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 - – central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, technology disruption,
talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
Low market penetration in new markets
– Outside its home market of Pricing Auctions, firm in the HBR case study When Customers Help Set Prices needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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.
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.
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 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.
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 -
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.
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.
Manufacturing automation
– Pricing Auctions can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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. Pricing Auctions 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.
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.
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.
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.
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.
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.
