Case Study Description of Note on Behavioral Pricing
The note introduces the behavioral or psychological aspects of consumer price acceptance. Begins by reviewing the traditional economic approach to product pricing and consumer price acceptance--namely, that consumers should be willing to purchase anytime a product's perceived value exceeds price. This purely economic approach questioned, and the concept of transaction "fairness" is introduced as an additional component of consumer price acceptance. Through paired vignettes, the behavioral side to product pricing is explored in some detail. In the end, the traditional economic perspective on product pricing is combined with the behavioral or psychological perspective to provide a more realistic understanding of how consumers respond to a firm's pricing decisions.
Swot Analysis of "Note on Behavioral Pricing" written by John T. Gourville includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Behavioral Pricing facing as an external strategic factors. Some of the topics covered in Note on Behavioral Pricing case study are - Strategic Management Strategies, Decision making, Pricing and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Note on Behavioral Pricing casestudy better are - – talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%,
cloud computing is disrupting traditional business models, increasing energy prices, etc
Introduction to SWOT Analysis of Note on Behavioral Pricing
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Note on Behavioral Pricing case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Behavioral Pricing, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Behavioral Pricing operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Note on Behavioral Pricing can be done for the following purposes –
1. Strategic planning using facts provided in Note on Behavioral Pricing case study
2. Improving business portfolio management of Behavioral Pricing
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Behavioral Pricing
Strengths Note on Behavioral Pricing | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Behavioral Pricing in Note on Behavioral Pricing Harvard Business Review case study are -
Ability to recruit top talent
– Behavioral Pricing is one of the leading recruiters in the industry. Managers in the Note on Behavioral Pricing are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Behavioral Pricing in the sector have low bargaining power. Note on Behavioral Pricing has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Behavioral Pricing to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Behavioral Pricing has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Behavioral Pricing to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Note on Behavioral Pricing Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Innovation driven organization
– Behavioral Pricing is one of the most innovative firm in sector. Manager in Note on Behavioral Pricing Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Sales & Marketing industry
– Note on Behavioral Pricing firm has clearly differentiated products in the market place. This has enabled Behavioral Pricing to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Behavioral Pricing to invest into research and development (R&D) and innovation.
Organizational Resilience of Behavioral Pricing
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Behavioral Pricing does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Behavioral Pricing is present in almost all the verticals within the industry. This has provided firm in Note on Behavioral Pricing case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- Behavioral Pricing is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Behavioral Pricing is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Note on Behavioral Pricing Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Behavioral Pricing are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Analytics focus
– Behavioral Pricing is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by John T. Gourville can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Highly skilled collaborators
– Behavioral Pricing has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Note on Behavioral Pricing HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Note on Behavioral Pricing | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Note on Behavioral Pricing are -
Skills based hiring
– The stress on hiring functional specialists at Behavioral Pricing has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to strategic competitive environment developments
– As Note on Behavioral Pricing HBR case study mentions - Behavioral Pricing takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High operating costs
– Compare to the competitors, firm in the HBR case study Note on Behavioral Pricing has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Behavioral Pricing 's lucrative customers.
Need for greater diversity
– Behavioral Pricing has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Increasing silos among functional specialists
– The organizational structure of Behavioral Pricing is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Behavioral Pricing needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Behavioral Pricing to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Behavioral Pricing products
– To increase the profitability and margins on the products, Behavioral Pricing needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, John T. Gourville suggests that, Behavioral Pricing is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Behavioral Pricing supply chain. Even after few cautionary changes mentioned in the HBR case study - Note on Behavioral Pricing, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Behavioral Pricing vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Note on Behavioral Pricing that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Note on Behavioral Pricing can leverage the sales team experience to cultivate customer relationships as Behavioral Pricing is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Behavioral Pricing needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Behavioral Pricing is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Note on Behavioral Pricing can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Note on Behavioral Pricing | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Note on Behavioral Pricing are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Behavioral Pricing can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Behavioral Pricing can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Behavioral Pricing can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Behavioral Pricing can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Learning at scale
– Online learning technologies has now opened space for Behavioral Pricing to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Loyalty marketing
– Behavioral Pricing has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Behavioral Pricing can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Behavioral Pricing can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Behavioral Pricing can use these opportunities to build new business models that can help the communities that Behavioral Pricing operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Manufacturing automation
– Behavioral Pricing can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Leveraging digital technologies
– Behavioral Pricing can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Creating value in data economy
– The success of analytics program of Behavioral Pricing has opened avenues for new revenue streams for the organization in the industry. This can help Behavioral Pricing to build a more holistic ecosystem as suggested in the Note on Behavioral Pricing case study. Behavioral Pricing can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Behavioral Pricing can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Behavioral Pricing can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Note on Behavioral Pricing suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats Note on Behavioral Pricing External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Note on Behavioral Pricing are -
Stagnating economy with rate increase
– Behavioral Pricing can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Regulatory challenges
– Behavioral Pricing needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Behavioral Pricing in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Behavioral Pricing.
Technology acceleration in Forth Industrial Revolution
– Behavioral Pricing has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Behavioral Pricing needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High dependence on third party suppliers
– Behavioral Pricing high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Note on Behavioral Pricing, Behavioral Pricing may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Behavioral Pricing needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Behavioral Pricing will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Consumer confidence and its impact on Behavioral Pricing demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Behavioral Pricing can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Behavioral Pricing in the Sales & Marketing sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Behavioral Pricing with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Note on Behavioral Pricing Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Note on Behavioral Pricing needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Note on Behavioral Pricing is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Note on Behavioral Pricing is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Note on Behavioral Pricing is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Behavioral Pricing needs to make to build a sustainable competitive advantage.