Pricing ROI, pricing capabilities and firm performance

Pricing is not only an important activity but frequently also a very important expense for industrial companies. In this short article we examine whether an improvement in measuring the return from pricing (pricing return on investment (ROI)) leads to an improvement in pricing capabilities and firm profits. The answer to this question is not trivial: performance measurement is costly and could, at least in theory, reduce performance. We survey 166 marketing and pricing managers from business-to-business companies globally and find that the effectiveness of pricing ROI measurement is positively related to firm performance only if pricing capabilities are well developed. This article offers two contributions: it explores the concept of pricing ROI, and it documents a positive link between pricing ROI and firm performance. To the ongoing debate on antecedents of pricing capabilities this research thus adds a further, so-far unexplored, perspective.