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 - – technology disruption, wage bills are increasing, increasing commodity prices, there is backlash against globalization, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%,
increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
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.
Organizational Resilience of Pricing Auctions
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Pricing Auctions does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Leadership & Managing People field
– Pricing Auctions 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 Pricing Auctions in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Analytics focus
– Pricing Auctions 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 Marco Bertini, Oded Koenigsberg 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.
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.
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.
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.
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.
Highly skilled collaborators
– Pricing Auctions 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 When Customers Help Set Prices HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Pricing Auctions is present in almost all the verticals within the industry. This has provided firm in When Customers Help Set Prices 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.
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 -
Increasing silos among functional specialists
– The organizational structure of Pricing Auctions is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Pricing Auctions needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Pricing Auctions to focus more on services rather than just following the product oriented approach.
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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study When Customers Help Set Prices, in the dynamic environment Pricing Auctions has struggled to respond to the nimble upstart competition. Pricing Auctions has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Skills based hiring
– The stress on hiring functional specialists at Pricing Auctions 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.
Aligning sales with marketing
– It come across in the case study When Customers Help Set Prices 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 When Customers Help Set Prices can leverage the sales team experience to cultivate customer relationships as Pricing Auctions is planning to shift buying processes online.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the When Customers Help Set Prices HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Pricing Auctions has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Pricing Auctions has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Pricing Auctions even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Workers concerns about automation
– As automation is fast increasing in the segment, Pricing Auctions 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.
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 -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Pricing Auctions can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
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 Pricing Auctions in the consumer business. Now Pricing Auctions can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Pricing Auctions is facing challenges because of the dominance of functional experts in the organization. When Customers Help Set Prices case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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.
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.
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.
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.
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. Pricing Auctions can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Pricing Auctions can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. When Customers Help Set Prices 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.
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.
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 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.
Shortening product life cycle
– it is one of the major threat that Pricing Auctions is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Pricing Auctions in the Leadership & Managing People industry. The Leadership & Managing People 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.
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 .
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.
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.
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.
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.
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.
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.
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.
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.