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This work introduces, develops, and empirically applies an innovative approach aimed at assessing selling prices based on the value perceived by the customers, as measured by electronic word-of-mouth (eWOM) in the guise of online reviews. To achieve this aim, it applies a constant return to scale Data Envelopment Analysis (DEA) approach where the price is the input, and the value attributes are the outputs measured through eWOM in the form of online reviews. We empirically apply the model to the hotel sector by considering both the prices and the service attributes (i.e., staff, location, cleanliness, comfort, facilities and free wi-fi) of 364 hotels based in two leading Italian tourism destinations: Milan and Rome. Our findings suggest that online review analytics can be suitably embedded into analytical models to assess prices. The index developed innovatively supports value-based pricing by means of online review analytics and it is easy-to-perform, and parsimonious as it is based on widely available information on the Internet.

In the Kraljic Portfolio Matrix (KPM), ‘leverage’ items are purchases with a strong financial impact but limited associated risk. For these items, the priority for the buyer is to exploit the full purchasing potential, purchasing the items with the lowest price compared to their value attributes, i.e. the features appreciated by the customer. Despite the financial importance of such purchases, practical approaches able to support buyers in assessing their purchasing prices in a value-based perspective are still lacking. Therefore, this paper develops a three-step Data Envelopment Analysis-based approach (PPA-DEA) to assess the purchasing price of ‘leverage’ items according to their value attributes. The approach is then tested on two supply categories of an Italian mechanical company. The results show that PPA-DEA is capable of providing focused insights and supporting effective managerial actions. At the same time, the most relevant issues in implementing the approach are pointed out. From the theoretical point of view the study provides a contribution to the literature on supplier selection and assessment applied to purchasing portfolio models by developing an innovative approach to taking tactical decisions on ‘leverage’ products and services. From the practical point of view, PPA-DEA, albeit with a single case study, proves to be a “parsimonious” approach, easy to apply and able to provide concrete results.

Supplier Total Cost of Ownership (TCO) is a widely-known approach for determining the overall cost generated by a supplier relationship, but its adoption is still limited. The complex calculations involved – and in particular the activity-based costing procedure for computing the cost of managing the relationship – pose a major obstacle to widespread TCO implementation. The purpose of this work is to formulate a Data Envelopment Analysis application (denoted ‘TCO-based DEA’) that can act as a proxy for TCO, and to test its ability to approximate the results of TCO with less effort. The study is based on the analysis of two categories of suppliers (74 in total) of a medium-sized Italian mechanical engineering company. The results show that TCO-based DEA is able to significantly approximate the outcomes of TCO, for both the efficiency indexes and rankings of suppliers, whilst requiring substantially less effort to perform the analysis. To our knowledge, this is the first study to develop a DEA-based tool for approximating TCO and to test it in a real-world setting. The research shows significant potential within the supply chain management field. In particular, TCO-based DEA can be used for analysing suppliers’ performance, rationalising and reducing the supplier base, assisting the negotiation process.