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The six pricing myths that kill profits

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  • Hinterhuber, Andreas

Abstract

Pricing is the most important driver of profits. Pricing is also, surprisingly, the area most executives overlook when implementing initiatives to increase profits. There is a reason: Research presented in this article suggests that most executives implicitly hold on to a series of weakly held assumptions about pricing that ultimately are self-defeating. These pricing myths are that (1) costs are the basis for price setting, (2) small price changes have little impact on profits, (3) customers are highly price sensitive, (4) products are difficult to differentiate, (5) high market share leads to high profits, and (6) managing price means changing prices. This research shows how executives can overcome these misconceptions and thus implement sustainable profit improvements via pricing.

Suggested Citation

  • Hinterhuber, Andreas, 2016. "The six pricing myths that kill profits," Business Horizons, Elsevier, vol. 59(1), pages 71-83.
    • Handle: RePEc:eee:bushor:v:59:y:2016:i:1:p:71-83
    DOI: 10.1016/j.bushor.2015.09.002
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    Cited by:

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    2. Liozu, Stephan & Hinterhuber, Andreas, 2022. "Pricing as a driver of profitable growth: An agenda for CEOs and senior executives," Business Horizons, Elsevier, vol. 65(4), pages 457-467.
    3. Bodlaj, Mateja & Čater, Barbara, 2022. "Responsive and proactive market orientation in relation to SMEs’ export venture performance: The mediating role of marketing capabilities," Journal of Business Research, Elsevier, vol. 138(C), pages 256-265.
    4. Kyung-A Sun & Seoki Lee, 2024. "How do strategic pricing approaches influence franchise fee decisions?," Tourism Economics, , vol. 30(6), pages 1508-1530, September.
    5. Andreas Hinterhuber & Todd C. Snelgrove & Bo-Inge Stensson, 2021. "Value first, then price: the new paradigm of B2B buying and selling," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(4), pages 403-409, August.
    6. Li, Feng & Du, Timon C. & Wei, Ying, 2020. "Enhancing supply chain decisions with consumers’ behavioral factors: An illustration of decoy effect," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 144(C).
    7. Kyung-A Sun & Joonho Moon, 2023. "Franchisors’ Strategic Pricing Approaches for Franchise Fee Decisions and the Moderating Role of the Competitive Condition: Evidence from the Korean Franchising Market," Administrative Sciences, MDPI, vol. 13(9), pages 1-14, August.

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