Value capturing as a balancing actValue capturing as a balancing act
Faculty of Applied Economics
Journal of business and industrial marketing. - Bingley
24(2009):1, p. 56-60
University of Antwerp
Purpose: The purpose of this case study is to illustrate the difficulty of capturing value by an upstream supplier in a mature business market. The case shows how successful market introduction and value capturing, especially in the case of mature markets, are dependent on the dominant logic of the participants in the supply chain. Scholars can use the case for a class discussion on value pricing. Design/methodology/approach: The approach takes the form of a multilevel case design as part of a larger project on value-based pricing sponsored by the Dutch foundation of Technique and Marketing (STEM). Findings: In this mature and technical industry, the dominant mindset of suppliers and customers turns out to be heavily biased towards cost containment. Also, a volume orientation and a short-term perspective are typical. This leads to adversarial relations in the supply chain, which makes it difficult to jointly introduce new value concepts. Notwithstanding the innovativeness of a new packaging concept with clear potential advantages to all downstream players, it turns out to be difficult to align these players during market introduction. In sum, existing relations, pricing structures and competitive behavior hinder new concept introduction and a value-sharing perspective. Research limitations/implications: With its focus on one industry and one product introduction, this case cannot be generalized to all business settings. However, the in-depth analysis stimulates further research on value-based pricing to incorporate industry characteristics and the pricing reality embedded in the dominant logic of the industry. Practical implications: The experience of this company might inspire other managers operating in similar environments. Managers should not underestimate the challenge of changing their pricing approaches. Turning to a value-based pricing might require a sustained effort in order to change industry rules. Originality/value: The literature hails value-based pricing without often considering the implementation difficulties. Especially upstream players have difficulties in capturing value inherent in their offerings.