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  • 1. HONG KONG UNIVERSITY OF SCIENCE AND TECHNOLOGY School of Business and Management Fall 2007 – MARK 248 Pricing Strategy COURSE OUTLINE 17 July 2007 Class Venue: Room 4502 Date and Time: Tuesday and Thursday 15:00 – 16:20 Instructor: Vincent Mak Tel. No.: 2358 7704 Department of Marketing E-mail: Office hours: Upon request Office: Room 4116A Course web page: COURSE DESCRIPTION: “Pricing is the moment of truth – all of marketing strategy comes to focus on the pricing decision” - by Prof. Raymond Corey, Harvard Business School Price is indeed of a unique nature among the Marketing-Mix elements. Still, Pricing is one of the least understood and most controversial aspects of managerial decision making. In this course we survey popular pricing practices, explore their pitfalls, and identify the fallacies they are based on. We then set the economic and the psychological foundations for effective proactive pricing decisions. After considering and incorporating the cost and the competition factors of the pricing process, we turn to profitable pricing strategies and tactics including perceived-value pricing, segmented pricing, price-bundling, dynamic pricing over the product-life-cycle, product-line pricing, pricing through the marketing channels and price competition. While the course incorporates issues and subjects from Economics, Managerial Accounting, Behavioral Decision Theory, and more, it is decidedly a Marketing course in nature – indeed it argues that Marketing should be the Price setter and the Pricing Manager in the corporation. However, as Marketing is too important to be left to the Marketing people alone- so is Pricing. Even if you do not plan to be involved in Pricing, or even in Marketing decisions, you would surely be exposed to your vendors’ pricing conduct – this course may help you to understand it and to be able to respond more effectively. COURSE OBJECTIVES: 1. To introduce the role of Pricing in the Marketing-Mix and its importance to the business strategy of the corporation.
  • 2. 2. To develop and enhance the ability to design and implement profitable pricing decisions by: a. Providing the knowledge and the understanding of the terms, concepts, approaches, problems, and tools required for the successful analysis, planning, implementation, and control of Pricing Strategies and Tactics. b. Exercising these processes and tools via analyses and Presentations of Pricing decisions, situations, and case studies. COURSE MATERIALS: Copies of Lectures Slides and Exercises – in the Course Site A set of Articles – in the Course Site Copies of the cases – in the Library Reserve section and the Marketing Department Office COURSE ASSIGNMENTS AND GRADING: Group Project: The project would focus on analyzing two cases of Price Differentiation. The analysis would be presented in class and submitted in the last meeting. The project and presentation will constitute 30% of the overall grade of the course. Group Assignments: You would be required to analyze 2 case studies dealing with pricing issues. Each of the case studies will constitute 25% of the overall grade of the course. Group Presentations: In addition to the project presentation, each group will be required to present in class a summary of one of the background readings/ case study. The presentation will constitute 10% of the overall grade of the course. Individual Assignment: The course will include an individual assignment that will constitute 10% of the overall grade of the course. To summarize: Assignment % of overall grade Group Project 30% Group Assignment (case study) 1 25% Group Assignment (case study) 2 25% Group Presentation 10% Individual Assignment 10% 100% COURSE TEXTBOOK: Thomas T. Nagle and John E. Hogan, The Strategy and Tactics of Pricing: A Guide to Growing More Profitably, Fourth Edition, Upper Saddle River, NJ: Pearson/Prentice Hall, 2006. COURSE OUTLINE: 2
  • 3. Date Subject Reading Assignments / Other Remarks 4/9 Introduction and Overview “Prices: How They Get Set” Chapter 1 of the course textbook 6/9 Economic Foundations for Pricing Chapter 2 of the course textbook Price Elasticity Exercise in class 11/9 Psychological Foundations for Pricing Dickson & Sawyer : “The Price Knowledge and Search of Supermarket Shoppers” Capon & Kuhn: “Can Consumers Calculate Best Buys?” Chapter 3 (p. 27-31 only) and Chapter 5 of the course textbook 13/9 Dickson & Sawyer : “The Price Knowledge and Presentations by 2 groups Search of Supermarket Shoppers” Sinha: "Cost Transparency" 18/9 Behavioral Decision Theory (1) Thaler : “Mental Accounting and Consumer Choice” 20/9 Behavioral Decision Theory (2) 25/9 Pricing Methods 27/9 Analysis of 2 Print Ads as to their use of Price Brief presentations by 5-8 groups Sensitivity Factors – presentations 2/10 Perceived Value to the Customer Forbis & Mehta : “Value Based Strategies for Industrial Products” Chapter 3 of the course textbook 4/10 Southwest Airlines – movie and discussion Group assignment due: Virgin Mobile USA case study 9/10 Virgin Mobile USA: Pricing for the very First Presentation by 1 group Time – case study 11/10 The Role of Costs in Pricing Cooper: “Does Your Company Need a New Cost System?” Cooper & Kaplan: “Measuring Costs Right” Chapter 8 of the course textbook 16/10 Housing Price and Crime Rates – empirical case study 18/10 The Role of Costs in Pricing (con’t) Lewis : “Activity-Based Costing for Marketing” Smith & Nagle : “Financial Analysis for Profit- Driven Pricing” 3
  • 4. 23/10 Competition in Pricing: A mini-game in class 25/10 Competition in Pricing Shapiro et al: “Manage Customers for Profits (Not Just Sales)” Ross : “Making Money with Proactive Pricing” Chapter 10 of the course textbook 30/10 Shapiro et al: “Manage Customers for Profits Presentations by 2 groups (Not Just Sales)” Cooper & Kaplan: “Measuring Costs Right” 1/11 Segmented Pricing Weigand : “Buy In-Follow On Strategies for Profit” Chapter 4 of the course textbook Group assignment due: Coca Cola case study 6/11 Coca Cola case study Presentation by 1 group Individual assignment due: Healthy Spring Water Company 8/11 A Framework for Effective Pricing Garda & Marn : “Price Wars” Rao et al. : “How to fight Price War” Dolan: “How Do You Know When the Price Is Right?” Chapter 7 of the course textbook 13/11 Garda & Marn : “Price Wars” Presentations by 3 groups Rao et al. : “How to Fight Price War” Dolan: “How Do You Know When the Price Is Right?” 15/11 Tellis: “Beyond the Many Faces of Price: An Integration of Pricing Strategies” 20/11 Online Pricing 22/11 Life Cycle Pricing Chapter 12 of the course textbook 27/11 Final project presentations: price differentiation Group presentations 29/11 Final project presentations: price differentiation Group presentations 4/12 Final project presentations: price differentiation Group presentations 6/12 Summary Final project due 4