This document provides a summary of the book "Harvard Business Review on Pricing". It discusses several key topics covered in the book, including different theories of pricing, the importance of getting pricing right, and 8 steps to determine the right price. It also summarizes articles on identifying customer values and sensitivity to price changes, understanding competition, pricing new products, using the six sigma framework for pricing, optimizing online pricing, and making money through proactive pricing strategies. The review concludes that the book will be very useful for both academics and practitioners in developing effective pricing strategies.

1. 1
BOOK REVIEW
Review of Harvard Business Review on Pricing (Boston: Harvard Business School,
2008), pp. 209, Rs. 595, (p/b), ISBN 978-1-4221-4658-3.
Introduction
What is pricing? What are the different theories of pricing? And, most importantly,
why is it important to get pricing right? These then are the three questions that are
addressed by the contributors in this set of eight essays that were originally
published in the Harvard Business Review (HBR). While these essays were
published at different points in time, they have been brought together in this
anthology of essays so that it becomes easier for readers of HBR to gain a
comprehensive idea of the problems that beset the theories and practices of pricing.
Most of these essays are by academics based at the Carlson Business School, Cass
Business School, Columbia University, Harvard Business School, the Ross Business
School, the Rotman Business School, and by consultants at McKinsey & Co. The
main topics that are covered here include identifying the modalities necessary to
know what is involved in identifying the right price, the relationship between the
process of pricing and the underlying psychology of consumption (including the
role of effective pricing in making profits), the steps involved in fighting a price war,
and determining effective pricing models for new products and services. In addition
to these topics, the Six Sigma framework of pricing, models of net-based pricing, and
the role of proactive pricing in making money are also included in this anthology of
essays.
Getting Prices Right
Robert J. Dolan sets out the eight important steps involved in getting prices right. He
argues that pricing is not an isolated endeavor, but must be linked to the overall
marketing strategy. It comprises the involvement, inputs, and co-operation of a
number of executives in the firm, and must be understood in the context of the firm’s
communication practices as well. The eight steps involved in pricing include
understanding what customers value in the product (since a particular product may
be valued differently by different customers) along with their levels of sensitivity to

2. 2
changes, if any, in prices. It is also important to work out prices - not so much for
particular products but within a range by getting in place an ‘optimal pricing
structure’. The reactions and responses of the competition are also important since
that will affect the firm’s ability to carry off its pricing model effectively. And, most
importantly, a firm must be able to understand the implications of its pricing for
what it considers to be its strategic accounts and determine whether it is cost-
effective to take up a particular customer or client. Dolan therefore recommends a
price audit wherein the firm should identify the main qualities of its pricing strategy
and follow the eight steps set out in this essay to get its pricing right. Getting the
pricing right however is not reducible to an internal analysis within the firm since
customers have a particular style of consumption which has to be factored into the
analysis. So, for instance, as John Gourville and Dilip Soman argue there is an
important psychological dimension at stake here. Some of the relevant
psychological factors include the timing and payment of products and services, price
bundling, the rate, mode, and forms of consumption, the cost-benefit analysis that
customers do when setting out to spend on products and services, and so on. The
reason these factors matter pertains to the fact that it is important for firms to get
customers to use their products; in order to ensure that they do so, it is important not
to ignore the psychological dimensions. Michael Marn and Robert Rosiello point out
that the right price is important since that will boost profits substantially whereas
getting it wrong can mislead customers and clients. What they are pushing for is a
framework that involves ‘three levels of price management’. This means that the
firm must situate its pricing strategy within a context of demand and supply, a
formal market strategy, and an effective pricing of transactions (including the
difficult problem of transaction prices).
Six-Sigma Pricing
Pricing, needless to say, is often implicated in disagreements between firms or can
trigger off conflicts that are difficult to resolve. Akshay Rao et al therefore set out
invaluable advice on what must be done to avert price wars and how revealing
‘strategic intentions and capabilities’ is a method that firms use to do so. They also

3. 3
differentiate between ‘price’ and ‘non-price’ based approaches to fighting price wars;
this difference is often overlooked since most firms respond to questions of prices
and pricing with only a narrow range of options without situating it within the
range of products and services that they have on offer, or an understanding how
specific acts of pricing retroactively determine the pricing modalities of the entire
portfolio. It is especially important to have a formal pricing policy for new products.
Joel Dean argues that the relevant factors here include the levels of technical
maturity, market maturity, and competitive maturity in a business situation that
requires clarity on pricing. Dean also sets out the relevant criteria for working out a
formal policy of ‘pioneer pricing’ along with a retrospective commentary that
analyzes the role played by cost, market segmentation, the cost compression curve,
and inflation in determining prices. Manmohan Sodhi and Navdeep Sodhi point out
that the Six Sigma framework is not only relevant in the context of costing but of
pricing as well. They describe a case where they were able to deploy Six Sigma
methods in the context of pricing by using the services of a black belt from
manufacturing and the actual five steps required to do so. This will make it possible
to align the pricing strategy with the over-all strategic goals of the firm and ensure
that pricing decisions are ‘based on solid data and analysis’.
Optimizing Prices Online
What are the differences though between regular forms of pricing and pricing on the
Net? Walter Baker et al argue that greater levels of optimization should be possible
here since customers can compare prices at less cost. Besides much more information
is available on the Net in order to make it possible for them to do so if they are
willing to put in the effort. E-pricing therefore offers possibilities that are much more
cost-effective for both buyers and sellers. This doesn’t necessarily mean though that
such cost savings will be automatically realized since the flexibility available herein
must be harnessed effectively. It is a good idea then to formalize the frameworks of
e-pricing that have started to emerge in response to the demands of e-commerce;
Baker et al actually provide a framework for doing so. They argue that it is
important to set up an ‘entrepreneurial pricing group’ in order to ensure that the

4. 4
potential of e-pricing is not lost. This group should be acquainted with the latest
analytic tools available to optimize on-line pricing strategies, and the opportunities
to deploy these tools as well. While this may be a bit difficult to believe, Baker et al
argue that not many firms are doing these things right; but, nonetheless, at least a
few firms are trying to ‘move in the right direction’. And, finally Elliot Ross argues
that it is possible to make lots of money with ‘proactive pricing’. He not only
advocates the need to develop a framework to do so, but also sets out a
questionnaire with the help of which the reader can figure out whether his firm
practices proactive pricing or is reactive and waiting to see what the competition will
do. This framework demands a willingness to move away from using simple costing
and the need to merely recover costs as its point of departure. It actually invokes a
proactive ‘dynamics of pricing’ as a way of calibrating its relation to the market. This
questionnaire comprises twenty questions and takes the reader systematically
through the different elements of the proactive pricing framework which includes
both strategic and tactical dimensions. The guidelines required to price effectively
are also included in this essay along with a renewed emphasis on the need to time
price changes effectively; effective pricing requires effective timing. This book will
be of enormous help to both academics and practitioners of pricing strategies.
SHIVA KUMAR SRINIVASAN