ABSTRACT
Many businesses set prices using a combination of instinct, rule of thumb (“we base our prices on our main rival or competitors”) and subjective opinion. Financial institutions are no different. This approach to pricing all too often results in lost revenues and strategic mistakes. Headlines describing the consequences of such pricing mishaps are becoming more prevalent: “Direct banks are putting margins under pressure”; “… in times of increasing price sensitivity”; “Bartering at the bank counter”; “Disastrous price wars …”. In a research study conducted by Simon and Dolan (1997), 187 executives in Europe and USA, including financial services managers, were asked about the areas of marketing in which they experienced the most competitive pressure and faced the greatest problems. The results placed pricing at the top of the list.
