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 onAlthough 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.show moreshow less

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Metadaten
Author:Christian Homburg, Ove Jensen, Alexander HahnORCiD
URL / DOI:https://www.jstor.org/stable/41714509
ISSN:1547-7185
Parent Title (English):Journal of Marketing
Publisher:Sage Publications, Inc.
Document Type:Article
Language:English
Date of first Publication:2012/09/01
Reviewed:Begutachtet/Reviewed
Release Date:2025/02/20
Volume:76
Issue:5
Pagenumber:21
First Page:49
Last Page:69
institutes:Fakultät Betriebswirtschaft
Ohm User Experience Center (Ohm-UX)
Research Themes:Soziale & ökonomische Transformation
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