Pricing Under Conditions of Environmental Turbulence: A Conceptual and Empirical Assessment

Firms typically make a wide range of price-related decisions, including list prices, discounts, rebates, bids, negotiation ranges, and price differentials across market segments. In this article, it is argued that underlying these decisions are a number of dimensions that reflect the overall pricing orientation of the firm. Specific dimensions include the extent to which price decisions are risk aversive versus risk-oriented, reactive versus proactive, cost-based versus market-based, and standardized versus flexible. It is hypothesized that increasing levels of turbulence in the environments of firms will result in pricing approaches that are more risk-oriented, proactive, market-based, and flexible. To test these hypotheses, a survey was conducted of manufacturing firms in the Midwestern United States. The results indicate significant relationships between various aspects of environmental turbulence and all four of the pricing dimensions. Implications are drawn for theory and practice.