ or competition‐based pricing, however, show a poor understanding of value‐based pricing, which may explain why their companies practice cost‐ or competition‐based approaches.