Pricing Strategy (45-831)

Professor Peter Boatwright

(412) 268-4219
376 Posner Hall
pbhb@andrew.cmu.edu

Course Overview
Determining the price of a product or service is one of the most important marketing
decisions. It is also one of the most complex and least understood aspects of
marketing. While many marketing activities are geared toward creating value for the
customer, sound pricing decisions are the fundamental tool for businesses to
capture the value they create. In today’s hypercompetitive environment, even slight
errors in determining the best price can lead to large financial losses. This course
draws on the fundamental disciplines of microeconomics, statistics and psychology
to shed light on good pricing practice. It surveys some popular pricing practices,
explores their pitfalls, and identifies the fallacies they are based on. The course
covers multiple current pricing strategies, tactics and their applications: product line
pricing; pricing through the marketing channel; price discrimination; two-part tariffs
and nonlinear pricing; price bundling; perceived value pricing; and competitive
pricing.

The course objectives are:

 To build the right pricing philosophy that guides everyday marketing activities
 To introduce a framework, based on concepts drawn from cognitive
psychology, economics and industrial organization, to study pricing decisions
 To master some concrete analytical and numerical tools for its successful
creation, utilization, and management of sound pricing decisions

Textbook
The required textbook for the course is “The Strategy and Tactics of Pricing” (6th
edition), Thomas Nagle and Georg Müller, 2018. This book may be found at Amazon
at the following link and is available in digital format, hardcover, and in paperback.
Amazon link:
https://www.amazon.com/Strategy-Tactics-Pricing-Growing-Profitably-ebook-dp-
B077MDDKGZ/dp/B077MDDKGZ/ref=mt_kindle?_encoding=UTF8&me=&qid=15530
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Course Requirements and Grading
The course will use a mix of lectures, case discussions and activities. Homework
problems will also be employed to make students apply their learning to practical
situations.
For full credit, assignments need to be completed on time. Assignments turned in
late will be given a maximum of half credit.

 Participation and Attendance

Class participation is strongly encouraged. You are invited to share how class
material relates to your past experience as a professional and a consumer, to
raise challenging questions and issues related to the pricing topics being
reviewed, and to participate actively in discussion of problems and cases. In
large part, your participation grade is based on attendance. Because you
might end up with important conflicts, everyone gets two free “skips” of
daytime sessions, or one free “skip” of an entire evening session.

 Readings and Exercises

There will be reading material for you to complete for some of the sessions.
The textbook is a worthwhile book to purchase and to read. You will gain
more from the class if you have prepared by reading in advance. We will
discuss many of the other readings in class, so please read those ahead of
time so that you will be prepared.
Additionally, there will be some exercises posted on Canvas for you to do for
class.

 Case Studies
Assignments for each case study are posted on Canvas. Turn them in via the
course website prior to the due date/time. Case studies are to be completed
in teams of 4-5 students, where teams will be composed after the first day of
class.

Please see case assignments for instructions on case write-ups. Your grade
will in part depend on the degree to which you follow the structure discussed
there.

In this class, the in-class case discussions will begin with a presentation made
by one of your groups. This group’s presentation will substitute for a version
that other groups turn in. As long as the presenters have taken the case
seriously, they will automatically receive a grade of “A” on the case. Any
groups that would like to volunteer should email me, where I will select the
first group per class section that volunteers by email. In your email, please
indicate the course section in which you are enrolled. Please note that a
group is only allowed to make one such presentation.

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 As for groups that do not present, your write-up is in the format of a report, as
described in the case assignments on Canvas.

 The Simulation
As a learning exercise (and as an occasion for friendly competition), we will be
using a pricing simulation, a team-based assignment. Your case study team
will assume the role of a district manager responsible for setting prices for
rental cars at a Florida rental car agency. See the simulation assignment
description on Canvas for details.

 Final Exam
The final exam for this class is scheduled for Tuesday, May 7, 9am-12pm.
Room locations will be posted to Canvas at a later date.

 Pass/Fail & Audit

I will not allow students to audit this course nor to take the class pass/fail.

 Team Feedback
At the end of the mini, I will send out a survey to ask each of you to rate each
team member’s performance. The format of the question is for you to assess
what percent of the effort/work was performed by each person on your team.
Keep in mind that the measure is holistic, covering not only hours of effort but
ability to collaborate and quality of output. For example, lots of hours of low
quality work does not translate into a high percentage of team work output. I
need each one of you to complete the team feedback form, meaning that I will
withhold course grades until it has been turned in. This team feedback may
be used to adjust individual course grades to reflect effort.

 Grading
Grading is not “on a curve,” in that I do not plan for a certain percent of
A’s, B’s, and so on.
List of Graded Portions of Course Weight
Case Analyses (3 cases) 30%
Class readings and exercises 10%
Canary Crew Economic Value 5%
Pricing Simulation 15%
Final Exam 30%
Attendance and Participation 10%

Waitlists
If a course section is oversubscribed and has a waitlist, anyone absent on the first
day of class will be removed from the roster. Students who are removed from the
waitlist are welcome to add themselves to the course waitlist and join the class if
there is space.

Notebook Computers

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Because inappropriate use of notebooks in the classroom inhibits educational goals,
my policy is that laptops are not to be used during class except for obviously
appropriate objectives, such as note taking. Those of you who do employ laptops for
legitimate uses should turn off your laptop sound and log off from all
communications tools (IM, Skype, email, ....). There are lectures that will utilize
software, and you may find it helpful to have notebooks for those lectures. It is not
essential to have a laptop in these sessions, just helpful.

Recordings of Classes
No student may record or tape any classroom activity without the express written
consent of Prof. Peter Boatwright. If a student believes that he/she is disabled and
needs to record or tape classroom activities, he/she should contact the Office of
Disability Resources to request an appropriate accommodation.

Copyrights
The materials in this class are exclusively for the use of students in the class. Course
materials may not be reproduced in any manner without written permission from the
author. Any review, retransmission, dissemination or other use of this information by
persons or entities other than the intended recipient is prohibited.

From the University:

Take care of yourself. Do your best to maintain a healthy lifestyle this semester by
eating well, exercising, avoiding drugs and alcohol, getting enough sleep and taking
some time to relax. This will help you achieve your goals and cope with stress.
All of us benefit from support during times of struggle. You are not alone. There are
many helpful resources available on campus and an important part of the college
experience is learning how to ask for help. Asking for support sooner rather than later
is often helpful.
If you or anyone you know experiences any academic stress, difficult life events, or
feelings like anxiety or depression, we strongly encourage you to seek support. For
local help and referrals, please contact the Director of Student Affairs at 650-335-
2846, Building 19, Room 1041 or student-services@sv.cmu.edu. Counseling and
Psychological Services (CaPS) at the Pittsburgh campus can also help you get
connected to support: call 412-268-2922 and visit their website
at http://www.cmu.edu/counseling/ to learn more.
If you or someone you know is feeling suicidal or in danger of self-harm, call someone
immediately, day or night:
CaPS: 412-268-2922
Suicide Prevention Hotline: 800-273-8255 (TALK)

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