The confidence factor in pricing: driving firm performance

Purpose – The purpose of this paper is to identify a set of specific activities and a set of competencies associated with above‐average firm performance. Design/methodology/approach – Quantitative survey of 748 respondents. Findings – It was found that four key competencies differentiate high performing from low performing companies: organizational confidence; pricing capabilities; organizational change capacity; and championing behaviors by top management. The research also identifies a set of specific activities that are linked with superior firm performance: activities directed at the improvement of pricing effectiveness (e.g. trainings, pricing tools; pricing performance reviews); improvements in product differentiation and product quality (e.g. through innovation and research aimed at identifying and creating customer value); increased sense of organizational confidence (e.g. optimism, resilience, “can do”‐attitude); improved support of top management; improved ability to stick to list prices and minimization of discounting behaviors; and finally, enhanced cultural adaptability to respond to changing market conditions. Research limitations/implications – Through a quantitative research design, the authors document the link between pricing capabilities, organizational confidence and superior firm performance. Practical implications – The authors identify both specific activities, as well as higher order competencies, practising managers need to develop in order to increase firm performance via pricing. Taking a hypothetical company as example, the authors' data show that, on average, a one point improvement on a seven‐point scale in organizational confidence leads to a 4 per cent improvement in return on sales. Originality/value – Our research highlights which organizational competencies drive firm performance. Specifically this research is the first quantitative survey which documents a positive relationships between organizational confidence and firm performance.