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 - – talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%,
central banks are concerned over increasing inflation, there is increasing trade war between United States & China, 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 -
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.
Cross disciplinary teams
– Horizontal connected teams at the Pricing Auctions 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study When Customers Help Set Prices, it seems that the employees of Pricing Auctions 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.
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 bargaining power of channel partners
– Because of the regulatory requirements, Marco Bertini, Oded Koenigsberg suggests that, Pricing Auctions 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.
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.
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 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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Pricing Auctions 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.
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.
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.
Developing new processes and practices
– Pricing Auctions can develop new processes and procedures in Leadership & Managing People 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 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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study When Customers Help Set Prices, Pricing Auctions may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Pricing Auctions can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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 .
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.
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.
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 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.
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.
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.