Mark McDonald

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Mark P. McDonald
GVP EXP
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

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Contextual Pricing: a book review

by Mark P. McDonald  |  April 6, 2012  |  2 Comments

Understand one of the most important and least understood decisions every company has to make — Price

Pricing is one of the most important decisions that companies face.   It is also one that is often reduced to a simple set of list prices, predefined bundles and reactionary policies.  It does not need to be that way as the authors of Contextual Pricing share in their book.  Rob Doctors, John G. Hanson, Cecilia Nguyen and Michael Barzelay have collaborated to create a highly informative, accessible and book that provides actionable advice and examples.  They have created a book that is much more than the normal business book and more accessible than an academic look at the complex issue of pricing.

Highly recommended as a comprehensive, business focused and readily accessible discussion of this critical decision.  The authors point out the importance of pricing when they discuss the observation that less than half of customer defections are price driven, yet when customers threaten to leave.  They also point out that the idea of price elasticity is fundamentally flawed and how to reform this through a combination of segmentation and elasticity.

The authors point out that pricing decisions need to be driven by customer context rather than simple list prices because the simply did not work.  Pricing is therefore more than just an issue of margin and production costs, but rather a complex set of contextually heavy decision.   The authors then go on in 17 chapters to explain exactly what this means.  The chapters are listed at the end of this review.

This book is highly recommended to every manager and executive who is interested in driving greater success from more successful pricing decisions and programs.  CMOs and CIOs should pay particular attention as Contextual Pricing covers the interaction and interdependencies between Pricing, Segmentation and Information.

Strengths

The book is comprehensive in its treatment of the issues of pricing as it covers the impact of marketing, segmentation, bundling and other pricing strategies.  Each topic is covered from the central ideas to illustrative case studies.

The book covers emerging and new issues, reflecting advances in ideas around digital pricing, revised bundling strategies, and managing prices in tough economic times.  All of these topics lead this book to go beyond just simple notions of price elasticity.

The case study examples cover a diverse range of industries from manufacturers to service companies from long established players to relatively new technology companies.  The range of case studies reflects the full range of situations most companies will face.

Challenges 

The book is not for the faint of heart.  It deeply discusses topics in a significant way that makes the book one that needs to be read, reflected upon, and thought through to see how they apply to your situation.  There are few books that have as much underlining and comments in the margins as this one.

The book covers significant ground related to pricing which limits the depth at which it can go into any one topic.  Read this book to get a strong understanding of pricing and its role in management.  Use that understanding to investigate specific pricing issues.

Here is the list of chapters that give you an idea of the books contents without giving those contents away.

Part 1: The Journey from Product to Context

Chapter 1 – Context and the Death of List Price

Chapter 2 – Why Value Matters Less than Competition

Chapter 3 – Which Context Matter to You?

Chapter 4 – Living in the Digital World

Chapter 5 – Antidotes to Prices Pressure

Part 2: Pricing for Poets and Profit Mazimizers

Chapter 6 – Price Structure

Chapter 7 – Scientific Bundling and Tiering

Chapter 8 – Dangerous Ways to Reduce or Increase Price

Part 3: Pricing Programs and the Marketing Mix

Chapter 9 – Segmentation, Context at Time

Chapter 10 – The Hinge of Fate: Pricing Strategy

Chapter 11 – Higher Return: Introductory Pricing Strategies

Chapter 12 – Brand, Messaging, and Competition

Part 4: Tools for Management

Chapter 13 – First Steps and Missteps

Chapter 14 – Cheap and Cheerful Pricing Tools

Chapter 15 – Key Contextual Data is Not in Your Company’s Database

Chapter 16 – An Enabling Systems Architecture

Chapter 17 – Creative Pricing

2 Comments »

Category: Management Strategic planning Strategy     Tags: , , , ,

2 responses so far ↓

  • 1 Pearl Zhu   April 7, 2012 at 11:20 am

    Hi, Mark, thanking for introducing the good book, just walk through the google preview, I would say, context pricing is one of the areas CIO & CMO can work closely since it’s directly impact business’s revenue growth; from IT perspective, how to integrate technology such as CRM, predictive analytics (context analytics), even some Big Data analysis to understand marketing trends., etc, and decide Key Context Factors, yes, for many industries such as transportation and hospitality, retailer or finance., etc, it’s also the opportunities to customize service and solutions. thanks

  • 2 Mark P. McDonald   April 7, 2012 at 12:51 pm

    Thanks for your comments, Pearl and I agree pricing is one of the unique areas where information/technology/product/process and finance all come together.