- 1.5 credits
- Prerequisite: MBA Core
Setting and managing prices of products and services is critical to the success of an enterprise. Pricing is a continuous activity as prices must be set for all new products and adjusted periodically for existing products. The pricing function in a firm also includes setting and managing price promotions, rebates, and discounts in an attempt to build performance. The purpose of this course is to provide you with conceptual and analytical tools for making informed pricing decisions. The easy to use but powerful pricing tools provided to you are a key take away from the class. These tools are being employed in the firms I work with and are having a measurable impact on their performance. I want you to be a great pricer in the near future and these tools can help.
The first part of the pricing course examines conceptual and analytical issues in buyer price sensitivity. Knowledge of buyer price sensitive must underlie every pricing decision. We will learn a variety of techniques for measuring buyer price sensitivity and use this knowledge to drive pricing decisions. The second portion of the pricing course examines approaches how firms can improve their performance through realizing higher prices. Gaining pricing power is of paramount importance to most marketers as rising raw material costs and enhanced competitive pressures are placing tremendous pressure on gross margins. We will establish when conditions are favorable for greater price realization and learn techniques for raising prices that do not alienate the customer (too much).
The third component of the pricing course examines approaches that enable firms to build their performance through lower prices. In many situations lower prices are effective tools for increasing sales, revenue, and share. Plus, lower prices can create barriers to entry in markets and build customer loyalty. However, price reductions are the most abused practice in pricing and can devastate a firm’s Value Proposition, segmentation effort, and profitability if not handled correctly. Analytical tools are offered to help you assess and manage the price reduction process.
The fourth component of the pricing class pertains to setting prices for new products. Because historical data does not exist for new products, different approaches must be employed. We will discuss several practical approaches for setting prices for new products. One of the new product price setting approaches to be discussed is Value-based pricing. Value-based pricing argues that customers who value our products more should pay more than customers who value our products less. The issues in value-based pricing are twofold: 1) how to assess customer value and 2) how to link value to price. An analytical value-based tool will be employed in class to help us pursue a value-based pricing approach.
The pricing knowledge and tools you will gain from the class are applicable to both B2C and B2B contexts. Channel issues complicate the pricing picture but we will gain some insights on how to price throughout the channel.
Course Objectives are:
1. To help you measure and exploit buyer price sensitivity using analytical tools.
2. To provide you with insights and tools to help you realize higher prices.
3. To help you determine when and how much to lower prices using analytical tools.
4. To provide you with insights into how to set prices for new products.
5. To help you learn how to apply Value-based Pricing techniques for new and existing products.