eThesis - School of Business electronic theses

Research Objective The objective of this is to find value based pricing models for a business process outsourcing service provider. Due to the intangible nature of services, it is more difficult for the customers to understand what they really are paying for. Variety and simultaneity in service process makes the pricing of services challenging. In value-based pricing, the price is determined by the customers' value perception of the product or service in question. The key value drivers are analysed and the price is then set accordingly. In this study, the case company's customers' expectations from the outsourcing service are reviewed to analyse value-creation opportunities in the outsourcing service provided by the case company. Suggestions for value-based pricing practices for the use of the case company are given.

Methodology This research is conducted as a single case study. The study is conducted following the logic of constructive research. The aim of constructive research is to create new organizational procedures or models. The new managerial construction developed as a result of this study is a new value-based pricing model for the case company. Empirical research data of the study comprises of interviews of the case company management, results of a customer value alignment survey and additional case company material. A total of five semi-structured interviews were conducted. The interviewees included representatives from the outsourcing business unit, sales function and development function of the case company. The customer value alignment survey included the key customers of the case company.

Results The findings of this study suggest that the case company's customers' main objectives of outsourcing are cost reduction, reducing personnel related risks and improving quality. As a result of this study, it is suggested that the case company implements a transaction-based pricing model where the price per unit is determined by using value engineering and the outsourcing contracts include a gain-sharing incentive and a SLA. The suggested pricing model incorporates customer value in the pricing and improves the case company's profitability by creating a more standardised service process.