Fundamentals of Price Management

In this fundamental chapter, we will identify price as the strongest driver of profit and explore the relevant aspects of price management. Despite its significance, price is often not well managed in practice. Sharp profit declines are not uncommon because of poor price management. The consequences of pricing are not fully understood for many reasons, including gaps in how theory is applied to practice, the multidimensionality of prices, complex chains of effects, psychological price phenomena, and implementation barriers. We should view price management as a process which encompasses strategy, analysis, decision-making, and implementation and which draws on insights from different scientific fields. In general, price mechanisms are increasingly penetrating parts of society beyond traditional business. More and more, fields such as education, traffic, and health care are controlled through price mechanisms. Price management is coming under an increasingly comprehensive regulatory framework, so that one always needs to make the appropriate checks before implementing a price measure.