Organizational and institutional barriers to value-based pricing in industrial relationships

In their effort to differentiate themselves from cost-driven rivals, many industrial companies are beginning to serve their customers through value-based offerings. Such companies often engage actively in collaborative value creation with their customers. To capture a fair share of the value created, they need to adopt a value-based pricing approach. Therefore, value-driven competition necessitates value-based pricing (VBP). The present study explores the barriers to exercising value-based pricing and suggests ways to overcome those obstacles in putting value-based pricing into action in B2B sales. The study is implemented as an exploratory multi-case study applying an abductive research methodology. Our cases show that industrial sellers try to understand and influence their customers' desired value perception, influence customer-perceived value (CPV), and improve their bargaining position as means to overcome these barriers to improved value capture. Hence, our findings deepen the current understanding of value-based pricing in industrial buyer-seller relationships. In doing so, it contributes to the literature on customer value, organizational capabilities, business models, and sales management in previously unexplored areas. Moreover, the study provides guidance to business practitioners willing to develop value-based pricing as part of their business model.