Pricing Strategy & Tactics – Chs. 4-6

Pricing Strategy & Tactics – Chs. 4-6
Understand the role of pricing policies in developing a strategic approach to pricing Establish the link between a firm’s pricing actions and customer expectations & future purchase behaviors Provide frameworks for understanding customer behaviors and establishing policies to ensure profitable pricing outcomes Understand the major stages of the price setting process and the role of value and cost at each stage Demonstrate the three factors shaping the choice of a price point Strategic alignment, Price-volume tradeoffs, & Customer response Introduce dynamic pricing (Rick Lester, TRG, September 27) Examine how to develop value-based communication messages to reflect key product characteristics

Chapter 5 – Pricing Policy
(Management of customer expectations and behaviors…) Most managers have difficulty communicating their firms pricing policies… because they don’t have any…. Lack of proactive (not reactive) pricing policies reduces firm negotiating power with potential buyers who devise purchase strategies to gain discounts. This has led to a large number of firms that have created “strategic sourcing” programs. One problem is that purchasers tend to research and understand the competitive landscape better than the firm’s sales representatives. Compounding the competitive landscape issue is the fact that many firms provide incentives based on units sold and not on margin gained off each sale.

The Interaction of Expectations and Behaviors
Topic: Behavioral Model of Pricing Interactions Key Learning Points for Students Establish the linkage between expectations and behaviors and how this leads many companies to create cycles of unprofitable pricing actions that are repeated over time Teaching Recommendations This is a powerful conceptual framework for understanding the ripple effect that pricing actions can have in the market. For students to grasp the concept fully, it is essential to illustrate it with several examples such as those provided in the book. Discussion Question(s) Describe the behavioral cycle of pricing for common pricing actions such as: End of quarter discounts Matching competitor price cuts Providing discounts whenever customers ask for them

Benefits Of Policy Driven Pricing
Provides greater consistency across customer base Mitigates costs associated with ad-hoc discounting Forces “give-get” trade-offs & value recognition Increases perceptions of price integrity Creates more efficient selling process Topic: Benefits of Policy Driven Pricing Key Learning Points for Students Understand the role of policies as part of a comprehensive pricing strategy Teaching Recommendations This slide can be the foundation of a very rich discussion on the market dynamics that make the need for strategic pricing so compelling. For example, the first bullet refers to consistency. Ask the students why consistency is beneficial and explore the competitive and customer implications of inconsistent pricing Discussion Question(s) Consider the following quote from one large customer whose purchasing department had recently determined to restrict their list of suppliers to a smaller group of “strategic suppliers:” “Geoff, I have been reviewing our purchases from you over the last 24 months and while I would like to see Atlantic become one of our strategic suppliers, my analysis shows that your prices are way out of line on a number of products and you better find a way to fix them quickly.” How would you respond to this (a couple of potential responses are provided below)? Inconsistent pricing across customers: Customers talk. Once other customers hear that you’ve created sweetheart deals for someone else, they will demand the same kind of treatment for themselves. Ad-hoc pricing is simple at the moment, but introduces many complexities and long term costs. For example, once customers learn that the key to lower prices is to negotiate hard and hold out for better prices at the end of the financial quarter, you then have to invest ever more in negotiation skills and incentives to get customers to buy at other times.

How Pricing Policy Leads to Certain Behaviors
Your firm only offers discounts to customers when they have a better price from your competitor(s). Behavioral Implication: Your loyal customers get nothing in return, while non-loyal customers are rewarded for searching for better deals from your competitors. Loyal and non-loyal customers begin to develop strategic relationships with your competitor(s) to keep your firm “honest” (i.e., press for the lowest price from your firm).

Your firm offers greater than normal discounts only to achieve sales goals (usually sales quotas). Behavioral Implication: Discounts tend to pile up at the end of a reporting period since achievement of sales goals are not clear at the beginning of the reporting period. Customers figure the timing issue out and migrate their purchases toward the end of your firm’s reporting period to secure discounts. Inventories tend to be greater than normal since sales tend to become cyclical with the reporting period.

Your firm provides discounts for annual volume, regardless of order volume or the share your buyer’s total need your sales represent. Behavioral Implication: This policy tends to lead to buyers centralizing their purchases with your firm. Centralization takes the value proposition away from those who understand it and places it with those who do not (i.e., order makers). This policy also benefits buyers by allowing them to assemble into buying groups in order to secure the discount or to hunt for better prices from your competitor(s).

Your firm publishes list prices, but your firm’s discounting patterns are inconsistent so as to keep your competitor(s) guessing as to your sales price(s). Behavioral Implication: Competitors cannot benchmark prices. Instead, competitors use information from purchasing agents to determine your prices, which leaves your firm with little to no power to influence your competitors’ pricing. Consequently, your customers take advantage of the situation by manipulating information between your firm and your competitors for their own benefit.

Structuring Your Firm’s Pricing Policies
Remove Inconsistency in Policies Centralize the pricing policy development and monitoring so that all sales representatives operate under the same policy and use the same metrics. Provide Incentives Reconsider commission compensation since it tends to focus sales representatives on short-term goals. Sales representatives should be informed as to what is good/bad for the company. In general, focus on higher margin sales should be one goal for sales representatives. Provide Analytical Performance Data Data should be provided to management and sales representatives.

Buyer Types - Exhibit 5-3 Topic: Buyer Behavior Framework
Key Learning Points for Students Understand some of the key motivations for customers as they proceed through the purchase process Teaching Recommendations Spend some time on the concept of cost of search and why this might be an important driver of customer search and negotiation behaviors. Discussion Question(s) Ask the students to name a customer segment in the rental car market that fits each cell. For example: Price – Students Value – Family vacationers Relationship – business traveler Convenience – emergency traveler

Desire for interaction Emotional Involvement Loyalty
Cues for Identifying Customer Type Consider these Characteristics in Each Case Relationship Value Price Convenience Desire for interaction Emotional Involvement Loyalty Number/type of considered vendors Involved decision-making Fast decisions Switching Costs Operational importance of differentiation Topic: Buyer Behavior Framework Key Learning Points for Students Understand how to identify different buyer types Teaching Recommendations Point out that customers do not present themselves with a sign on their lapel identify them as a price or relationship buyer. Therefore, managers must determine ways in which to identify the buyer type and then apply appropriate policies

See Reading on Price Positioning
Convenience Driven Price Driven Brand (Relationship) Driven Value Driven

Pricing Strategy & Tactics – Chs. 5-6
Understand the role of pricing policies in developing a strategic approach to pricing Establish the link between a firm’s pricing actions and customer expectations & future purchase behaviors Provide frameworks for understanding customer behaviors and establishing policies to ensure profitable pricing outcomes Understand the major stages of the price setting process and the role of value and cost at each stage Demonstrate the three factors shaping the choice of a price point Strategic alignment, Price-volume tradeoffs, & Customer response Introduce dynamic pricing Show how to communicate new prices to maximize perceived fairness and minimize adverse customer response

The Price Setting Process - Exhibit 6-1
Define Price Window Set Initial Price Communicate Prices to Market Set initial price range based on differential value & relevant costs Determine amount of differential value to be captured Develop communication plan to ensure prices are perceived to be fair Key Questions: What is the appropriate price ceiling for this product? How should I incorporate reference prices into my price window? What is the role of costs in setting my initial price range? Key Questions: Is price point consistent with my business strategy & objectives? What are the price-volume tradeoffs and what is their impact on profitability? What are the non-value related determinants of price sensitivity? Key Questions: What is the best approach to communicate price changes to customers? What are the considerations for implementing significantly higher prices? Topic: Overview of the Price Setting Process Key Learning Points for Students Realize the basic stages of the price setting process that apply to most pricing contexts Introduce the concept of a price window and understand the determinants of the price floor and ceiling Understand the rationale for setting an initial price and then testing in the market place Teaching Recommendations There are a number of new concepts introduced at this point in the chapter. It is recommended to spend some time ensuring students understand ideas like price window, price volume tradeoffs and pricing objectives Discussion Question(s) Divide the class into several groups with each assigned a different product category. Ask the students to make a list of all of the factors they would consider when pricing a new product in that category. Compare their answers and then show where they would fall in the price setting process.

Defining Price Windows Springfield Case: Weighted Average Economic Value
Exhibit 6-2a: Positively Differentiated Offering Exhibit 6-2b: Negatively Differentiated Offering Neutral Pricing Topic: Price Windows Key Learning Points for Students Understand the concept of a price window Illustrate how and why price window changes depending on whether the product is positively or negatively differentiated Teaching Recommendations There is an excellent numerical example illustrating the ramifications of pricing above or below the price window. Instructors might wish to illustrate that example on this slide Discussion Question(s) Why is a price window important? How does it help the organization? What would happen if a positively differentiated product were priced bellow the reference price? What are the implications for pricing above the price ceiling? Price skimming captures high margins at the expense of sales volume. Prices are high relative to what the “middle market” is willing to pay. Viable when the profit from the price-insensitive segment exceeds profit from sales to larger market at lower price. Penetration pricing sets price far enough below economic value (not below cost!) to attract and hold a large base of consumers. Generates sales volume (& lower marginal costs) at the expense of higher margins.

Consistent with Business Strategy? Competitive Advantage
The unique position a firm develops through resource & capability deployments that leads customers to choose the firm’s products over competitors. Advantage can be based on: Cost Leadership (Low cost & price); Product Differentiation – offering superior economic value by creating superior product/service features & quality through innovation & product development capabilities; Marketing Differentiation – offering superior perceived value by developing Unique image (brand-centric differentiation) achieved through targeting, positioning & communication capabilities Close relationships with customers (customer-centric differentiation) achieved through CRM capabilities & customization For each case, ask “What is the focal firm’s competitive advantage?”

Conditions for Alternative Pricing Objectives
Product Differentiation Skim Cost Leadership Penetration Marketing Differentiation Neutral CUSTOMERS Difficult Comparison Effect Price Quality Effect Low Price Sensitivity Reference Price Effect Little differentiation High price sensitivity Total Expend Effect Large Part of End-Benefit Customers are sensitive to other elements of the marketing mix COMPETITION Sustainable differentiation Limited threat of opportunism Limited opportunity for scale economies Low threat brands Sustainable cost & resource advantage Financial strength Competitors not willing to retaliate Aggressive small share brands Large share brands w/ a lot to lose (Oligopolies) Sustainable mktg mix advantages Avoid threat of retaliation This slide is a summary of the conditions leading to various pricing objectives that is discussed in detail in the chapter COSTS Changes in Unit Price Drive Profit Low CMs Low Volumes Large BE Sales Changes At or near capacity Changes in volume drive profitability High CMs High volumes Small BE Sales Changes Excess capacity Sufficient CM to finance advertising... Costs similar to competitors Little excess capacity Incremental capacity is expensive

PENETRATION NEUTRAL SKIM Little differentiation
Sustainable cost & resource advantage Changes in volume drive profitability NEUTRAL Customers are sensitive to other elements of the marketing mix Large share brands w/a lot to lose (Oligopolies) Sufficient CM to finance advertising... SKIM Difficult Comparison Effect Price Quality Effect Sustainable differentiation Changes in Unit Price Drive Profit

Setting Price: The Price-Volume Trade-off
Price optimization is a complex process that involves 2 distinct components: (a) the firm’s current price and cost structure, and (b) customer response to price offerings and changes. Estimating customer response requires deep understanding of customers and competitors, a difficult and imprecise problem at best. Instead, start with 2 relatively easy questions to answer: How much volume could I afford to lose before a price increase would decrease my profitability? How much volume would I have to gain for a price decrease to improve my profitability? DQ ≤ DQBE? DQ ≥ DQBE? In effect, you change the customer response estimation problem from a two-tailed estimate to a one-tailed estimate.

Incremental Percent Breakeven Sales Change
Current contribution New Price = New CM% × New Quantity × P (CM% + DP%) P × CM% × Q = P (1 + DP%) × × Q (1 + DQ%) P (1 + DP%) CM% = (CM% + DP%) × (1 + DQ%) CM% (CM% + DP%) BEDQ% = – (CM% + DP%) (CM% + DP%) – DP% BEDQ% = (CM% + DP%)

Incremental Percent Breakeven Sales Change
Current contribution New Contribution Margin = New Quantity × (P – C) Q = (P + DP - C) × (Q + DQ) PQ – CQ = PQ +PDQ + DPQ + DPDQ – CQ - CDQ = PDQ + DPQ + DPDQ - CDQ = DQ(P + DP – C) + DPQ DQ(P + DP – C) = -DPQ DQ -DP -DP = BE = Q (P + DP – C) (CM + DP)

Incremental Percent Breakeven Sales Changes
Current Contribution Margin 5% 10% 20% 30% 40% 50% 60% 70% 80% 90% % Change in Price -80% -67% -50% -40% -33% -29% -25% -22% -20% -18% 15% -75% -60% -43% -27% -23% -16% -14% -17% -13% -11% -10% -9% -8% -7% -6% -5% 0% 100% 33% 14% 11% 9% 8% 7% 6% 25% 17% 13% -15% 43% 27% 23% 67% 29% Topic: Price-volume tradeoffs Key Learning Points for Students Breakeven calculations are an effective way to compare different scenarios associated with different prices. This tool can be used to explore the profit implications of different prices. Starting with the baseline scenario (the row for 0%), suppose you wanted to simulate the effect of lowering price by 5%. The breakeven sales change varies, depending on your product’s baseline Contribution Margin. If your product had a low contribution margin (say 20%), then your unit volume would have to be 33% greater using this slightly lower price -- compared to your baseline scenario of 0%. Teaching Recommendations Ask students to explain a given cell in the Breakeven Sales Change Matrix shown in this slide. Many software companies like Microsoft have high CMs -- perhaps 90%. Suppose Microsoft was considering reducing their prices on Microsoft Office by 20%; how many more units would they need to sell annually to achieve the same profitability they would achieve under the baseline (0%) scenario? Answer: 29%. How would this change for a product with 40% CMs, or 20% CMs? Note that for a 20% CM product, a 25% price reduction would require an infinite increase in sales volume. Price increase: % decrease < the breakeven decrease leads to contribution increase. Price decrease: % increase > the breakeven increase leads to contribution increase.

Price Sensitivity Drivers
Size of expenditure Shared costs Switching costs Importance of end-benefits Perceived risk Price-Quality perceptions Perceived fairness Price framing Reference prices Relative to income Paid by employer, parents… Monetary & non-monetary Economic & psychological Receive expected benefits? Higher price=higher quality? Fair price range Gains vs. losses Topic: Price Sensitivity Drivers Key Learning Points for Students Understand that value is not the only determinant of a customer’s willingness to pay Identify key factors determining price sensitivity and recognize how these factors can be influenced by marketers Teaching Recommendations The text presents several questions which can help managers use the nine factors discussed above to make informed judgments regarding the importance of price in buyers' purchase decisions. The key is to ensure that students can personalize the factors by connecting them to their own decision making process. Discussion Questions Ask the students to define and give one example of each sensitivity factor from their own experience How can the impact of these sensitivity drivers be minimized by marketers? An interesting assignment is to have students find print advertisements that are designed to influence price sensitivity. The student's assignment is to explain which factors that affect price sensitivity is the advertiser trying to influence.

Prospect Theory Perceived Value Losses Gains Objective Value
Small Gains Overvalued Large Gains Undervalued Small Losses Strongly Overvalued Reference point Losses Gains Objective Value

Remember their favorite brand(s) & the last price they paid.
Internal Remember their favorite brand(s) & the last price they paid. Reference Price Shoppers: Wow! I paid $15.00 for that Franciscan yesterday and it’s on sale here for $ Better get a case.

External Reference Price Shoppers:
Remember their favorite brand(s) but not the last price paid. OK. The Voss brand is $ Just out of curiosity, how much is the Rombauer – oh, $32. Voss it is.

Don’t have a favorite brand or remember prices.
Price Range Shoppers: Don’t have a favorite brand or remember prices. Let’s see. Clos du Bois $9.99, Voss $16.00, Franciscan $12.99 & Rombauer $35...

Elasticity – a visual representation . . . .
Price P2 elastic P1 (many substitutes – grains, fruits and vegetables, bagged soil, paper clips, rubber bands) P2 unit elastic P1 inelastic (few substitutes – gemstones, transplant organs) Quantity Demanded Q2 Q1 Q2 Q1

Elasticity – Measurement of Price
Sensitivity at the Market Segment Level We can measure or estimate price sensitivity at the market segment level by assessing the price elasticity for a particular product or service. Percent Change in Unit Sales (over relevant range) Percent Change in Price (over relevant range) Elasticity = E = % D in Unit Sales % D in Price E = (22%-49%)/Average(22%,49%) (14-12)/Average(14,12) Single Ticket Demand in Springfield Nor’easters

How to Estimate Volume Along the Demand Curve
Use the Polynomial Trendline Function in Excel R² = 1

Elasticity – Measurement of Price
Sensitivity at the Market Segment Level Measure of Price Elasticity |Price Elasticity| < 1 An increase in price within the range evaluated results in lower unit sales but higher revenue (profit?). Inelastic |Price Elasticity| > 1 An increase in price within the range evaluated results in lower unit sales and lower revenue (profit?). Elastic |Price Elasticity| = An increase in price within the range evaluated results in an identical change in unit sales and the same revenue (profit?). Unit Elastic

Elasticity Required to Breakeven
Current Contribution Margin 5% 10% 20% 30% 40% 50% 60% 70% 80% 90% % Change in Price -4.00 -3.33 -2.50 -2.00 -1.67 -1.43 -1.25 -1.11 -1.00 -0.91 15% -5.00 -2.86 -2.22 -1.82 -1.54 -1.33 -1.18 -1.05 -0.95 -6.67 -10.00 0% -5% -20.00 -10% -15% -20% Topic: Price-volume tradeoffs Key Learning Points for Students Breakeven calculations are an effective way to compare different scenarios associated with different prices. This tool can be used to explore the profit implications of different prices. Starting with the baseline scenario (the row for 0%), suppose you wanted to simulate the effect of lowering price by 5%. The breakeven sales change varies, depending on your product’s baseline Contribution Margin. If your product had a low contribution margin (say 20%), then your unit volume would have to be 33% greater using this slightly lower price -- compared to your baseline scenario of 0%. Teaching Recommendations Ask students to explain a given cell in the Breakeven Sales Change Matrix shown in this slide. Many software companies like Microsoft have high CMs -- perhaps 90%. Suppose Microsoft was considering reducing their prices on Microsoft Office by 20%; how many more units would they need to sell annually to achieve the same profitability they would achieve under the baseline (0%) scenario? Answer: 29%. How would this change for a product with 40% CMs, or 20% CMs? Note that for a 20% CM product, a 25% price reduction would require an infinite increase in sales volume. Price increase: |Elasticity| < the breakeven amount leads to contribution increase. Price decrease: |Elasticity| > the breakeven amount leads to contribution increase.

Homework for Next Week Fire Safety
– DP% BEDQ% = (CM% + DP%)

Price & Value Communication
The Problem: Customer generally does not know true value unless informed by seller. Value communication is important when your product or service creates value that is not readily apparent to potential consumers. Value communication is nothing more than information dissemination. Develop value proposition (i.e., compellingly unique & distinctive economic or psychological benefits). Communicate the value proposition, and Deliver the value.

Adapting the Message for Product Characteristics
Relative Cost of Search Low Simple “Search” Goods High Complex “Experience” Goods Management Consulting Commodity Chemicals Greater Price Dispersion Investment Advice Home Equity Loans Auto Repairs Hotels Economic Benefits Desktop Computers Life Insurance Type of Benefits SUV’s College Education Pain Medications Blood Pressure Drugs Sports Cars Topic: Adapting the Message for Product Characteristics Key Learning Points for Students Realize the importance of the two key value drivers – relative costs of search and types of benefits sought. Tie these differences to the ways that consumers perceive value and how companies can communicate that value Teaching Recommendations An explanation of relative cost of search and types of benefits is key before looking at the quadrants of this matrix. It is recommended that you cover the difference between “search” and “experience” goods. Discussion Question(s) Dividing the classroom into 4 groups, assign students in each quadrant to consider the following: What types of benefits are sought in these types of products How the customers search for information? How do they determine differences between brands? How can companies communicate their value effectively to consumers? Fitness Equipment Unique work of Art Digital Cameras Psychological Benefits Cosmetics Exotic Vacations Designer Clothes

Framework of Value Communication Strategies
Relative Cost of Search Low “Search” Goods High “Experience” Goods Strategy 1 Economic Value Communication Communicate Objective Information That Differential Economic Value Justifies Pricing (e.g., Computers) Strategy 2 Economic Value Assurance Communicate Assurances That Differential Economic Value Justifies Pricing (e.g., Investment Returns, Hotel Guarantee) Economic Benefits Type of Benefits Strategy 3 Psychological End-Benefit Framing Associate Differential Performance with Subjective Psychological Value That Justifies Pricing (e.g., Cosmetics) Strategy 4 Psychological End-Benefit Assurance Communicate Assurances That Total Psychological Value Justifies Pricing (e.g., Art, Exotic Vacations, Mattresses?) This slides presents the 4 key strategies to communicate value. Use this slide in conjunction with the example: Economic Value Communication: Communicate objective information that differential economic value justifies pricing. This includes message content containing objective, concrete, statistical information about your brand’s performance vis-à-vis other competitive brands, particularly focusing on quantitative information about differential economic value. Show and discuss the exhibits Marriott Timeshare, Reliable Software, and Kinko’s DocStore. Look for comparative ads that show differential attribute or benefit performance, especially ads that quantify differential value. In addition value communication tools are effective in this quadrant -- spreadsheet-based models, or web-based models that enable the customer to quantify differential value. Show and discuss the value selling sheet example, and the spreadsheet value-based selling tool. Economic Value Assurance: Communicate Assurances That Differential Economic Value Justifies Pricing. Because it is more difficult to judge differences between brands, message content is effective when it contains reassurances of the brand’s differential economic value – e.g., testimonials about differential value from customers, opinions leaders, or endorsers. Often information that is in narrative, story, or video form is effective -- with an emphasis on the brand name and trust. Some companies use case studies on a website, or do seminars, group presentations or exercises involving some type of personal selling. Ask the class to describe how money management firms communicate value to individual investors, especially those who know little about financial markets or money management. Psychological End-Benefit Framing: Associate Differential Performance with Subjective Psychological Value That Justifies Pricing. Here it is usually helpful to communicate value not in terms of direct product or benefit performance, but instead in terms of the end-benefit buyers hope to achieve from product use. Ask students: Why do people purchase designer clothes? Why do people purchase expensive sports cars -- for example, a Porsch? In these situations the most effective value communication strategy is to associate the brand’s differential performance with subjective psychological end-benefits that are valuable -- and therefore justify pricing. Show examples of ads that demonstrate this -- for example, the Duracell ad, or the famous Michelin series with the baby, or the Airfone ad. The questions these ads evoke are: What is the differential worth of the end-benefit associated with this purchase? Psychological End-Benefit Assurance: Communicate Assurances that Total Psychological Value Justifies Pricing. In this quadrant value is vague and ambiguous; buyers have difficulty judging whether one brand is better than another, and benefits are highly individualized and ideosyncratic. Consequently, value communication should focus on the total value of the end-benefit -- not the differential value. And narrative or image information is usually easier to process than statistical performance information. For example, many weight loss advertisements use testimonials of end-benefits (the final outcome), stories, narratives, or videos. Hair Club For Men is a good example of promoting value using this strategy, see An interesting assignment is to have students find print advertisements that are designed to communicate value. The student's assignment is to explain what types of benefits buyers seek and the relative cost of search you might expect for most buyers of this category…for example, is the category complex and difficult to compare brand performance? Place the ad on the value communication model shown in this slide and then describe the value communication strategies appear evident with this ad. Psychological Benefits

Art Assignment Choose a product & identify (15 minutes)
Your retail price position and the Value Proposition for the product; i.e., what is compellingly unique & distinctive. The target customers (relational, value, convenience, or price), the relative size of the market, and their desired psychological benefits. How you will communicate the value to customers given high experience characteristics & psychological benefits. For example, what assurances can you offer that the product will deliver the desired psychological benefits? Price range, pricing objective (skimming, penetration, or neutral), price point & whether you will negotiate discounts. Communicate value & price in 2 minutes

The Price Setting Process - Exhibit 6-1
Define Price Window Set Initial Price Communicate Prices to Market Set initial price range based on differential value & relevant costs Determine amount of differential value to be captured Develop communication plan to ensure prices are perceived to be fair Key Questions: What is the appropriate price ceiling for this product? How should I incorporate reference prices into my price window? What is the role of costs in setting my initial price range? Key Questions: Is price point consistent with my business strategy & objectives? What are the price-volume tradeoffs and what is their impact on profitability? What are the non-value related determinants of price sensitivity? Key Questions: What is the best approach to communicate price changes to customers? What are the considerations for implementing significantly higher prices? Topic: Overview of the Price Setting Process Key Learning Points for Students Realize the basic stages of the price setting process that apply to most pricing contexts Introduce the concept of a price window and understand the determinants of the price floor and ceiling Understand the rationale for setting an initial price and then testing in the market place Teaching Recommendations There are a number of new concepts introduced at this point in the chapter. It is recommended to spend some time ensuring students understand ideas like price window, price volume tradeoffs and pricing objectives Discussion Question(s) Divide the class into several groups with each assigned a different product category. Ask the students to make a list of all of the factors they would consider when pricing a new product in that category. Compare their answers and then show where they would fall in the price setting process.

Next Week Akash Rathod B2B Pricing & Pricing Strategy Over the Life Cycle (Chs. 7-8)

Pricing Strategy & Tactics – Chs. 4-6

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Pricing Strategy & Tactics – Chs. 4-6

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