Career Focus

Pricing Strategy studies the “back end” of a firm’s relationship with its customers. That is, the course examines how organizations of all shapes, sizes, and vocations choose to earn revenue from their efforts to stand out and serve the market. It is exactly at this moment-when a firm asks customers to exchange good money for the novel offerings it supplies-that ineffective practices tend to creep in.

Accordingly, the course is intended for students who will be responsible for the revenue policy and growth of a product or service business, as well as students who anticipate starting their own enterprise or acting as advisors or investors.

Educational Objectives

The overall objective of the course is to equip students with the necessary logic and skills to implement a superior pricing strategy. In particular, the course seeks to answer these and other fundamental business questions:

1. How should we think about prices and pricing?
2. Are we making the most of our hard-earned differentiation, or are we squandering it?
3. What is the impact of technology on the way we generate revenue? Are we behind the times?
4. What is the best revenue model for our business? Should we launch a subscription or encourage sharing? Are there other options that we are neglecting?
5. Are we selling at the right price? What information do I need to make this judgment?
6. How should we estimate and act on willingness-to-pay information?
7. Is there an opportunity to serve different prices to different customers? Will customers turn on us?
8. What is best way to act against competitors? Can we delay the forces of commoditization?
9. How can we discount our offerings without damaging the brand?

Content and Organization

Pricing Strategy pushes well beyond the mechanics of setting a price, and the approach that I favor is much more one of general management than conventional marketing. While pricing certainly involves an element of “running the numbers,” there is much more to cover.

The 14 sessions comprise case study discussions (roughly 60% of class time), exercises (25%), interactive lectures and contributions from guest speakers (15%). The goal of the case discussions and exercises is to examine important concepts in different managerial settings, and to sample making decisions based on both qualitative and quantitative data. The lectures and guest speakers complement this effort by presenting frameworks, analytical techniques, practical insights, and pertinent examples.

Morever, the core of the course is split into four modules. The first module, modeling prices, asks students to reflect on the metric that organizations use to generate revenue. Should an organization earn revenue simply by selling what it makes, or should it earn revenue from ensuring access, upon actual consumption, or conditional on performance? The second module, setting prices, examines the process of integrating information on costs, customers, competitors, and the company itself to settle on the right “sticker” price. The third module, varying prices, delves into the delicate task of personalizing and customizing prices to fit the different valuations of customers. To the extent that the market is heterogeneous, sticking with a single price is clearly suboptimal, yet this is what customers may find palatable and insist on. Finally, the fourth module, defending prices, studies how to “sell” prices with confidence to customers and how to act responsibility in the face of competitors.

Grading

Grading is based on class participation (50%) and a final paper or take-home exam (50%). The paper provides students with an opportunity to apply the concepts introduced in the course in a setting they find personally relevant or interesting-students review and critique either a current “hot” theme in pricing or the recent performance of a specific organization or business unit.