Journal of Revenue and Pricing Management

Volume 2 Number 2

REVIEWS AND EVENTS Book Review Pricing: Making Profitable Decisions By Kent B. Monroe (3rd edn; McGraw-Hill, New York; 2002; ISBN: 0-07-252881-8, 658pp) This text is aimed at business and vocational study students in higher education as well as practitioners in a wide field of commerce including not-for-profit organisations. It is a substantial reworking of the second edition, which was published in 1990. Monroe has taken particular care in contextualising and analysing the impacts of deregulation and privatisation plus the issues of emergent markets. The structure and coverage of the book make it an excellent core text for courses and also a handy reference book to be kept within easy reach to be dipped into periodically by practitioners. The objectives of the book have been to cover comprehensively issues and factors that influence price-setting strategies and alternative pricing strategies applicable to a variety of markets. The text considers established as well as emergent markets, and those in decline, where entropic conditions are effectively handled. Each chapter has been clearly set out, using appropriate examples to underline key points and themes with diagrams to support the readers’ development and understanding of concepts. Chapter One sets out the thesis of the book with definitions and current pricing practices and the perception of price with a summary broadly outlining the implications for managers. The chapter opens with an appealing Russian proverb as a fundamental caution. There are two fools in any market: one does not charge enough. The other charges too

much. The discussion questions sets out a practical problem-solving exercise to underpin concepts developed over the chapter. Section Two is divided into three subsections where neoclassical economic theories are reviewed, and their limitations highlighted prior to launching into recent important advances in economic theory. Chapter Two develops the core theme of price determination theory and theory of buyer behaviour, which are discussed without dismissing the shortcomings of neoclassical theory but instead highlighting its usefulness as the foundation of effective pricing. Monroe reminds the reader that application of the laws of demand and supply are often misunderstood, where instead of a ‘number’ we should focus upon the ‘relationship’ between product/price and the consumer at a given time. Unexpected change in competitor strategies or other environmental factors will always have an impact upon practical pricing problems, and we are reminded that no economic theory can provide exact solutions but only insight. Chapters Three and Four review recent research into the concept of information as a resource and its utility in analysing market behaviour and implementing pricing strategies. Seasonality and pricing anomalies, together with buyers’ learning behaviour, open up Chapter Three, which neatly enables Stigler and Nelson’s contribution to understanding the relationship

Journal of Revenue and Pricing Management, Vol. 2, No. 2, 2003, pp. 175–184 # Henry Stewart Publications, 1476–6930

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Reviews and Events

between buyers’ perception and learning with price and quality to be comprehensively discussed. Chapter Four develops the issues surrounding transactions where consumers pick up price and quality signals. Monroe reassures that effective competitor analysis, together with a sound understanding of brand equity and pricing strategies, reduce the threat or fear of price wars. Section Three expands the discussion surrounding behavioural price research and how consumers use price in the purchase decision process. Chapter Five reviews the complex area of behaviour using neoclassic theory as a foundation and then explores decision processing and price awareness and how consumers are increasingly becoming more sensitive to price’s influence on judgment. Chapters Six and Seven develop techniques related to pricing practices and perception of value. These two chapters provoke a moral and ethical debate for both students and practitioners, since it is within this area that consumer protection lobbyists and legislators remain active and vigilant towards what may constitute ‘sharp practice’. It is in this area the debate is not fully developed. While Chapter Eight develops the theme of value analysis management and approaches to introducing value-oriented pricing, the chapter understates the impact within saturated markets offering homogenised products. Chapter Nine outlines practical and sound research methodologies, ideal grounding for students attempting a dissertation in this field of research. Section Four develops the core theme of profitability analysis and makes it an ideal section for practitioners to revisit in order to keep their business models and pricing strategies competitive and fresh. Chapter Ten sets out cost concepts and classifications using traditional and more dynamic analytical tools in an attempt to move away from obsolete costing practices. Chapter Eleven comprehensively covers profit analysis for multiple product organi-

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sations using techniques to optimise resources. Chapter Twelve concludes this section by tackling issues related to marketing operational costs and its impact upon profitability based on more conventional techniques, and avoids getting bogged down in the debate surrounding the impact of e-tailing type distribution channels. Sections Five and Six focus on the practical application of a number of developed themes within the text and, again, it is well worth practitioners revisiting this section. Chapter Thirteen is a timely reminder on how the experience curve can easily be mismanaged as a pricing tool owing to the myopia of managers who need to understand clearly the relationships between cost, price, volume and profit, where alternative strategies need implementation. Chapters Fourteen and Fifteen cover pricing over the product life cycle and product line, where forecasting techniques and yield management are discussed. Chapter Sixteen looks at developing price structure techniques which complement the discussion surrounding yield management. However, the chapter needs a ‘health warning’ in that some techniques such as discounting can be damaging to revenue management where the consumers become educated in reading sales strategies and subsequently delay purchase. Chapter Seventeen looks at the distribution channel and its conflict between competition, the consumer response and legislation, together with the management of salesforce personnel in areas of sales promotion management affecting decision making. Some examples used lean heavily upon the North American experience, and the outcomes from changes in legislation. However, the past shows these experiences become adopted elsewhere in the developed world and remain justifiable in their use within this text. Section Seven handles specialised pricing strategies in selected markets where behaviour is governed by other factors. Therefore, the text deals with international

Reviews and Events

pricing, competitive bidding and Internet pricing on an individual basis and highlights the unique issues that influence their pricing behaviour. Many readers will be drawn to this section, particularly to evaluate Monroe’s approach to internet pricing in light of the current shakedown and repositioning of e-commerce. Overall, this is an excellent resource for students and practitioners alike. Monroe has successfully updated an earlier edition. By building upon our understanding of neoclassical theory with contemporary theoretic development, Monroe has clearly demonstrated that these techniques are

being successfully applied by organisations somewhere at any given time. The text effectively uses clear examples to support the development of themes and underpin theory and maintain momentum within the text. The discussion questions at the end of each chapter are practical, and give the reader an opportunity to be challenged in their thinking and more importantly, in their application in solving pricing problems.

Julian Hoseason Glion Hotel School, Switzerland

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