When Customers Help Set Prices SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of When Customers Help Set Prices
This is an MIT Sloan Management Review article. For most companies, pricing has always been a sensitive, private affair. This article is directed at managers who seek to profit from product differentiation and take maximum advantage of their ability to stand out. Instead of leaving good money on the table and struggling to convert product differentiation into revenue, the authors argue, companies should consider enlisting the pricing help of their customers. Outsourcing pricing isn't an all-or-nothing proposition. Managers can select pricing models ranging from complete oversight to complete delegation. Citing examples from companies including Google, Uber, Orbitz, Volkswagen, Coca-Cola and Humble Bundle, the article integrates classic views on pricing with the latest research and practice to develop a simple framework to help managers decide how much pricing control they should retain and how much they should relinquish to customers. For most businesses, the default approach is having a single fixed price and selling to anyone willing to pay that amount. However, authors Marco Bertini and Oded Koenigsberg argue that this is economically inefficient: Those prepared to pay more in effect receive a discount; those willing to pay less (but an amount that's still profitable) are turned away. For companies interested in interactive approaches to pricing, the authors discuss three collaborative models: auctions, name-your-own-price auctions and negotiations. In the authors'view, asking customers to weigh in on price can have benefits that go beyond promoting greater efficiency. It can promote customer engagement, provide opportunities for customization, allow managers to signal information about their company or product and open up opportunities for increasing market share.
Swot Analysis of "When Customers Help Set Prices" written by Marco Bertini, Oded Koenigsberg includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pricing Auctions facing as an external strategic factors. Some of the topics covered in When Customers Help Set Prices case study are - Strategic Management Strategies, Pricing and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the When Customers Help Set Prices casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, increasing household debt because of falling income levels, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions,
challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of When Customers Help Set Prices
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in When Customers Help Set Prices case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pricing Auctions, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pricing Auctions 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 When Customers Help Set Prices can be done for the following purposes –
1. Strategic planning using facts provided in When Customers Help Set Prices case study
2. Improving business portfolio management of Pricing Auctions
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Pricing Auctions
Strengths When Customers Help Set Prices | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pricing Auctions in When Customers Help Set Prices Harvard Business Review case study are -
Sustainable margins compare to other players in Leadership & Managing People industry
– When Customers Help Set Prices firm has clearly differentiated products in the market place. This has enabled Pricing Auctions to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Pricing Auctions to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Pricing Auctions is one of the leading recruiters in the industry. Managers in the When Customers Help Set Prices are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Pricing Auctions in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Pricing Auctions is one of the most innovative firm in sector. Manager in When Customers Help Set Prices Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Pricing Auctions has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pricing Auctions to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Pricing Auctions has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in When Customers Help Set Prices Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Strong track record of project management
– Pricing Auctions is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Pricing Auctions 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 Pricing Auctions is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in When Customers Help Set Prices Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Pricing Auctions 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.
Low bargaining power of suppliers
– Suppliers of Pricing Auctions in the sector have low bargaining power. When Customers Help Set Prices has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Pricing Auctions to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Pricing Auctions digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Pricing Auctions has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Pricing Auctions has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Pricing Auctions 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.
Weaknesses When Customers Help Set Prices | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of When Customers Help Set Prices are -
Capital Spending Reduction
– Even during the low interest decade, Pricing Auctions has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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 Pricing Auctions supply chain. Even after few cautionary changes mentioned in the HBR case study - When Customers Help Set Prices, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Pricing Auctions vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study When Customers Help Set Prices, is just above the industry average. Pricing Auctions needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Interest costs
– Compare to the competition, Pricing Auctions has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to strategic competitive environment developments
– As When Customers Help Set Prices HBR case study mentions - Pricing Auctions 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 cash cycle compare to competitors
Pricing Auctions 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Pricing Auctions is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study When Customers Help Set Prices can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Pricing Auctions products
– To increase the profitability and margins on the products, Pricing Auctions needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study When Customers Help Set Prices, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High operating costs
– Compare to the competitors, firm in the HBR case study When Customers Help Set Prices 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 Pricing Auctions 's lucrative customers.
Products dominated business model
– Even though Pricing Auctions has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - When Customers Help Set Prices should strive to include more intangible value offerings along with its core products and services.
Opportunities When Customers Help Set Prices | 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 When Customers Help Set Prices are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Pricing Auctions can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Pricing Auctions 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Pricing Auctions 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. Pricing Auctions 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.
Using analytics as competitive advantage
– Pricing Auctions has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study When Customers Help Set Prices - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pricing Auctions to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Pricing Auctions can use these opportunities to build new business models that can help the communities that Pricing Auctions operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Learning at scale
– Online learning technologies has now opened space for Pricing Auctions 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.
Leveraging digital technologies
– Pricing Auctions 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.
Better consumer reach
– The expansion of the 5G network will help Pricing Auctions to increase its market reach. Pricing Auctions 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Pricing Auctions in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Pricing Auctions 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 Leadership & Managing People segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Pricing Auctions can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, When Customers Help Set Prices, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Pricing Auctions 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.
Creating value in data economy
– The success of analytics program of Pricing Auctions has opened avenues for new revenue streams for the organization in the industry. This can help Pricing Auctions to build a more holistic ecosystem as suggested in the When Customers Help Set Prices case study. Pricing Auctions can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats When Customers Help Set Prices External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study When Customers Help Set Prices are -
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.
High dependence on third party suppliers
– Pricing Auctions 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.
Stagnating economy with rate increase
– Pricing Auctions 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.
Consumer confidence and its impact on Pricing Auctions 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.
Environmental challenges
– Pricing Auctions 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. Pricing Auctions can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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 Pricing Auctions in the Leadership & Managing People sector and impact the bottomline of the organization.
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. Pricing Auctions needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Increasing wage structure of Pricing Auctions
– 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 Pricing Auctions.
Technology acceleration in Forth Industrial Revolution
– Pricing Auctions has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Pricing Auctions needs to keep up with the evolution of technology in the Leadership & Managing People 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 Pricing Auctions 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 Pricing Auctions with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Pricing Auctions 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 When Customers Help Set Prices .
Regulatory challenges
– Pricing Auctions 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 Leadership & Managing People industry regulations.
Weighted SWOT Analysis of When Customers Help Set Prices 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 When Customers Help Set Prices 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 When Customers Help Set Prices 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 When Customers Help Set Prices 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 When Customers Help Set Prices 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 Pricing Auctions needs to make to build a sustainable competitive advantage.
