Berkeley-Haas School of Business Wasim Azhar

UGBA 169: Pricing Fall 2018

Professor: Wasim Azhar: azhar@berkeley.edu. Office Hours: Tuesdays 4-6 pm

Reader: Eddie Ning (eddie_ning@berkeley.edu) Office Hours: TBA

ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES:

Optimal pricing is an essential component of business strategy in competitive business
environments and yet many firms employ arbitrary rules and haphazard approaches to pricing
that adversely affect their profits and competitive positions. This course aims to equip participants
with useful concepts, formulae, techniques, and frameworks for assessing, formulating, and
implementing optimal pricing strategies and tactics within the context of overall business objectives
and strategies. The course will draw on behavioral, mathematical, and economic foundations,
principles of marketing strategy, and game theory to develop and describe effective systematic and
structured approaches to pricing decisions. Concepts and topics covered in the course will include
new product pricing, pricing over the product life cycle, value pricing, segmented pricing, nonlinear
pricing, price discrimination, promotional pricing, retail pricing techniques, pricing software
products, Freemium, SaaS and SaaP pricing models and product line pricing strategies. Pricing
strategies and tactics in competitive bidding situations will also be covered. The course will consist
of cases and lecture discussions. The course is primarily intended for managers who in their careers
will be involved in evaluating, formulating, implementing and/or recommending pricing policies,
strategies and tactics within the context of integrated business strategies.
GRADE DISTRIBUTION

Grade Distribution:

20% Individual Class Participation

15% Individual Take-Home Assignment
30% Two Take-Home Group Assignments.
35% Individual In-Class Final

READINGS:

1) Textbook: The Strategy and Tactics of Pricing: A Guide to Growing More Profitably,
5th edition: Nagle, Hogan and Zale. Routledge ISBN 978-0-13-610681-4

2) Required Reading: Cases and readings package.

 COURSE OUTLINE AND SCHEDULE

Week 1

Thursday, August 23
Reading: Ch 1: PP 1-15

Lecture Discussion: Course Overview; Pricing Frameworks Concepts; Math techniques review;

Week 2

Tuesday, August 28

Reading: Ch 9: PP 181-199

Lecture Discussion: Costing for Pricing; Price Segmentation; New Product Pricing Strategies

Thursday, August 30

Readings: "Principles of Pricing" HBS 9-506-02

Lecture Discussion: Pricing Complements and Substitutes
Week 3

Tuesday, September 4

Topic: New Product Pricing: Integrated Pricing Strategy

Case: Curled Metal Inc: Engineered Products Division: HBS 9-709-434

Thursday, September 6

Reading: Ch 10: PP 207-217, 233-234

Lecture Discussion: Linear & Non-Linear Demand Curves; Price Elasticity; Lerner Rule

Week 4

Tuesday, September 11

Reading: Ch 2: PP 17-46

Topic: Two-Part Pricing

Case: Keurig At Home: Managing a New Product Launch: KEL 021

Thursday, September 13

Topic: Two-Part Pricing

Case: Keurig At Home: (continued)

Week 5

Tuesday, September 18

Reading: Ch 6: PP 118-140

Topic: Product Portfolio Pricing

Case: Avon Co: HBS 9-590-022

1) Submit your recommended price for the 5hp EAS drive by 8 pm, 9/16.
2) Group Assignment 1: Submit a word document answering Q1 and Q5 only by 12:30pm,
9/18. (3 page limit Word document)

Thursday, September 20

Topic: Product Portfolio Pricing

Case: Avon Co: (continued)

Week 6

Tuesday, September 25

Readings: Ch 7: PP 141-156, Ch 5: PP 108-115, Ch 11: PP 244-268

Lecture Discussion: Pricing Strategies and Tactics

Thursday, September 27

Readings: "The Economics of Product Variety" HBS 9-191-099

Ch 3: PP 47-70
Topic: Pricing Services and Events

Case: Avari Ramada Hotel: Pricing Hotel Rooms: Stanford M-314

Week 7

Tuesday, October 2

Reading: “The Three Faces of Consumer Promotion" CMR 289

Lecture Discussion: Services and Event Pricing; Promo Pricing

Thursday, October 4

Reading: Ch 5: PP 115-117

Topic: Promo Pricing

Case: Case: Culinarian Cookware: Pondering Price Promotion HBS 4057

Week 8

Tuesday, October 9

Lecture Discussion: Software Pricing Models; Freemium Pricing

Thursday, October 11

Lecture Discussion: Freemium Pricing (continued); Software Pricing Strategy and Tactics

Week 9

Tuesday, October 16

Lecture Discussion: Pricing Strategies and Tactics

Thursday, October 18
Guest Speaker: Srivatsan Desikan, Lead, Blockchain & AI-ML Marketing, Cisco.
CEO, DroneInch.
Topic: Moving from Box Pricing to SaaS Pricing

Week 10

Tuesday, October 23

Lecture Discussion: Pricing Strategies and Tactics; Auction Pricing

Thursday, October 25

Guest Speakers: Ben Chuba, VP Packaging/Pricing& Competitive Strategy, Docusign.

Ran Haimoff: Director of Customer Value Management, Docusign

Topic: Freemium Pricing a digital online service.

Week 11

Tuesday, October 30:

Guest Speaker: Kathleen Egan, Consultant Retail Promotional Pricing

Topic: B2C Retail Promotional Pricing

Thursday, November 1

Topic: Bid Pricing

Case: Computron, Inc. 2006: HBS 9-597-063

1) Submit your recommended Price Bid for Koenig contract for Computron by 11pm, 10/30

2) Individual Assignment to be submitted answering Q4 and Q5 only by 12:30 pm, 11/1

(3 page limit Word document)

Week 12

Tuesday, November 6

Topic: Game Theory Concepts for Pricing

Case: Beauregard Textiles Company: HBS 9-191-058

Thursday, November 8

Case: Lesser Antilles Lines: The Island of San Huberto: DARDEN UVA-QA-0355
Week 13

Tuesday, November 13

Reading: "How to Fight a Price War" HBR OnPoint 472X

Topic: Commodity Pricing; Price Wars
Case: Kennedy: To Be Distributed Later

1) Submit your individual recommended bid price in $/KVAR for Kennedy for Stage 3 of the
SVA contract by 9pm, 11/11

2) Group Assignment # 2 to be submitted answering Q2, Q3 and Q5 only by 12:30 pm, 11/13
(6 page limit Word document)

Thursday, November 15

Case: Kennedy (Continued)

Week 14

Tuesday, November 20

Lecture Discussion: Pricing Strategies and Tactics

Thursday, November 22.

Thanksgiving Break. No Class.

Week 15

Tuesday, November 27

Topic: Pricing in International Markets

Case: To Be Distributed Later

Thursday, November 29

Topic: Pricing in International Markets

Case: To Be Distributed Later

Final Exam TBA

Case Discussion Questions
Week 3: September 4
Case: Curled Metal Inc: Engineered Products Division: HBS # 9-709-434
Key Topics: Pricing and going-to-market strategies for a new product

Discussion Questions:
1. What is the value proposition of the new Curled Metal Inc (CMI) pads?
2. What price should CMI set for its 11.5 inch pad in particular? Why?
3. How big is the potential market for the product? What factors does it depend on?
4. Should CMI add the $150,000 permanent tooling for manufacturing its pads? Why or
why not?
5. What is the role of the various players in the market (Hammer Manufacturers,
Architects and Consulting Engineers, Renting Companies, Construction Contractors,
Pile driving Contractors) and how do they view these new pads? Why?
6. How should CMI price and market its pads? Why?

Week 4: September 11
Case: Keurig At Home: Managing a New Product Launch: KEL # 021
Key Topics: Pricing a new consumer product; Two-Part Pricing

Discussion Questions:
1. Should Keurig use a single K-Cup for all markets or should it launch the Keurig-Cup in
the at-home market and continue to use the K-Cup in the commercial market?
2. Evaluate the key players in the coffee brewer and pods market and their impact on
Keurig's strategy and position in the eco-space.
3. What introductory price for the brewer and for the portion pack (K-Cup/Keurig-Cup)
do you recommend? Why?
4. Analyze Keurig’s marketing plan and launch strategy. What suggestions would you
proffer? Why?
Week 5: September 18
Case: Avon Co: HBS # 9-590-022
Key Topics: Pricing across a product line; Skimming, penetration and market pricing

Discussion Questions:
1. Evaluate the market that Avon competes in. What are the key characteristics?
2. What should the firm’s pricing strategy be for the new speed drive? Why?
3. What are the pros and cons of pricing high? Pricing low?
4. Taking the 5 h-p drives as representative of the overall pricing strategy, evaluate the
strategic impact of various price points for the 5 h-p drive?
5. What introductory price would you recommend for the 5 h-p EAS drive? Why?
6. What overall pricing strategy would you recommend for Avon’s product line? Why?

1) Submit your recommended price for the 5hp EAS drive by 9pm, 9/16
2) Group Assignment 1: Submit a word document answering Q1 and Q5 only by 12:30 6pm,
9/18. (3 page limit Word document)

Week 6: September 27
Case: Avari Ramada Hotel: Pricing Hotel Rooms: Stanford # M-314
Key Topics: Pricing of Services; Segmented Pricing; Price Performance Metrics.

Discussion Questions:
1. Why are there so many Price Tiers? Should they be reduced? Why or why not?
2. Assess the Trends in Occupancy Percentages (OP) and Average Room Rates (ARR) of
Avari as compared to Pearl Continental. Should Raza be concerned about OP or ARR
or both? What are the trade-offs?
3. Should Raza seek to increase OP or ARR? What factors should he consider? Which
ones would you prioritize? Why? What other metrics could/should Raza use to evaluate
the performance of Avari's pricing structure? Why?
4. What recommendations would you make to Raza for increasing the financial
performance of Avari? Why?
Week 7: October 4
Case: Culinarian Cookware: Pondering Price Promotion HBS # 4057
Key Topics: Consumer and Retail Promotional Pricing

Discussion Questions:
1. Evaluate Culinarian Cookware's (CC's) product line and pricing strategy.
2. What are the pros and cons of CC's price promotions?
3. What particular information can be gleaned from Exhibit 7?
How does this information impact your decisions?
4. Evaluate the analysis of the 2004 Price Promotion done by (a) the Consultants and (b)
Victoria Brown. What flaws, if any do you see in their analysis?
5. Was the 2004 Price Promotion profitable financially? Tactically? Strategically?
Support your reasoning with rationale.
6. Should CC run a price promotion the next year or not? Why?
7. If your boss decides that a Price Promotion is to be run, what would you recommend
re the specifics of the promotion?
8. What recommendations regarding its pricing strategy would you give CC? Why?

Week 11: November 1

Case: Computron, Inc. 2006: HBS # 9-597-063

Key Topics: Bid Pricing for Contracts: Pricing across the Product Life Cycle;

Discussion Questions:

1. How far does Zimmerman have to cut price to have a chance?

2. What is gained by bidding low? What is lost by bidding low?
3. What is gained by bidding high? What is lost by bidding high?
4. What should Zimmerman bid? Why?
5. What short and long-term recommendations would you proffer to Computron? Why?

1) Submit your recommended Price Bid for Koenig contract for Computron by 6 pm, 10/30
2) Individual Assignment to be submitted answering Q4 and Q5 only by 12:30 pm, 11/1
(3 page limit Word document)
Week 12: November 6

Case: Beauregard Textiles Company: HBS # 9-191-058

Key Topics: Profitability analysis for deciding pricing and capacity utilization

Discussion Questions:

1. What are the financial results for Beauregard Textile Company that Beal and Calloway
should be looking at with respect to the present pricing arrangement?
2. Should Beauregard Textile Company announce a price of $3.00 or $4.00 per yard for
Triaxx-30? Why?

Week 12: November 8

Case: Lesser Antilles Lines: The Island of San Huberto: DARDEN # UVA-QA-0355

Key Topics: Game theory concepts for pricing strategies.

Discussion Questions:

1. Appraise LAL’s past pricing strategy. Can this strategy achieve its objective?
2. What are the assumptions behind the table in Exhibit 4 of the case? How realistic are
they? Accept these assumptions. What price actions would you recommend to LAL
management? Be specific about how you would implement your recommendations.

Week 13: November 13

Case: Kennedy: To be Distributed In Class

Key Topics: Competitive bid pricing; Price Leadership; Price Wars.

Discussion Questions:

1. How important is pricing in this industry? Why? What are the roles if any of the other
elements of the marketing mix in this industry?
2. Why is the industry in such a mess? What factors have contributed to the mess?
3. Evaluate Kennedy’s past and marketing strategy in general and pricing strategy in
particular. What would you have done differently if at all? Why?
4. If you have been entrusted with the responsibility of bidding by Kennedy, what would
your stage I and stage II bids have been for the SVA Contract?
5. If you had been entrusted with the responsibility of bidding by Kennedy, what would
your bid be for stage III of the contract? Why?
1) Submit your individual recommended bid price in $/KVAR for Kennedy for Stage 3 of the
SVA contract by 6 pm, 11/11
2) Group Assignment to be submitted answering Q2, Q3 and Q5 only by 12:30 pm, 11/13
(6 page limit word document)

Week 15: November 27

Case: Barco (TBD)

Key Topics: Pricing over the PLC; Pricing across International Markets and segments
Discussion Questions:

1. Assess Barco's Product Line and Pricing Strategies across the Video, Data and
Graphics segments.
2. Compare the strategies of the competitors in the projection systems market.
3. How serious is the impending introduction of the Sony 1270 to Barco? Why?
4. Evaluate the product development and pricing options being considered by Barco.
5. What product development and pricing actions across USA, Germany, and France in
particular and the rest of the world in general would you recommend? Why?
6. What overall short-term and long-term marketing strategies would you recommend to
Barco? Why?

Key Dates:
September 16: Individual Price recommendation for Avon Due 6 pm

September 18: Group Take-Home on Avon Due 12:30 pm

October 30: Individual Price Bid for Computron Due 6 pm

November 1: Individual Take-Home on Computron Due 12:30 pm

November 11: Individual Price Bid for Kennedy Due 6 pm

November 13: Group Take-Home on Kennedy Due 12:30 pm

Final Exam TBA

Cases:

Curled Metal Inc: Engineered Products Division HBS # 9-709-434

Keurig At Home: Managing a New Product Launch KEL # 021

Avon Co HBS # 9-590-022

Avari Ramada Hotel: Pricing Hotel Rooms Stanford M-314

Culinarian Cookware: Pondering Price Promotion HBS # 4057

Computron, Inc. 2006 HBS # 9-597-063

Beauregard Textiles Company HBS # 9-191-058

Lesser Antilles Lines: The Island of San Huberto UVA-QA-0355

Kennedy (To be Distributed later in Class)

Barco (To be Distributed later in Class)

Readings
“Principles of Pricing” HBS 9-506-021
“The Economics of Product Variety” HBS 9-191-099
“The Three Faces of Consumer Promotion” CMR 289
“How to Fight a Price War” HBR OnPoint 472