Strategic benchmarking of service pricing based on the value added

Abstract

Purpose – The purpose of this paper is to investigate opportunities to move benchmarking studies toward a strategic level. The authors benchmarked how service prices are defined based on the value added for the customer. Design/methodology/approach – A multi-case research investigated how manufacturers can increase their service revenues; how corporate reputation can be analyzed to enhance financial and market performance; how customer satisfaction and price acceptance are related; and how benchmark studies can move to a more strategic level based on a conjoint analysis of value and price. Findings – Price’s benchmarking studies must combine the customers’ value demands; the customer expectations associated to each value demand; the competitor prices; and the revenue alternatives that a supplier can explore (e.g. sale of new goods, services for new goods, services for non-new goods, and repair parts). The combination of these elements reveals several opportunities for revenue generation. This combination may also help to explain the existence of different prices for similar goods and services. The authors referred to this as a flexible pricing policy. Flexible pricing may help manufacturers maximize revenues, and win and maintain customers. Research limitations/implications – The following research questions are suggested for future studies: What other elements should be considered in strategic benchmarking studies? What other elements can influence a flexible pricing policy for goods, spare parts, and services? In what contexts can a flexible pricing policy be applied? How should flexible pricing practices be benchmarked? Practical implications – A strategic benchmarking study must first identify the customers’ value demands. It is then necessary to analyze customer expectations associated to each value demand. As shown, customers may have different expectations for the same product or service. Similar expectations must be grouped together in order to allow a well-structured benchmark. Originality/value – The authors’ findings suggest interesting points to be observed by the manufacturers who supply integrated solutions with a long life cycle.