European Management Journal Vol. 21, No. 6, pp.
717–730, 2003
Pergamon
doi:10.1016/j.emj.2003.09.014
Performance as a Basis
for Price-setting in the
Capital Goods Industry:
Concepts and Empirical
Evidence
REINHARD HÜNERBERG, University of Kassel
AXEL HÜTTMANN, McKinsey and Company, Munich
This paper discusses a new pricing strategy, which
leads to a certain variability of prices as the supplier
offers to fix prices to performance parameters of
long-lasting industrial goods. The underlying idea
is to give a signal of the supplier’s competence
and/or to conclude a contract, which contains
additional value for both parties to the market.
Some theoretical findings are applied to this con-
cept and lead to 13 hypotheses, especially dealing
with the perceptions of the buyer. Empirical
research covered 131 German mechanical engineer-
ing companies. The data were used to evaluate the
use of performance-based pricing and test the
hypotheses. The results show a mixed picture.
Uncertainty-reducing effects are well perceived
while other assumptions could not be confirmed.
Based on the results recommendations are
developed on how and when to apply performance-
based pricing.
 2003 Elsevier Ltd. All rights reserved.
Keywords: Performance-based pricing, Price stra-
tegies, Signalling effects of pricing, Uncertainty
perceptions of buyers, Industrial marketing, Capital
goods industry
Conceptual and Theoretical Framework
The customer tries to maximize his net benefit when
purchasing goods and services. A potential supplier
European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003
 2003 Elsevier Ltd. All rights reserved.
Printed in Great Britain
0263-2373 $30.00
can try to provide evidence on the value of his offer
to increase his chances of being selected. There are
several possibilities to do so: e.g. reference projects,
certificates, awards, well-established brands (Spence,
1976). Price policy can also serve as a means to
reduce the customer’s uncertainty about the benefit
of an offer.
Definitions
Price policy is a very powerful marketing instrument
as it directly influences profit. It encompasses both
direct and indirect measures (van Waterschoot, 1995).
Price setting — seen as a direct measure — primarily
relates to the fixing of a net price (gross price minus
diverse rebates). Numerous other marketing instru-
ments, e.g. terms of delivery and payment, special
product features, maintenance and other contractual
agreements, have less direct influence on the cus-
tomer’s financial position.
The situation of the capital goods industry differs
considerably from that of other areas in the industrial
goods industry and still more from the consumer
goods industry and from services in most sectors.
Order value for capital goods generally is high, so
that both parties face substantial financial risks.
Moreover, offerings tend to be both complex and cus-
tomized and — at least with regard to the core
product — lead to one-off deals (Webster, 1984). The
customer may be fixed with his choice for some time
717
PERFORMANCE-BASED PRICING
and will therefore be reluctant to make decisions. In
general, his co-operation is needed to establish the
offer. This is all the more true the larger and the more
innovative the investment in question. The focus of
this article is on decisions concerning such big busi-
ness transactions.
Performance refers to the effectiveness of the invest-
ment in question and may be used as a basis for vari-
able price setting. Forecasting and measuring the
results attributable to a new machine poses a big
challenge. If variables that sufficiently reflect per-
formance are defined, price can be based on these
variables. There are three major price categories
which may be applied in this context: input-based
prices relating to intensity of use (defined as — cus-
tomer-driven — time of use, as average output etc.);
output-based prices relating to performance levels of
the investment in question (defined as maximum out-
put per period of time, up-time and necessary main-
tenance periods, manufacturing tolerances, number
of rejects etc.) and output-based prices regarding the
customer’s economic results (defined as cost savings,
revenues, contributions etc.).
In all these cases the seller of the investment partici-
pates in the buyer’s technical risk and - for the last
category mentioned — to a certain extent even in his
market risk. Thus the seller reduces customer uncer-
tainty through a special price-setting concept. Table
1 shows 10 types of performance-based pricing that
were used in our questionnaire.
Performance-based Prices within the Context of
Strategic Price Concepts
The price concept explained above is one example
of a basic strategic price concept. Performance-based
Table 1 Types of Performance-based Pricing used
in the Questionnaire
Input-based prices relating to intensity of use:
❖ Number of times used
❖ Time of use (e.g. number of operating hours)
❖ Number of end-products produced
❖ Number of users
Output-based prices relating to performance levels of capital
goods:
❖ Performance (e.g. max. output/hour)
❖ Availability (e.g. up-time of capital good)
❖ Quality (e.g. manufacturing tolerances, rejects)
Output-based prices regarding the customer’s economic
results of using capital goods:
❖ Cost savings realized
❖ Revenues generated
❖ Contribution margin/profit generated
718
pricing fits into a set of other pricing or price-related
strategies. Figure 1 shows major approaches grouped
along the dimensions ‘complexity of price offer’ and
‘seller’s risk’ (for an overview of possible approaches
cf. Ross, 1984, p. 151f.). It needs to be pointed out
that these approaches are not completely exclusive.
‘Fixed Overall Prices’ are documented in a uniform
price list effective for all customers (Ross, 1984). A
certain degree of flexibility is introduced if the cus-
tomer can choose from a list of individually priced
elements to configure a custom package (Nagle and
Holden, 1995). This strategy is easy to understand
and control. It does not expose the seller to any
unforeseen risk. Its applicability for the type of capi-
tal goods looked at in this article is, however, restric-
ted, because the specific demand is not reconcilable
with price standardization on behalf of the seller.
Moreover, the seller’s dependency on individual cus-
tomers makes it difficult for him to refuse price
negotiations.
‘Price Differentiation’ is a more complex concept
with more risk for the seller who offers the same or
rather similar products at different prices (Phlips,
1983). Pigou has already distinguished three types of
price differentiation (Pigou, 1929): individual prices
leading to the maximum price for each contract (type
1), segmentation of customers into groups with the
customer choosing at which price to buy (type 2), and
segmentation of customers into groups with the seller
setting the price for the buyer (type 3). Type 1 may
be realized through negotiations and auctions. Type
2 can be based on (slight) differentiation of elements
of the offering (e.g. in the field of product features,
customer service, financial and other conditions), on
several forms of bundling, or on purchase volume.
Type 3 contains price differentiation according to
time of purchase (e.g. season, product life cycle), to
location of the customer (e.g. in different countries),
and to other characteristics of the customer (e.g. size,
industry segment). This Type 3 entails particularly
high risks of arbitrage effects, against which the seller
has to build up barriers (e.g. through simultaneous
differentiation of the offering). Some forms of price
differentiation are in widespread use in large capital
goods transactions. Individual negotiations, bundling
Figure 1 Price-related Strategies
European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003

offers, international and customer-based price differ-
ences all meet the characteristics of specificity and
individuality of this business.
‘Financing’ a purchase further increases the com-
plexity and risk for the seller, as he needs to consider
financial aspects beyond his core competence. By
offering financial services the seller actually leaves
the area of mere price setting. Examples are a sup-
plier’s credit or a credit that the seller procures. Vari-
ous leasing models also fall into this category.
Because of the high value of large capital goods trans-
actions, financial support is often expected or even
obligatory, especially in international trade.
‘Risk Sharing’ is considered as the most complex and
risk-prone offer a seller can make. He explicitly
accepts part of the buyer’s diverse risks in the field
of technical, economic and other imponderables. The
most common elements are guarantees, options of
exchange, penal obligations, and assumption of
export (import) risks. The subject of this article —
performance-based price concepts — is another form
of risk sharing and is, in many respects, the most far-
reaching one. The buyer shares his risks (and opport-
unities!) with the seller; by committing himself he
demonstrates his goodwill and underlines his capa-
bility. In contrast to the other possibilities mentioned,
it forms an integrated concept that concentrates on
price without opening another field of negotiation.
Our empirical study for Germany shows that the con-
cept starts to become an accepted alternative in the
field of capital goods pricing. Hypotheses are
developed from marketing theory and tested to show
the relevance of this approach.
Price is a frequently researched marketing area.
Research focuses on the application of different price
strategies and the methods of fixing prices
(Diamantopoulos, 1991). There is also some empirical
evidence for the economic potential of price differen-
tiation as a marketing instrument, the importance of
financing, and risk sharing (see Table 2 for a selection
of empirical studies).
Hypotheses on Performance-based Pricing
Obtaining information on markets and their parti-
cipants on the one hand and transfer of information
to the latter in order to influence their decisions on
the other hand are considered the two major tasks of
marketing (Kaas, 1990). Several conceptual and
theoretical approaches deal with the many questions
involved. ‘New Institutional Economics’ and ‘Behav-
ioural Sciences’ provide some fundamental insights
and are selected as sources to generate a total of 13
hypotheses on performance-based pricing.
New Institutional Economics focuses on the difficult-
ies of obtaining information and on the transaction
cost incurred by collecting and processing infor-
European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003
PERFORMANCE-BASED PRICING
mation. One basic assumption is that there is an
asymmetric distribution of information between the
market participants, which encourages self-interest
seeking and leaves room for opportunistic behaviour
(Williamson, 1984). Opportunistic behaviour together
with bounded rationality and information asym-
metry are the main reasons for the uncertainty of
business transactions. Three areas can be subsumed
under New Institutional Economics or at least con-
sidered as being closely connected with this
approach: economics of information — analysing
informational behaviour of market participants
(Stigler, 1961; Spence, 1976) principal agent theory —
designing efficient incentives in case of information
asymmetries and potential opportunistic behaviour
(Arrow, 1991), and transaction cost theory — examin-
ing the efficiency of alternative institutions and pro-
cedures (Coase, 1937; Williamson, 1985).
The field of Behavioural Science encompasses a large
variety of concepts and theories from psychology,
social psychology and sociology. Three theories are
selected as supplementary sources for generating
hypotheses in the context of this article’s topic: Find-
ings from learning theory — dealing with the process
of behavioural changes on the basis of experience
(Hilgard and Bower, 1983) risk theory — being
related to prospect theory and mental accounting
which refer to individuals’ dealing with perceived
risk (Cunningham, 1967) and theory of interaction
and exchange — explaining mechanisms and results
of social exchange processes (based on the seminal
work of Thibaut and Kelley, 1959; Homans, 1961).
If one looks at the effects of performance-based pric-
ing concepts, reduction of perceived risk and a
decrease in transaction cost are the most evident
advantages for the customer. A complex and chang-
ing environment as well as information deficits may
leave potential customers with doubts about the use
of the object in question, its characteristics, and the
firm offering it. Moreover, specificity of demand and
the resulting risks cause cost of search, negotiation
and control. New Institutional Economics and Behav-
ioural Science obviously contribute to explaining the
effects of performance-based pricing on customer
perceptions. The first five groups of hypotheses are
directly linked to this background. The other eight
hypotheses, mainly derived from behavioural
science, focus on additional relations that primarily
help to understand the seller’s point of view.
(1) If performance-based prices are linked to para-
meters of use or result, the customer’s risk of sel-
ecting the wrong offer is partly transferred to the
supplier. Thus a revision of the investment decision
is less costly, giving the buyer more room to
manoeuvre. The supplier has an incentive to provide
the most adequate product and will leverage his
experience to do so. Hypotheses 1 and its three sub-
hypotheses summarize these assumptions:
❖ H 1: The buyer’s perceived uncertainty with
719
PERFORMANCE-BASED PRICING

Table 2 Selected Empirical Studies on Complex Forms of Price Setting (Seen from the Supplier’s (S) or
Customer’s (C) Point of View)

Author Sample (response rate) Main results S C

Price Wied-Nebbeling (1975) 421 German industrial 2/3 of the companies surveyed use price X
differentiation: companies (ca. 40 per differentiation; large and medium-sized
cent) companies tend to use spatial price
differentiation, small companies prefer
individual price differentiation

Morris (1987) 288 industrial companies Volume, future revenue potential and X
from Florida, USA (35 purchase frequency are the most popular
per cent) forms of price differentiation

Lutz (1995) 306 SME from Differences in distribution and competition are X
Germany, France and the main reasons for international price
the UK (34 per cent) differentials

Baltas and Freeman (2001) 600 product launches of A hedonistic price function does not X X
computer hard disks completely explain existing price differences.
between 1980 and 1989 The heterogeneity of customer segments is a
key influence factor that helps to explain
price differences

Financing: Kehren (1999) Structured interviews Project financing has a significant influence X
with 101 Sales & on the revenue of a business unit, especially
Marketing employees of in developing countries. Leasing can rarely
ABB be used for the export of capital goods

Risk- Bauer and Bayón (1995) 128 CEOs of German 56 per cent of the companies included X
sharing: companies buying penalties for delay of delivery in their
specialty machinery (22 contracts, 11 per cent agreed on penalties if
per cent) a specified output was not reached

Kaas and Schade (1995) 121 consultants and 74 90 per cent of the consultants did not base X X
clients (52/31 per cent) their fees on the success of the project
although 57 per cent indicated that success
could be measured easily

regard to the adequacy of an investment will
decrease when accepting a performance-based
price offer.
❖ H 1.1: Performance-based pricing reduces the
buyer’s perceived risk of selecting the wrong
investment alternative.
❖ H 1.2: Performance-based pricing increases the
buyer’s perceived financial gain.
❖ H 1.3: Performance-based pricing ensures that
the seller recommends the product which best
fits the buyer’s needs.
the agent’s — activities. The information systems
necessary to control such input parameters result in a
reduction of information asymmetries. Output-based
pricing establishes joint objectives for both parties
and prevents the seller from exploiting his infor-
mation advantage. The intense interactions required
when negotiating a performance-based price further
reduces the buyer’s uncertainty and levels out the
imbalance of power often perceived by the buyer
(Webster, 1984; Shapiro, 2002). This leads to the for-
mulation of hypothesis 2 and its two sub-hypotheses:

(2) The willingness of the supplier to offer a perform-
ance-based price signals that he has no hidden inten-
tions and will not take hidden actions, which would
be detrimental to the customer. Such risks are parti-
cularly high if customized solutions have to be
developed and many services are involved. Here the
pricing concept becomes a substitute for intensive
information gathering about the competitiveness and
reliability of the market partner. Paying the supplier
on the basis of his input, e.g. material used or time
spent, is another way for controlling the supplier’s —
❖ H 2: The buyer’s perceived uncertainty with
regard to the seller will decrease when accepting
a performance-based price offer.
❖ H 2.1: Performance-based pricing is perceived
as a credible signal for the seller’s goodwill and
competence by the buyer.
❖ H 2.2: Performance-based pricing is an assur-
ance that the seller acts in the buyer’s interest.
(3) The buyer’s uncertainty with regard to the charac-
teristics of the product originates from the com-

720 European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003

plexity of capital goods and potential interdepen-
dencies with other investments. In addition, quite a
number of product characteristics are experience-
based for the customer whereas the supplier knows
those qualities in advance. Information substitutes
play a decisive role yet again as the customer tries to
limit the cost of search. A performance-based price
is an efficient means in this respect. It presents an
‘exogenously costly signal’, i.e. it is a credible signal
that incurs high costs if copied by a less capable com-
petitor. A product that is delivered but not yet com-
pletely paid represents a ‘hostage’ from the buyer’s
point of view (Williamson, 1983, p. 526 f.); the seller
as the agent therefore foregoes part of his role and
power. In this context a performance-based price is
especially valuable if the variable used as payment
parameter measures an experience-bound criterion.
This also reduces the perceived risk, especially with
regard to problems that might arise once the pur-
chase has taken place. Altogether New Institutional
Economics and Behavioural Science support the third
hypothesis with its two sub-hypotheses:
❖ H 3: The buyer’s perceived uncertainty with
regard to product quality will decrease when
accepting a performance-based price offer.
❖ H 3.1: Performance-based pricing is a credible
signal of product quality for the buyer.
❖ H 3.2: Performance-based pricing reduces the
buyer’s perceived risk of negative purchase
consequences.
(4) A credible signal of the supplier, an instrument
to reduce negative consequences of procurement
decisions, elements of an information and incentive
system — all these functions of performance-based
prices influence transaction cost. A credible signal
simplifies information gathering and may even
reduce the number of alternatives to consider
(Spence, 1976). Both aspects result in cost savings. If
price setting is based on criteria measuring experi-
ence qualities, cost for product testing may be saved.
In addition, provisions for negative investment
consequences can be reduced as those consequences
become less likely. Finally, performance-based prices
make control of opportunistic behaviour unnecess-
ary, which further reduces transaction cost. But
implementing such a price concept also causes
additional transaction costs when negotiating con-
cept details and selecting, measuring and controlling
the performance parameters. As a net effect, we
assume that performance-based prices reduce trans-
action costs. Hypothesis 4 and its three sub-
hypotheses reflect this assumption:
❖ H 4: Performance-based pricing reduces the buy-
er’s transaction cost.
❖ H 4.1: Performance-based pricing reduces the
buyer’s cost of acquiring information and test-
ing products.
❖ H 4.2: Performance-based pricing simplifies and
shortens the buyer’s procurement process.
European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003
PERFORMANCE-BASED PRICING
❖ H 4.3: Performance-based pricing reduces the
cost of observing and controlling the supplier.
(5) The hypotheses put up so far look at different
types of investment risk and at the transaction cost
involved. Performance-based pricing is supposed to
exert positive influence on both investment uncer-
tainty and transaction cost. In consequence perform-
ance-based prices should be increasingly convincing
the higher the perceived uncertainty of the buyer.
Thus hypothesis 5 is added with three sub-
hypotheses concerning the three types of risks or
uncertainties discussed before:
❖ H 5: The higher the buyer’s perceived procure-
ment uncertainty, the more he will appreciate per-
formance-based pricing.
❖ H 5.1: The higher the buyer’s perceived uncer-
tainty with regard to the adequacy of the
investment, the more he will appreciate per-
formance-based pricing.
❖ H 5.2: The higher the buyer’s perceived uncer-
tainty with regard to the seller, the more he will
appreciate performance-based pricing.
❖ H 5.3: The higher the buyer’s perceived uncer-
tainty with regard to the product quality, the
more he will appreciate performance-based
pricing.
(6) The relationship between performance-based pric-
ing and perceived purchase uncertainty may be
influenced by internal variables of the buying com-
pany. Positive experience with the rather innovative
concept of performance-based pricing should
increase the buyer’s appreciation and facilitate future
application. Learning theory refers to this phenom-
enon as the ‘law of effect’ (Hilgard and Bower, 1983).
Hence hypothesis 6 is established which deals with
this moderator effect:
❖ H 6: Procurement uncertainty given, experience
with performance-based pricing increases the buy-
er’s appreciation of such pricing concepts.
(7) The flexibility of the customer’s procurement pro-
cesses could be another internal factor influencing the
acceptance and appreciation of performance-based
pricing. Standardized RFP-procedures, fixed criteria
for investment decisions and other rigid rules in the
internal organization of a company make it difficult
or impossible to introduce new and flexible forms of
pricing and influence the assessment of a perform-
ance-based price concept in a negative way (Frey and
Schlosser, 1993). This leads to hypothesis 7:
❖ H 7: Procurement uncertainty given, a flexible pro-
curement process increases the buyer’s appreci-
ation of performance-based pricing.
(8) It has been assumed that the buyer’s appreciation
of performance-based pricing depends on his level of
uncertainty (cf. (5)). Thus it is valuable to identify
721
PERFORMANCE-BASED PRICING

variables that influence these uncertainties. They
could be considered as indirect determinants of how
buyers assess the pricing concept. In this context the
characteristics of the product are of major interest.
Investment decisions for customized capital goods
can only be reversed at high cost and consequently
cause uncertainty. Systems tailored to the specific
needs of the buyer fall into this category and — to a
lesser extent — production facilities and plant con-
struction, whereas more standardized products
rarely belong to it (Backhaus, 2002). This consider-
ation leads to hypothesis 8:
❖ H 8: Performance-based prices are most advan-
tageous for the buyer when purchasing systems,
less advantageous for production facilities and
plant construction, and least advantageous for
standard products.
(9) The buyer’s experience with the procurement of
similar or even identical capital goods probably is
another important factor. Experience reduces uncer-
tainty and a straight or modified re-buy (Robinson et
al., 1967) makes performance-based prices less
attractive. Hypothesis 9 describes this assumption:
❖ H 9: Performance-based prices are more advan-
tageous for the buyer in first buy than re-buy situ-
ations.
(10) Finally, perceived importance of an investment
is supposed to influence the customer’s evaluation of
performance-based prices. If an investment heavily
influences a company’s operational and financial suc-
cess, the purchase decision is particularly risky
(Webster, 1984; Heide and Weiss, 1995). Hypothesis
10 expresses this link:
❖ H 10: The more important an investment is for the
buyer the more he will appreciate performance-
based pricing.
better quality. It may be difficult to distinguish
between both effects as they lead to the same result,
a higher price. Nevertheless, the following hypoth-
esis is established:
❖ H 12: The buyer will be ready to pay a premium
for the risk taken on by the seller in the context of
a performance-based price concept.
(13) The other main and most fundamental interest
of the buyer besides realizing a higher price is the
acquisitions of (new) customers. In order to attract
customers, their switching barriers, partly due to the
specific character of capital investments, have to be
overcome. Performance-based pricing seems to be an
adequate means to do so. The offer of performance-
based prices signals the supplier’s commitment and
ensures that the mutual ties are perceived as more
balanced. This may convince the buyer to switch to
an outside supplier and/or to enter into new obli-
gations. These considerations lead to hypothesis 13:
❖ H 13: The buyer is more willing to try a new sup-
plier if he offers performance-based prices.
If one revisits the thirteen hypotheses developed
above, two central groups of assumptions can be
identified (cf. Figure 2). The first group (hypotheses
1–4) contains assumptions about the main effects of
performance-based prices on the buyer: a reduction
of perceived purchase uncertainty and a reduction of
transaction cost. The second group analyses the
expected influence of perceived purchase uncertainty
on the buyer’s appreciation of performance-based
pricing (hypothesis 5). Buyer characteristics that may
influence this relation as potential moderator vari-
ables are included in the analysis (hypotheses 6 and
7). In an attempt to generate cues for a seller willing
to offer performance-based pricing, the influence of

(11) A supplier offering performance-based prices

has one central goal: He wants to increase the buyer’s
willingness to pay more in comparison with other
price models. Performance-based prices may be a
chance to overcome adverse selection, a phenomenon
leading to market failure, if information asymmetries
exist, e.g. with regard to experience and credence
qualities (Akerlof, 1970). Hypothesis 11 thus deals
with the possibility to realize higher prices if per-
formance-based pricing is applied.

❖ H 11: The buyer will be ready to pay a price pre-

mium for outstanding supplier performance in the
context of a performance-based price concept.

(12) The next hypothesis is closely linked with

hypothesis 11. The seller’s offer to share part of the
risk of the business transaction may induce the buyer
to pay a premium for such a concession. In the end
this correlates with the willingness to pay more for Figure 2 Central Groups of Hypotheses

722 European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003

specific procurement situations on the perceived
uncertainty of the buyer is included in the analysis
(hypotheses 8–10). Finally, potential behaviour
changes of the buyer in reaction to a performance-
based price offer, which are positive for the supplier,
are looked at (hypotheses 11–13).
Empirical Study
Conceptual and theoretical approaches support the
relevance of performance-based pricing as a special
case of risk sharing (see above). But so far no empiri-
cal research has been established to that respect. Thus
it is challenging to find empirical evidence for this
pricing strategy and its implications.
Methodology
We selected the industrial area of mechanical engin-
eering as our field of research and restricted it to big
German companies (annual turnover of at least 50
million ). Reasons for this decision were — besides
feasibility — the high economic relevance of this sec-
tor (with regard to employees it is the biggest sector
in Germany, with regard to turnover it comes third),
a sufficient heterogeneity of firms and a high pro-
portion of large capital goods transactions.
The basis for selection was the Amadeus database of
Bureau van Dijk, which provided a good represen-
tation of the industrial sector, following the definition
of the German Federal Statistics Office. Out of 18,684
companies listed as mechanical engineering compa-
nies, 631 fulfilled the criterion of size required. Four
hundred and forty of them were selected at random
and contacted by phone. Sixty-nine of these 440 were
eliminated immediately as they could not make inde-
pendent investment decisions or had not engaged in
any capital goods transaction in the past 12 months.
Another 71 declined to take part in the survey, so
that a questionnaire was finally sent to 300 firms. In
the end 131 questionnaires were sent back and com-
pleted in a way that allowed analysis. Thus the
response rate was 43.7 per cent on the basis of the
300 questionnaires sent out and 35.3 per cent on the
basis of adequate companies at first contact. The
phone contact also served for identification of key
informants within the buying decision process of the
company. For 75 per cent of the companies the key
informant was either the managing director or the
head of procurement. A competence check of the
respondents showed among other criteria an average
experience in industrial goods purchasing of 13.3
years. The empirical research took place at the end
of 2002.
Industrial sub-sectors of mechanical engineering
were rather well represented in the sample compared
with the distribution in the Amadeus database.
European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003
PERFORMANCE-BASED PRICING
According to a chi-square test the survey was, how-
ever, not representative with a view to company size.
This was due to a higher representation of medium-
sized and large firms with annual turnover of more
than 100 million . This fact has to be taken into
account when interpreting the empirical results. But
there was also evidence that the classes defined on
the basis of company size by Amadeus did not totally
correspond with the informants’ own assessments.
An eight-page questionnaire with 61 items was
developed and pre-tested. The first part introduced
the concept of performance-based pricing and tested
to what extent the companies had used or at least
been offered 10 selected forms of performance-based
pricing. In a second part the informants were asked
to assess performance-based prices against the back-
ground of an investment decision they were involved
in over the past 12 months. Additional questions
described the transaction selected. A third part con-
tained the usual statistical information. Most ques-
tions were asked in a closed form. Likert scales with
seven categories were interpreted on an interval
level.
Data analysis was both descriptive and hypotheses
testing and used SPSS for Windows (10.0) and LIS-
REL (8.52). Because of sufficient sample size t-stat-
istics and variance analysis were applied. For
investigating structures, correlation, linear and
moderated regression analysis as well as exploratory
factor analysis were used (Stevens, 2002). The
operationalization process included validity and
reliability tests (exploratory factor analysis, Cron-
bach’s alpha, item-to-total correlation, supplemented,
if possible, by confirmatory factor analysis and its cri-
teria (Bagozzi and Baumgartner, 1994)).
Dissemination of Performance-based Pricing
Some examples of performance-based prices have
been made public: One is ABB and Ford that jointly
realized a painting facility and shared cost savings
from plant design innovations that went beyond the
agreed upon appropriation price (Frey and Schlosser,
1993). Johnson Controls Facility Management used a
related approach for selling technical equipment for
building complexes. Prices are defined as fixed per-
centage of the savings of operating expenses, which
the buyer — especially in the public sector — realizes
in the years to come. Another example is the jet tur-
bine engine business of General Electric (GE). When
selling their engines to airline companies they often
negotiate payment per flying hour and also take on
maintenance.
Our empirical research showed that most types of
performance-based prices are not in widespread use.
There are, however, a few exceptions. Within the cat-
egory of input-based prices relating to intensity of
use, price per user is a well-known and applied con-
723
PERFORMANCE-BASED PRICING
cept, probably due to the system underlying software
license fees. Almost half of the respondents actively
use this price concept. Another area of application
falls into the category of output-based prices linked
with quantity and/or quality of output: Almost one
third of the sample had been offered payment
according to availability; about 20 per cent got an
offer that linked payment with efficiency or quality.
The other six forms, which were mentioned in a list
annexed to the corresponding question, apparently
do not play a major role. Looking at the seller and
his offer, it can be stated that forms of performance-
based pricing implying more risk for the seller are
applied less often (cf. Figure 3).
Altogether 36 per cent of the firms of the sample had
never used any form of performance-based prices.
Thirty per cent had not even been faced with such a
form of pricing (cf. Figure 4).
Beyond the description of the dissemination of per-
formance-based prices it is critical to understand the
function and perception of such price concepts as this
determines their future proliferation. Therefore the
test of the hypotheses developed above is to the fore
of our analysis.
Operationalizations and Results of
Hypotheses Testing
Some of the variables used in the hypotheses require
complex operationalization, especially the central
concept of buyer’s perceived uncertainty, which is
explicitly employed in hypotheses 1, 2, 3 and 5. There
are a number of suggestions in literature how to
establish an adequate validation model for this con-
cept (Lawrence and Lorsch, 1979; Duncan, 1972;
Figure 3 Dissemination of Performance-based Pricing
724 European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003
Milliken, 1987; Achrol and Stern, 1988; John and
Weitz, 1989 ). Each dimension of procurement uncer-
tainty (with regard to adequacy of use, to seller, to
product) in our study was operationalized through
six indicators (items in the questionnaire), which
were considered reflective. An exploratory factor
analysis suggested two factors for each dimension,
which were interpreted as ‘informational situation’
and ‘striving for risks coverage’. Reliability and val-
idity of those factors were judged on the basis of a
confirmatory factor analysis, which was, however,
restricted because of the limited number of items. It
showed — especially as far as uncertainty with
regard to adequacy of use and to product was con-
cerned — sufficient indicator and factor reliabilities
as well as average variances (for details cf.
Hüttmann, 2003). The values of the two factors
extracted for each of the three dimensions were
added to form three sub-indices, which were then
aggregated to a total index of procurement
uncertainty. They served as scales for the different
uncertainties when testing the above-mentioned
hypotheses.
Hypothesis 6 looks at experience with performance-
based pricing as a moderator variable. The oper-
ationalization of this variable is based on 10 items of
the questionnaire. The responses to the correspond-
ing questions were used to form an experience index.
The weighting of the indicators and their response
categories was mainly founded on plausibility. The
use of performance-based prices, for example, was
supposed to have an influence on experience twice
as high as mere offers with no contract following. It
is our assumption that experience is roughly reflected
by the index; detailed interpretations would, how-
ever, require further investigation.
Hypothesis 7 refers to another moderator variable,

Figure 4 Experience of Respondent Companies with Performance-based Pricing
flexibility of the procurement process. Three items of
the questionnaire were used to measure this variable.
Exploratory factor analysis, item-to-total correlation,
Cronbach’s alpha confirmed one-dimensionality.
Indicator reliability of one item was, however, low.
Hypothesis 8 deals with the importance of the invest-
ment. Suggestions to be found in the literature were
used in a modified form to develop four items with
regard to this concept (McQuiston, 1989; Heide and
Weiss, 1995). The indicators gave evidence of one-
dimensionality of the variable. Exploratory factor
analysis, item-to-total correlation, Cronbach’s alpha
and all criteria of confirmatory factor analysis
(indicator reliabilities, factor reliability, average vari-
ance and global criteria such as AGFI) provided satis-
factory values. Thus the factor values were used to
represent the importance of the investment. Table 3
gives an overview of the operationalizations chosen
to measure the above constructs as well as the results
of the most important tests.
Table 4 shows the 13 hypotheses and the sub-hypoth-
eses at a glance as well as the overall result of the
empirical tests, i.e. whether the individual hypothesis
was confirmed (c) or had to be rejected (r), on the
basis of the operationalizations outlined before. It
also refers to the statistics employed.
To assess the sub-hypotheses of hypotheses 1, 2, 3
and 4, one tailed t-statistics were applied to test if the
means of the 7-point Likert scales were significantly
above 4. This was confirmed for all sub-hypotheses
belonging to hypotheses 1, 2, and 3, but not for those
belonging to 4. This implies that the assumed
relationship between performance-based prices and
European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003
PERFORMANCE-BASED PRICING
buyers’ various uncertainties reflects the perception
of the selected population. The results for H 1.3, H
2.2 and H 2.1 need to be highlighted, as their scores
were particularly high. Contrary to the relationship
between performance-based prices and uncertainty,
the connection between different types of transaction
cost and performance-based pricing is not perceived
likewise. The corresponding hypotheses had to be
rejected. The fact that monetary effects of process
simplifications etc. are less evident and not of major
interest to procurement departments — members of
which in general answered the questionnaire — may
explain these results.
Linear regression was applied to test hypothesis 5,
with procurement uncertainty as independent and
appreciation of performance-based pricing as depen-
dent variable. Although the independent variable
accounts only for 13.3 per cent of the total variation
in the dependent variable and even less when look-
ing at the sub-hypotheses, an influence of uncertainty
seems to exist, besides other variables — perhaps
attitude characteristics of the buyer — which were
not included in our analysis. A multiple regression
analysis with the three categories of uncertainty as
independent variables could only identify uncer-
tainty with regard to the adequacy of the investment
as a predictor variable (with significance at a 0.01
level, beta coefficient = 0.209).
To analyse the influence of the two internal variables
(hypotheses 6 and 7), they were included in the
regression both as independent and as moderator
variables (describing the interaction effect between
the independent variables):
App ⫽ b1 ⫹ b2 Unc ⫹ b3 Exp ⫹ b4 Unc · Exp
725
PERFORMANCE-BASED PRICING

Table 3 Construct Operationalizations

Constructs and indicator Item-to-total- Indicator T-values

(Global measure: Cronbach’s alpha, variance explained, AGFI, RMSEA) correlation reliability

Flexibility of the procurement process to deal with performance-based

pricing:
(0.76 — 53 per cent — saturated model)
Standardized procurement processes and invitations for tender make it difficult to 0.5 0.5 16.3
take into account performance-based prices
The methods of investment calculation used make it difficult to evaluate an offer 0.6 0.8 16.4
with performance-based prices
A decision in favour of a performance-based price offer will cause push-back by 0.6 0.2 16.3
some of the deciders
Importance of the investment: (0.81 — 52 per cent — 0.99 — 0.08)

The investment in question considerably influences our production process 0.7 0.7 21.9
The quality of our end-products massively depends on the use of the capital good 0.6 0.4 21.1
The investment in question has a considerable impact on the profitability of our 0.7 0.6 20.5
company
A wrong investment decision would have far-reaching consequences for our 0.5 0.4 21.2
company

and The final and decisive question concerns the — econ-

App ⫽ b1 ⫹ b2 Unc ⫹ b3 Flex ⫹ b4 Unc · Flex
(with App being the buyer’s appreciation of perform-
anced-based pricing; Unc the procurement uncer-
tainty; Exp the experience and Flex the procure-
ment flexibility).
The beta coefficients and the significance levels of the
regression did neither suggest a direct nor a moder-
ated effect of experience, and no moderated, but a
direct influence of procurement flexibility. As both
regressions do not show any influence of the moder-
ator variables, the hypotheses have to be rejected.
omic — reactions of buyers being offered perform-
ance-based prices (hypotheses 11–13). Results of one-
tailed t-tests, looking at whether the means of
responses on the Likert scales are significantly above
four, gave no clear-cut picture. Whereas neither
hypothesis 11 on the acceptance of a higher price nor
hypothesis 12 on the willingness to pay a risk pre-
mium could be confirmed, the test of hypothesis 13
suggested that performance-based price offers con-
tribute to the decision to try a (new) supplier.
Managerial Implications

Hypotheses 8–10 deal with specific aspects of the
procurement situation. Evidence for an influence of
investment importance on the buyer’s appreciation
of performance-based prices is limited. Spearman’s
rank-order correlation coefficient shows a rather low
value (0.150), but is significant at a 0.05 level.
The concept of performance-based pricing and the
empirical evidence of our survey can be looked at
from the buyer’s and both the seller’s point of view.
For both market participants there are differing
advantages, disadvantages, problems and pre-requi-
sites, which need to be analysed carefully.

The assumed sequence of ‘systems, production facili-

ties and plant construction and standardized pro-
ducts’ for the acceptance of performance-based pric-
ing could not be confirmed. Despite significant
differences according to an analysis of variance and
t-test results between group 1 (systems) and 3
(standardized products) as well as 2 (production
facilities and plant construction) and 3, groups 1 and
2 did not differ significantly as expected.
The average perception of performance-based prices
was — contrary to the hypothesis — better in case of
re-buyers than of first buyers and the corresponding
t-test of the null hypothesis did not lead to rejection.
This surprising result is, however, in concordance
with other findings (Heide and Weiss, 1995).
The Buyer’s Perspective
When accepting performance-based prices the buyer
transfers part of his risks to the seller. He has to ana-
lyse under which circumstances this offers value to
him. According to our empirical research buying
companies are aware of the uncertainty reducing
effects of performance-based pricing. On the other
hand the willingness to accept corresponding offers
is less clear once a higher price or a risk premium is
involved. Those responsible for procurement should,
however, calculate carefully at what price it is still an
economic advantage to reduce individual risk categ-
ories. The necessary quantitative estimations should
be feasible on the basis of own experience, other com-

726 European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003
 PERFORMANCE-BASED PRICING

Table 4 Hypotheses on Performance-based Pricing and Results of the Empirical Studya

Hypotheses Statistics Results

H 1: The buyer’s perceived uncertainty with regard to the adequacy of an investment Confirmation of sub- c
will decrease when accepting a performance-based price offer hypotheses 1.1-1.3
H 1.1: Performance-based pricing reduces the buyer’s perceived risk of selecting the Mean of 7-point Likert c∗∗∗
wrong investment alterantive scale
H 1.2: Performance-based pricing increases the buyer’s perceived financial scope Mean of 7-point Likert c∗∗∗
scale
H 1.3: Performance-based pricing ensures that the seller recommends the product Mean of 7-point Likert c∗∗∗
which best fits the buyer’s needs scale
H 2: The buyer’s perceived uncertainty with regard to the seller will decrease when Confirmation of sub- c
accepting a performance-based price offer hypotheses 2.1 and 2.2
H 2.1: Performance-based pricing is perceived as a credible signal for the seller’s Mean of 7-point Likert c∗∗∗
goodwill and competence by the buyer scale
H 2.2: Performance-based pricing is an assurance that the seller acts in the buyer’s Mean of 7-point Likert c∗∗∗
interest scale
H 3: The buyer’s perceived uncertainty with regard to product quality will decrease Confirmation of sub- c
when accepting a performance-based price offer hypotheses 3.1 and 3.2
H 3.1: Performance-based pricing is a credible signal of product quality for the buyer Mean of 7-point Likert c∗∗∗
scale
H 3.2: Performance-based pricing reduces the buyer’s perceived risk of negative Mean of 7-point Likert c∗∗∗
purchase consequences scale
H 4: Performance-based pricing reduces the buyer’s transaction cost Confirmation of sub- r
hypotheses 4.1-4.3
H 4.1: Performance-based pricing reduces the buyer’s cost of acquiring information Mean of 7-point Likert r
and testing products scale
H 4.2: Performance-based pricing simplifies and shortens the buyer’s procurement Mean of 7-point Likert r
process scale
H 4.3: Performance-based pricing reduces the cost of observing and controlling the Mean of 7-point Likert r
supplier scale
H 5: The higher the buyer’s perceived procurement uncertainty, the more he will Regression analysis c∗∗∗
appreciate performance-based pricing
H 5.1: The higher the buyer’s perceived uncertainty with regard to the adequacy of Regression analysis c∗∗∗
the investment, the more he will appreciate performance-based pricing
H 5.2: The higher the buyer’s perceived uncertainty with regard to the seller, the more Regression analysis c∗∗∗
he will appreciate performance-based pricing
H 5.3: The higher the buyer’s perceived uncertainty with regard to the product quality, Regression analysis c∗∗∗
the more he will appreciate performance-based pricing
H 6: Procurement uncertainty given, experience with performance-based pricing Moderated regression r
increases the buyer’s appreciation of such pricing concepts analysis
H 7: Procurement uncertainty given, a flexible procurement process increases the Moderated regression r
buyer’s appreciation of performance-based pricing analysis
H 8: Performance-based prices are most advantageous for the buyer when Variance analysis r
purchasing systems, less advantageous for production facilities and plant construction,
and least advantageous for standard products
H 9: Performance-based prices are more advantageous for the buyer in first buy than T-test r
re-buy situations
H 10: The more important an investment is for the buyer the more he will appreciate Correlation c∗∗
performance-based pricing
H 11: The buyer will be ready to pay a price premium for oustanding supplier Mean of 7-point Likert r
performance in the context of a performance-based price concept scale
H 12: The buyer will be ready to pay a premium for the risk taken on by the seller in Mean of 7-point Likert r
the context of a performance-based price concept scale
H 13: The buyer is more willing to try a new supplier if he offers performance-based Mean of 7-point Likert c∗∗∗
prices scale

c=confirmed, r=rejected, ∗significant with 0.1 ⱖP ⬎ 0.05; ∗∗significant with 0.05 ⱖP ⬎ 0.01, ∗∗∗significant with P ⱕ0.01
a

panies’ information, external insurance offers, etc. In Buyers should especially take into account perform-
this context it is an interesting detail that respondents ance-based price concepts if their demand is highly
in leading positions were more open to accepting a specific and innovative, if there are numerous and
higher price than others. heterogeneous fields of applicability, if the procure-

European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003 727
PERFORMANCE-BASED PRICING
ment market is complex, and if single decisions con-
stitute a rather high financial burden, as it is often
the case when procuring systems. All these factors
imply high risks and are thus indicators for potential
advantages of performance-based pricing. Probably
the most decisive question is whether a buyer only
wants to reduce potential negative effects or whether
he can also profit from better performance. In the lat-
ter situation, performance-based prices are the only
appropriate solution; in most other cases a risk-
reducing function may also be achieved through
other concepts, e.g. guarantees or penalties.
Transaction cost advantages were not perceived as
expected on theoretical grounds. It has to be pointed
out, however, that buyers should consider trans-
action cost carefully, even if they are less evident. In
the end they are a substantial source of cost savings,
and they may be affected through a number of differ-
ent concepts. Their complexity or the lack of experi-
ence with them should not prevent companies from
fully analysing their cost implications. Both trans-
action cost and performance-based pricing are rather
complex concepts, especially when applied in con-
junction. It especially requires the calculation of net
effects when including such aspects in important and
long-range decisions.
Overall, buyers of industrial goods should get used
to regularly considering performance-based prices as
one possibility to reduce risk and transaction cost.
They should develop schemes to identify situations
where such concepts make sense. It may even be
necessary and possible to cater for procurement pro-
cedures which allow analysing and accepting such a
type of pricing. Although performance-based pricing
can mainly be considered as a marketing instrument
of the seller, the buyer himself, however, may ask for
application of such price setting methods and suggest
parameters and activities which he would like to real-
ize. If developed in this direction performance-based
pricing has the potential to become an important
instrument of procurement marketing.
The Seller’s Perspective
The seller has to consider the buyer’s perceptions and
assessments, but can also try to influence both. He
has to decide whether and which type of perform-
ance-based pricing he should offer for which pro-
ducts, to which customers, under which market cir-
cumstances and how he can integrate this type of
pricing into an adequate marketing mix.
Buyers’ positive perception of performance-based
pricing as a means to reduce uncertainties suggest
that the seller should widely use this price concept
as far as he can realize a competitive advantage by
doing so and does not incur substantial risks. This
should be possible if the parameters to measure per-
formance remain within the seller’s sphere of influ-
728 European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003
ence (e.g. cost savings, production tolerances). In this
case he can even forego higher prices. The seller has
to be more selective if he offers performance-based
pricing parameters which are not completely under
his control (e.g. output, contribution to profit, etc.).
In this case he needs additional revenues to compen-
sate for the risk. Therefore he needs to convince cus-
tomers to pay higher prices. Our research showed
that such buyers exist, although the majority of them
are not ready to pay a premium.
The products and the market situations, for which a
customer would consider a performance-based price
offer, should also be in the sellers’ focus. A special
case of interest are products with low marginal pro-
duction cost, e.g. software, because the seller’s risk of
losing money is restricted as long as he can ensure a
sufficient number of successful business transactions
to recover his research and development cost and
other necessary start-up investments.
The choice of target customers for performance-based
prices does not solely depend on the type of product
being purchased. The uncertainty-reducing effect
makes such prices particularly attractive to customers
with doubts about their investment decision,
especially with regard to selecting the adequate good
to fulfil the envisaged task. Therefore the seller has
to collect data in order to define such customers.
Although some hypothesized factors of influence on
the appreciation of performance-based pricing could
not be confirmed, there was at least evidence of a
direct effect of procurement flexibility. This is a hint
for the seller that he has to look or provide for flexible
customers. It has already been mentioned that there
is a better understanding of new concepts at higher
management levels. Apart from perceptions, flexi-
bility on the buyer’s side will be a pre-requisite any-
way, when it comes to the realization of perform-
ance-based pricing.
There are a number of marketing requirements,
which a supplier has to meet when setting perform-
ance-based prices. The price concept itself has to be
defined carefully; the seller has to decide e.g. which
parameters to use and how to measure them, which
proportion of the price to make variable and which
amount to ask for more or less immediately, how to
deal with uncertain revenues (also on the balance
sheet), whether to combine the concept with other
price instruments (such as finance offers for the fixed
portion of the price). As to the last point it is evident
that performance-based pricing may be used to dif-
ferentiate prices. It offers a very subtle form of differ-
entiation and thus may avoid customer confusion
and frustration.
Beyond the market research necessary to identify
adequate customers, data acquisition is a central
requirement of performance-based pricing, as it can-
not be realized without risk management on the sup-
plier’s side. On the one hand he must know exactly

the efficiency and effectiveness of his goods in differ-
ent applications, on the other hand he has to assess
the customer and his behaviour. In the course of a
capital goods transaction with a performance-based
price the principal-agent relationship changes to the
detriment of the seller. With the delivery of the capi-
tal goods he becomes principal and may face hidden
characteristics, intentions, and actions of the buyer
(Schmidt and Wagner, 1985), e.g. wrong information
on intensity of use, no information on situational
changes, measurement manipulations. The more risk
the seller takes the more dependent he becomes on
his customer. Therefore a controlling system is
required that provides the relevant information and
enables the seller to interfere if necessary.
Performance-based pricing requires customized
offers which, in comparison with competing offers,
lead to higher customer value and/or reduced cost
of total ownership for the buyer. The price concept is
a credible signal for the benefit of the offer. Customer
service with its elements of advice, installation, main-
tenance, training, etc. in general is a crucial compo-
nent of such offers, both as an instrument of cus-
tomization and a means to establish and control
performance parameters. It also contributes to a long-
term relationship, supported by long-lasting use of
investment goods (on average 10.5 years in our
study). A ‘naked’ innovative price offer does not
seem feasible. This holds especially true if one bears
in mind that this price concept is still rather new and
that the empirical study gave a mixed picture on per-
ceptions, which will probably entail rather cautious
behaviour.
A major requirement, also supported by our research,
is an adequate communication of the price concept.
As it is not yet well known and rather complex, it
needs explanation. The potential advantages have to
be explained carefully using dialogue oriented com-
munication means (for the intensive communication
linked with performance-based pricing cf. Shapiro,
2002). Only then members of the target group and
perhaps even beyond will be convinced to enter such
a far-reaching contractual relationship. This may also
lead to a re-assessment of the other advantageous
aspects and effects of the concept, which — according
to the results of the study — are not or only partly
perceived. In correspondence with the type of per-
formance-based pricing and the objectives behind
(attraction of a new customer or getting a better
price) the communication message should either
focus on mere signalling quality and reliability or
more on offering an additional service. Special
consideration is necessary when employing
performance-based pricing in response to invitations
of tenders.
European Management Journal Vol. 21, No. 6, pp. 717–730, December 2003
PERFORMANCE-BASED PRICING
Conclusions
Performance-based pricing is a new pricing strategy
concept gaining importance in the capital goods
industry. It shows certain similarities with other
forms of business transactions, e.g. leasing. There are
numerous types, which differ with regard to para-
meters selected for measuring performance and to
the extent of price variability.
The major advantage for the buyer, which is well per-
ceived, is a reduction of diverse risks. Other effects,
e.g. reduction of transaction cost, seem to be less
obvious. The seller may attract new customers and
realize a price premium, but this requires additional
marketing efforts. The seller has to develop a sophis-
ticated information and control system as part of a
risk management approach to make performance-
based pricing a successful business model.
The concept is not suitable for every capital goods
transaction; products, customers, market situations
and own competence decide on whether to apply
performance-based prices and which type. The seller
has to gather experience and should be able to diver-
sify risks across a number of customers. After all, per-
formance-based pricing does offer the opportunity to
gain a competitive advantage, which cannot easily be
imitated. For that reason it is not yet another pricing
approach, but a whole marketing concept for estab-
lishing a close relationship between buyer and seller.
Future research should concentrate on how this con-
cept works in other industrial areas, in and between
different cultures, and which further pre-requisites
may be necessary. Other ways to validate theoretical
constructs, the finding of other variables influencing
not only perceptions but also real behaviour, the
effects of special price concept designs, which include
mixed forms, too, may be both of academic and prac-
tical interest.
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REINHARD
HÜNERBERG, Universi-
tät Kassel/FB 7, Diagonale
12, D-34109 Kassel, E-mail:
huenerberg@wirtschaft.uni-
kassel.de
Reinhard Hünerberg holds
the Chair of Marketing at
the University of Kassel,
Germany. His teaching and
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AXEL HÜTTMANN,
Trautmannstrasse 7, D-
81373 München, E-mail:
Axel Huettmann@web.de
Axel Hüttmann works as a
Consultant for McKinsey &
Company, Munich. He is a
doctoral graduate from Kas-
sel University. His research
centres on business-to-busi-
ness marketing, especially
pricing.