The Three Capitals of Pricing – Human, Systems and Social Capital
In this paper we explore the possibility, heretofore unexplored in the marketing literature, that firms “invest funds” in their pricing processes. This builds on some of the recent economic work on the costs of price adjustment. To do this we undertook a two-year, cross- disciplinary, ethnographic study on the nature of investments made by senior managers to enhance the effectiveness of the pricing processes within their firms. We discovered at least three distinct types of investments that managers at these firms made to price more effectively, which we term as the three capitals of pricing - human capital, systems capital and social capital. Our evidence suggests that pricing is really about managing both prices and investments in the pricing capital used to set and adjust those prices. The existence of these three forms of pricing capital provides a new perspective on pricing strategy, suggesting that firms compete on prices simultaneously in three different ways within their organizations. First, they compete on whether to invest in pricing capital versus or other areas of capital investment, such as plant, equipment, etc. Second, they decide what form of pricing capital to invest in – human, systems or social. Third, they set and adjust prices constrained by the existing pricing capital they have in place at the time of their pricing actions. We discuss the implications of these three forms of pricing capital and these new perspectives on pricing for the marketing, economics and strategy literature.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Mark Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2003.
"Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets,"
2003-07, Bar-Ilan University, Department of Economics.
- Mark J. Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 514-533, May.
- Mark Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," Macroeconomics 0402020, EconWPA.
- Mark Zbaracki & Mark Bergen & Daniel Levy & Mark Ritson, 2005.
"Beyond the Cost of Price Adjustment: Investments in Pricing Capital,"
2005-03, Bar-Ilan University, Department of Economics.
- Mark Zbaracki & Mark Bergen & Shantanu Dutta & Daniel Levy & Mark Ritson, 2005. "Beyond the Cost of Price Adjustment: Investments in Pricing Capital," Macroeconomics 0505013, EconWPA.
- Daniel Levy & Mark Bergen & Shantanu Dutta & Robert Venable, 2005.
"The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains,"
- Levy, Daniel, et al, 1997. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 791-825, August.
- Yuxin Chen & Chakravarthi Narasimhan & Z. John Zhang, 2001. "Consumer Heterogeneity and Competitive Price-Matching Guarantees," Marketing Science, INFORMS, vol. 20(3), pages 300-314, June.
- Birger Wernerfelt, 1988. "Umbrella Branding as a Signal of New Product Quality: An Example of Signalling by Posting a Bond," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 458-466, Autumn.
- Laurence Ball & N. Gregory Mankiw, 1992.
"Asymmetric Price Adjustment and Economic Fluctuations,"
NBER Working Papers
4089, National Bureau of Economic Research, Inc.
- Ball, Laurence & Mankiw, N Gregory, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," Economic Journal, Royal Economic Society, vol. 104(423), pages 247-61, March.
- Ball, L. & Mankiw, N.G., 1992. "Asymmetric Price Adjustment and Economic Fluctuations," Harvard Institute of Economic Research Working Papers 1602, Harvard - Institute of Economic Research.
- Mahoney, Joseph T., 1995. "The management of resources and the resource of management," Journal of Business Research, Elsevier, vol. 33(2), pages 91-101, June.
- Rajiv Lal & Ram Rao, 1997. "Supermarket Competition: The Case of Every Day Low Pricing," Marketing Science, INFORMS, vol. 16(1), pages 60-80.
- Andrew C. Caplin & Daniel F. Spulber, 1987.
"Menu Costs and the Neutrality of Money,"
NBER Working Papers
2311, National Bureau of Economic Research, Inc.
- Rao, Vithala R, 1984. "Pricing Research in Marketing: The State of the Art," The Journal of Business, University of Chicago Press, vol. 57(1), pages S39-60, January.
- Carlton, Dennis W, 1986.
"The Rigidity of Prices,"
American Economic Review,
American Economic Association, vol. 76(4), pages 637-58, September.
- Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0505014. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.