Performance-based and functional contracting in value-based solution selling

• Published in: Industrial marketing management 2016-11, Vol.59, p.37-49
• Main Authors: Liinamaa, Johanna, Viljanen, Mika, Hurmerinta, Anna, Ivanova-Gongne, Maria, Luotola, Hanna, Gustafsson, Magnus
• Format: Article
• Language: English
• Subjects: Action research; Functional contracting; Integration; Performance-based contracting; Value-based sales
• ISSN: 0019-8501; 1873-2062
• DOI: 10.1016/j.indmarman.2016.05.032

Solution sellers increasingly use value-based selling and pricing strategies to market and monetize their offerings. Performance-based contracts constitute a key component of value-based pricing strategies. The present study explores solutions to the challenges solution sellers may encounter while developing value-based selling processes and implementing value-based pricing. The research design builds on the explorative action research methodology. While our study confirms earlier research on barriers to value-based selling and pricing, we also identify legal-technical contract design issues as an important but previously unknown barrier. We further identify integration as the appropriate theoretical framework for conceptualizing the barriers. Finally, we identify functional contracting as a solution for value-based sellers to overcome the barriers arising from deficient precontractual integration. The study highlights the role of contracts as barriers to be overcome by legal sales efforts when implementing value-based selling and pricing strategies. Further, the study stresses the utility of functional contracting in pre-contractual integration.