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How to Organize Pricing? Vertical Delegation and Horizontal Dispersion of Pricing Authority

How to Organize Pricing? Vertical Delegation and Horizontal Dispersion of Pricing Authority Although pricing is one of the strongest drivers of profitability, little empirical research has examined how a firm should organize pricing internally. This research draws on the information-processing view of organizational design to conceptualize a framework of how firms organize their pricing authority both within the sales function and across the sales, marketing, and finance functions. The authors find a nonlinear, inverted U-shaped relationship between the vertical delegation of pricing authority and profitability as well as a positive relationship between the horizontal dispersion of pricing authority across sales, marketing, and finance and profitability. Another key finding is a positive interaction between vertical delegation and horizontal dispersion, indicating that firms need to jointly design vertical delegation and horizontal dispersion. In addition, the results identify price-related market dynamism as a moderator of the horizontal dispersion of the pricing authority–profitability relationship and emphasis on margin-based incentives as a moderator of vertical delegation of the pricing authority–profitability relationship. The authors also analyze the relationship between the organizational design of pricing authority and sales growth. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Marketing SAGE

How to Organize Pricing? Vertical Delegation and Horizontal Dispersion of Pricing Authority

Journal of Marketing , Volume 76 (5): 21 – Sep 1, 2012

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References (106)

Publisher
SAGE
Copyright
© 2012 American Marketing Association
ISSN
0022-2429
eISSN
1547-7185
DOI
10.1509/jm.11.0251
Publisher site
See Article on Publisher Site

Abstract

Although pricing is one of the strongest drivers of profitability, little empirical research has examined how a firm should organize pricing internally. This research draws on the information-processing view of organizational design to conceptualize a framework of how firms organize their pricing authority both within the sales function and across the sales, marketing, and finance functions. The authors find a nonlinear, inverted U-shaped relationship between the vertical delegation of pricing authority and profitability as well as a positive relationship between the horizontal dispersion of pricing authority across sales, marketing, and finance and profitability. Another key finding is a positive interaction between vertical delegation and horizontal dispersion, indicating that firms need to jointly design vertical delegation and horizontal dispersion. In addition, the results identify price-related market dynamism as a moderator of the horizontal dispersion of the pricing authority–profitability relationship and emphasis on margin-based incentives as a moderator of vertical delegation of the pricing authority–profitability relationship. The authors also analyze the relationship between the organizational design of pricing authority and sales growth.

Journal

Journal of MarketingSAGE

Published: Sep 1, 2012

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