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 - – increasing energy prices, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, increasing commodity prices, talent flight as more people leaving formal jobs,
competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, 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 -
Successful track record of launching new products
– Behavioral Pricing has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Behavioral Pricing has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
Strong track record of project management
– Behavioral Pricing is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Behavioral Pricing has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Note on Behavioral Pricing - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
High switching costs
– The high switching costs that Behavioral Pricing has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Superior customer experience
– The customer experience strategy of Behavioral Pricing in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Ability to lead change in Sales & Marketing field
– Behavioral Pricing is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Behavioral Pricing in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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 -
High cash cycle compare to competitors
Behavioral Pricing has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Note on Behavioral Pricing, it seems that the employees of Behavioral Pricing don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
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.
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 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.
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.
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.
Low market penetration in new markets
– Outside its home market of Behavioral Pricing, firm in the HBR case study Note on Behavioral Pricing needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 -
Better consumer reach
– The expansion of the 5G network will help Behavioral Pricing to increase its market reach. Behavioral Pricing will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Behavioral Pricing in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Behavioral Pricing to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Behavioral Pricing in the consumer business. Now Behavioral Pricing can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Behavioral Pricing can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
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.
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.
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.
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.
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.
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.
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.
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 -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Behavioral Pricing can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Note on Behavioral Pricing .
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Behavioral Pricing business can come under increasing regulations regarding data privacy, data security, etc.
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.
Increasing wage structure of Behavioral Pricing
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Behavioral Pricing.
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.
Environmental challenges
– Behavioral Pricing needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Behavioral Pricing can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Shortening product life cycle
– it is one of the major threat that Behavioral Pricing is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
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.
