The price of dominance. A book on the scientific and practical approach to pricing.
By Anastasia Matveeva
It is a very comprehensive book - it takes time and some persistence to read it. But it is worth it. The authors have set themselves the goal of "creating a book that simultaneously has a solid theoretical foundation and meets practical needs". One of them, Hermann Simon, is the founder of a large, respected consulting firm in the field of pricing, which deals with numerous problems of practical pricing. The second author, Martin Fassnacht, is a professor, holder of the Chair of Marketing at WHU - Otto Beisheim School of Management in Düsseldorf; his portfolio includes research in the field of pricing management and the implementation of the knowledge gained from this research in practice. Such a duo is capable of achieving this ambitious goal. They have overcome the difficulties which, according to the authors' experience, are associated with a deep understanding of pricing in all areas of the economy, even if they sometimes have an intuitive grasp of the phenomenon.
At the beginning of the book, in fact, the foundations of price theory are set out. But most of it is an analysis of factors that should be taken into account in the process of pricing in real life - economic, industry, psychological, etc. One of the chapters even shows in which cases there is a gap between the postulates of various price theories and the practice of pricing. It also shows the causal relationship between the emergence of such gaps. The result is a work that proves that pricing does not follow the simplest calculation formula "cost plus surcharge". It is rather a complex game with this "plus" in search of its greatest possible value, which gives the seller the greatest benefit. According to the authors, pricing is a strategy and not a tactic.
The main focus of the authors is that the benefits must be long-term. And in order to achieve a long-term effect of the fixed price, it should be correctly defined long before the product is launched on the market. If the price seems too high, the product will not find the consumer, and if it is too low, the company will not make a profit. To prevent this, the authors introduce the concept of value: "The price that the consumer is willing to pay and the price that the seller can get always reflects the value of the product or service in the eyes of the consumer.
This concept becomes the starting point for a detailed analysis of possible approaches to pricing, depending on the market, price range and target group for the product offered by the company. Each pricing rule is supported by relevant examples that specify the principles formulated in the book. Ways and means are presented to determine what value a customer sees in a product or service. A correct understanding of customers and the value they see in a product also helps companies to avoid price wars. However, the authors do not forget that price is a powerful weapon in competition that no one has been able to eliminate, and make valuable recommendations.
It is also important that the book highlights various innovations that have developed as a result of online trading. Online trade, especially in digital goods, has brought new approaches to pricing. Some of these approaches could be transferred to the offline world. All these innovations are based on the fact that the Internet has made pricing transparent. This fact has shaken up many companies and opened the way for new pricing processes to find fair prices that also meet customer expectations.
The book contains many tables, graphics and models that help the reader to find his way around much easier. Mathematical formulas are also not missing in this book. I would also like to emphasize the stylish design of the book - black and white drawings with nostalgic motifs from the early days of capitalism give the serious texts a romantic touch.
Published in: The Expert Magazine, 31-34(1172) 27.07.2020.
Russian edition: Simon, H./ Fssnacht, M. (2019), Price Management: Прайс-менеджмент - Стратегия, анализ, решение и реализация, Moscow: Byblos Publishing.