Note by James R. Martin, Ph.D., CMA
Professor
Emeritus, University of South Florida
Pricing Decisions Main Page |
Surveys Main Page
This article provides some additional data regarding how firms price their products based on a 2016 survey of 86 firms. The authors compare the 2016 data with the survey results from two other articles published in 1983 and 1995. The 2016 survey indicated that 40.7% of the firms used full cost pricing, 36% used market-based pricing, 17.4% used variable cost pricing, 1.2% used value-based pricing, and 4.7% used other measures. Their survey included a mix of industries including manufacturing, financial service/banking, retail or wholesale, other service, nonprofit or government, and other.
The table below compares the results of the Shim 2016 survey with Govidindarajan and Anthony's 1983 survey and Shim and Sudit's 1995 survey. These results indicate that full cost pricing is still the most popular pricing strategy, but market-based pricing has become a close second.
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See my note for an extension of the table above. Martin, J. R. 2022. Comparing pricing strategies. (Note).
Related summaries:
Abel, R. 1978. The role of costs and cost accounting in price determination. Management Accounting (April): 29-32. (Summary).
Bertini, M. and O. Koenigsberg. 2021. The pitfalls of pricing algorithms. Harvard Business Review (September/October): 74-83. (Summary).
Govindarajan, V. and R. N. Anthony. 1983. How firms use cost data in price decisions. Management Accounting (July): 30-31, 34-36. (Summary).
Hinterhuber, A. 2008. Customer value-based pricing strategies: Why companies resist. Journal of Business Strategy 29(4): 41-50. (Summary).
Hinterhuber, A. and S. Liozu. 2012. Is it time to rethink your pricing strategy? MIT Sloan Management Review (Summer): 69-77. (Summary).
Hughes, S. B. and K. A. Paulson Gjerde. 2003. Do different cost systems make a difference? Management Accounting Quarterly (Fall): 22-30. (Summary).
Martin, J. R. Not dated. Chapter 11: Conventional Linear Cost-Volume-Profit Analysis. Management Accounting: Concepts, Techniques & Controversial Issues. Management And Accounting Web. Chapter11.
Martin, J. R. 2022. A note on pricing strategies. (Note).
Porter, M. E. 1980. Competitive Strategy: Techniques for Analyzing Industries and Competitors. The Free Press. (Summary).
Shim, E. and E. F. Sudit. 1995. How manufacturers price products. Management Accounting (February): 37-39. (Note).
Thurston, K. L. D. M. Keleman and J. B. MacAarthur. 2000. Providing strategic activity cost information: Cost for pricing at Blue Cross and Blue Shield of Florida. Management Accounting Quarterly (Spring): 4-13. (Summary).
