Prepare a brief analyzing the pricing practices of an insurance company according to the outline below. -> Briefly introduce the company and its typical approach to the marketplace (e.g. low-cost,...

Copyright 2015 by Kelley School of Business, Indiana University. For reprints, call HBS Publishing at (800)545-7685. BH 718 Business Horizons (2016) 59, 71—83 Available online at www.sciencedirect.com ScienceDirect www.elsevier.com/locate/bushor The six pricing myths that kill pro?ts Andreas Hinterhuber Hinterhuber & Partners, Falkstrasse 16, 6020 Innsbruck, Austria KEYWORDS Abstract Pricing is the most important driver of pro?ts. Pricing is also, surprisingly, the area most executives overlook when implementing initiatives to increase pro?ts. Pricing; There is a reason: Research presented in this article suggests that most executives Pro?tability; implicitly hold on to a series of weakly held assumptions about pricing that ultimately Misconceptions; are self-defeating. These pricing myths are that (1) costs are the basis for price Value-based pricing; setting, (2) small price changes have little impact on pro?ts, (3) customers are highly Market share price sensitive, (4) products are dif?cult to differentiate, (5) high market share leads to high pro?ts, and (6) managing price means changing prices. This research shows how executives can overcome these misconceptions and thus implement sustainable pro?t improvements via pricing. # 2015 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved. to ?nance (in de?ning payment terms) to controlling 1. Pricing: Guided by principles or (in setting discount levels) to supply chain (in de- driven by myths? termining which customers are eligible for free shipping) to key-account management (in price ne- Pricing is, for better or worse, the most important gotiations with large accounts), is responsible for driver of pro?tability (Schindler, 2011). However, pricing–—so in the end, of course, nobody is. pricing is not yet on most executives’ agendas as a How does this self-defeating behavior persist? primary concern. Less than 5% of companies have a The extensive research I conducted over...