IILM UNIVERSITY

Course: MBA/PGDM/2021-2023

Module Name: PRICING STRATEGY

Academic Year 2021-22

About the Course:

Out of the four-element of marketing; the product, its promotion, its placement or distribution, and
its price. The last element - pricing - differs from the other three: in the sense that it is the only element
that helps the firm to capture the value in the form of profit. Pricing is the harvest of the seeds that
are sown in from effective product development, promotion, and placement. Hence pricing presents
managers with a lever to maximize the yield of the effective implementation of the remaining three
marketing elements. However, a lack of clear understanding of the pricing element and over-
dependence on tactical methods to optimize prices often results in poor harvest for an organization.
Therefore, the objective of the course is to prepare students to identify profit-boosting changes in
pricing practices and develop strategies accordingly. The course attempts to move students from a
tactical approach to optimize prices to a strategic approach to managing prices and hence the market.
In order to do so, the course will draw upon analytical marketing techniques, market strategy and
economic theories to describe approaches for designing optimal price strategy. Specifically, the
course attempts to answer questions like how to price new products, determine price structure for
different customer segment; how to asses appropriate price of a product, avoid price wars, and how
pricing can be used as a promotional tool.

General Course Information:

Course Details
Course: Pricing Strategy
Code:
Credits: 3
Trimester: 5
 Core/Elective: Marketing Elective
Level: Postgraduate
Contact: Up to 4 hours per week
Prerequisites: 508 Marketing

Course Faculty
Module Leader: Ashish Gupta, ashish.gupta@iilm.edu
Module Tutor: Prof. Shahana

Class and tutorial details

Classes for this course shall be scheduled twice/thrice a week. 2/3 tutorial sessions shall also be
conducted for this course. Presence in all formats of evaluation (internal and end term) is
mandatory
For a course like this class participation is crucial. You will be able to effectively participate
in discussions only when you have prepared yourself adequately well for the class. For this
you will need to go through the readings and other study material for the respective sessions,
before reaching the class. Please note the quality of learning in each session will be dependent
on how much knowledge we are able to create for each other.

Module Learning Outcomes:

Pricing is one of the most important but least understood marketing decisions. This module aims to
teach students about concepts, practices, and techniques behind pricing strategies. On successful
completion of this module, the students will understand how firms use Pricing as a strategy to create
value and generate revenues. Students will be able to:

1. Understand the economic, consumer and competitor aspects of setting the price.
2. Be able to apply the knowledge of basic economics to make a better pricing decision.
3. Recognize the price discrimination opportunities.
 4. Understand the concept of price elasticity, calculate different types of elasticity and determine
the price change impact on demand.
5. Analyze and apply different pricing models: Cost-plus pricing; Marginal cost-plus pricing &
Peak-load pricing -Index-based pricing.
6. Develop understanding among students about the mechanism of different pricing practices

Course learning outcomes Program learning outcomes Assessments

MLO1, MLO2, MLO4, PLO1, PLO2 Quiz

MLO5

MLO2, MLO6 PLO2, PLO3, PLO4 Project Presentation

MLO1, MLO3, MLO4, PLO2 & PLO4 Written Exam

MLO6

Learning Resources

Main Text

1. Pricing Strategies: A Marketing Approach. Robert M. Schindler, Rutgers University–Camden

All the readings along with their link are given in the session plan. The PDF file for the case study
and few readings will be given before the session.
Reference Books
1. The strategy and tactics of Pricing: Thomas Nagle, John Hogan, Joseph Zale
2. Pricing: Making Profitable Decisions, Kent B. Monroe, 2nd Edition, Amacon, NY 1990.
3. Price Theory and Applications, Peter B. Pashigian, McGraw-Hill, 1995

Learning and Teaching Activities:

Approach to Learning and Teaching in the Course: For a course like this class participation is crucial.
You will be able to effectively participate in discussions only when you have prepared yourself
adequately well for the class. For this you will need to go through the readings and other study
material for the respective sessions, before reaching the class. Please note the quality of learning in
each session will be dependent on how much knowledge we are able to create for each other.
Detailed Session Plan

Session Topics Pre-Readings Learning

activities in
Session

1 Introduction to the course Schindler Chapter 1 Discussion,

Pricing as an element of Marketing Mix; Question and
Three pricing lens Answer
Executives Zero in on Price, WSJ, Sept. 27, 2010

https://web.archive.org/web/20190927191923/https://ww
w.wsj.com/articles/SB1000142405274870379380457551
2272902268314

The Three Lenses of Pricing

https://www.bcg.com/capabilities/pricing/three-lenses-
pricing

2&3 Basic Metrics of Pricing; Relationship Schindler Chapter 14 Discussion,

Between Price and Quantity (Demand Question and
Curve); Cost, Cost Variation and Supply Managing Price, Gaining Profit Answer
Curve https://faculty.fuqua.duke.edu/~wama/marketing469/files/
Auctioning as a Pricing Mechanism. Introduction%20to%20Pricing/managing%20price,%20ga
ining%20profit.pdf
4&5 Understanding Customer Value & Costs Schindler Chapter 3 Discussion,
Question and
“Bearings that Pack a Punch (and Their Own Controls),” Answer
NYT, Jan. 2, 2010
https://www.nytimes.com/2010/01/03/business/03novel.ht
ml

6&7 Estimating Customer Value & Case: Adios Junk Mail Discussion,
Willingness to Pay Question and
Answer

Quiz

8, 9 & 10 Psychology of Pricing ; Behavioral
Pricing ; Nudge Economics
1. Note on Behavioral Pricing by John T. Gourville Discussion,
Question and
2. Consumer’s Mental Accounting by Manel Baucells Answer
3. Prospect Theory: An Analysis of Decision under Risk.
Econometrica, 263-292. Khaneman D. & Tversky

11 & 12 Regression; Estimating Price Elasticity; Schindler Chapter 6 Discussion,

Cross Price Elasticity, Income Question and
Elasticity and its application to estimate Answer
price.

13, 14 & 15 Drivers of Price Elasticity : Market Schindler Chapter 7 Discussion,

Share & Competitor’s Price; Taking a Question and
derivative and Price Optimization Schindler Chapter 8 Answer

Quiz
16 & 17 Price Discrimination based on cost Schindler Chapter 10 Discussion,
variation; Product line Pricing; Question and
Product Line Pricing Principles Case: Heinz Ketchup: Pricing the Product Line Answer

18 & 19 Role of Competition in Pricing Schindler Chapter 13 Discussion,

Strategy; Use of Game theory to Question and
shape strategy. Case: Keurig at Home Answer
The Right Game: Use Game Theory to Shape
Strategy by Brandenburger & Barry Nalebuff

20 & 21 Price Customization based on Case Study: Retail Relay Discussion,

segmentation Question and
Answer

Quiz

22 Price Customization and Negotiation Capturing the Value of Supplementary Services by Discussion,
in B2B context. Anderson and Narus Question and
Answer
https://web.archive.org/web/20210116065353/https://
hbr.org/1995/01/capturing-the-value-of-
supplementary-services

23 & 24 Project Presentation

Session Plan

Session 1: Introduction

The focus of this session is to introduce students to concepts, principles, and techniques that provide
guidance to help a seller set the best price. Price setting can be a really overwhelming experience,
you need to think about supply-demand; pricing of the competitor and also about the customer value
and how value depend on different segments. The session will also try to give a brief about the all the
three aspects and their overlap.

Session 2 & 3: Demand Curve; Supply Curve & Auctioning as a Pricing Mechanism

The session really focuses on economic principles and how they inform pricing decisions. After all,
pricing is an economic concept. In this session we will learn how firms can use reservation prices to
compute optimal prices for products. In the first half, we will use willingness to pay data for price
optimization. We will also look at Auctions as a mechanism to uncover reservation prices. We will
discuss different types of auctions that are commonly used. Study the Winner’s curse and the
phenomena of Bid rigging. Finally, we will look at how second-price auctions work in search-based
advertising

Session 4 & 5: Understanding Customer Value & Costs

The session will focus on the role of pricing in value creation and discuss the increasing importance
of pricing in today’s markets. The lecture will focus on reviewing the concepts of Economic value to
the consumer and will dwell on the relevant cost for making pricing decisions in the short and long-
run.

Session 6 & 7: Estimating Customer Value & Willingness to Pay

Case: Adios Junk Mail

The session will focus on methods that firms can use to assess willingness to pay. In particular, we
will discuss how firms can use surveys in pricing research. We will see how one company, Adios
Junk Mail, used surveys to better understand Willingness to Pay.

Session 8, 9 & 10: Behavioral Pricing

Pricing is usually thought as a rational utility model. However, human beings are not always rational
and hence a firm’s pricing strategy must consider this aspect. This session will therefore focus on
psychology behind consumer purchase decisions and the mental accounting that impacts those
decisions. We will also consider consumer price perceptions and ways to frame prices and create
better deals and discount plans that work for both the consumer and the seller.

Session 11 & 12: Elasticity and its application to estimate price

The session will begin with a brief review of regression to model demand. In particular, we will study
how to estimate price elasticity, cross-price elasticity, income elasticity and how to use such estimates
in price optimization. In the second half of the session, we will explore how to model individual-level
data on consumer choices via a discrete choice mode

Session 13, 14 & 15: Drivers of Price Elasticity

Last sessions focused on understanding market’s response to price change i.e. price elasticity. This
session will focus on various factors that influence market’s price sensitivity. We classify these
factors into four categories: 1. Economic 2. Competitive 3. Cognitive and 4. Emotional and will
elaborate on each of them.

Session 16 & 17: Price Discrimination & Product Line Pricing

Case: Heinz Ketchup: Pricing the Product Line

Till now we have focused on two aspects initial price setting for a product or modification of the price
for a single product. In this session we will focus on price structure which consists of the pattern of
the prices it charges its customers. For example, an important factor behind different prices is the
existence of different segment. Another important thing to consider is the existence of product line.

Session 18 & 19: Role of Competition in Pricing

Case: Keurig at HomeIn this session, we will focus on the role of competition in pricing
strategy. We will explore how to avoid price wars and how to get out of price wars. In the
second half, we will discuss how to price product lines. In particular, we will study how to price
complementary products within the context of the Keurig case

Session 20 & 21: Price Segmentation

Case Study: Retail Relay

In this session we will discuss how firms can use price promotions to manage prices in the short term.
We will study the different forms of sales promotions and how these impact category purchasing,
brand choices and store choices. We will make use of Retail Relay Case, were the firm is trying to
expand their business and ran some promotional technique to capture new customers.
 Session 22: Price Customization and Negotiation in B2B context

In the first half of the session, we will study how to design bundles and how to set nonlinear pricing
schedules. In the second half, we will explore pricing issues in B2B contexts. We will discuss how
firms can target prices based on past history of purchasing. We will also study how to structure and
manage price negotiation

Session 23 & 24: Project Presentation

Groups will present their final projects to the class. All groups are required to submit to me complete
hardcopies of their slides, including any relevant appendices, for grading purposes. Be mindful of the
time limit and plan your slides accordingly

Assessment Plan

Assessments for Subject are based on the following four principles:

 Assessment must encourage and reinforce learning.
 Assessment must enable robust and fair judgments about student performance.
 Assessment practices must be fair and equitable to students and give them the
opportunity to demonstrate what they have learned.
 Assessment must maintain academic standards.

Assignment Assignment Description Individual/ Weight MLG PLGs

Group Mapping Assessed

A1 End-Term Exam Individual 15 Marks MLO1, L2, L4

(50%) MLO3,
MLO4,
MLO6

A2 Application-based project. Group 12 Marks MLO2, L2, L3, L4

(40%) MLO6

A3 Quiz – 3 quizzes Individual 3 Marks MLO1, L1, L2

(After Session 7, 15 & 21) (10%) MLO2,
MLO4,
MLO5
Assessment related details
 If a student is absent on the scheduled date of quiz, she/he shall be given one more option
to reappear in the same, provided the faculty is convinced that the reason for absence is
genuine. Inability to attend the reappear assessment will result in the student being
awarded zero.
 Group assessments shall not be repeated. In case a student is absent on the day of
presentation of the same, the student will be awarded zero for this component of
assessment. The faculty in such cases shall conduct a separate viva for the concerned
student and grade her/him accordingly.
 End term assessments are compulsory. Absence in end term assessments will be marked
as ‘absent’ and the result will be marked as ‘incomplete’. This is irrespective of the
student’s score in internal assessments.

Assessment details:
(a) Quiz (3- mark): This quiz will be conducted based on sessions 1-6. (Total 10 questions 0.5
marks each)
(b) Project Presentation (12- marks): In a group of 6 students each team should select an
interesting problem and analyze the pricing decision faced by a firm. The pricing problem
could be one currently or previously faced at work. The goal of the project is to apply the
concepts from the course to a real pricing problem, either one created by the team or an
opportunity faced by a real organization (potentially your own). I include a set of suggested
project ideas after this section, but you are free to choose your own topic. If you do, please
discuss it with me well in advance.

The final deliverables are in the form of PowerPoint slides and an in-class presentation.
There is no formal project write-up. That is, all your motivation, analysis, and
recommendations must be contained within the presentation. The presentation should be
10 to 15 minutes long and we will allocate an additional 3 to 4 minutes for questions and
comments from the class.
Topic Ideas for the Final Project

1. Product lifecycles have shrunk in recent years due to rapidly shifting customer
preferences, product proliferation and technological advancements.

Pricing is a particularly important and complex issue for short-lifecycle products – i.e.,
products that become obsolete within 6 months – 2 years of introduction. Profile the pricing
practices at a company that operates in a short-lifecycle environment – e.g., technology,
fashion, entertainment or information contexts. How does the company adjust prices as the
product evolves from one stage to the next, as the demand/supply balance changes, or as
customers’ value for the product changes? Where within the organization are
markdown/promotion vs. introductory price decisions made? What role do channel
partners play in managing price across the lifecycle? How are customer expectations
managed vis-a-vis price changes? What practical issues does the company face in
implementing advanced pricing practices? What opportunities do you see for further
improving pricing practices?

2. Some industries are experiencing major forces of change that are leading to the
adoption of new pricing practices.

Examples of such forces include deregulation, entry of low-cost competition, technological

innovation, and transition from one stage to the next of the industry/product lifecycle.
Identify an industry that is witnessing such changes in pricing caused by environmental
forces. Profile the changes in pricing that are being driven in the industry and the strategies
being adopted by different players. Who is being successful at capturing additional value
– across competitors, and across the value chain? Is the industry converging to a stable new
pricing regime or is it moving into relatively anarchic conditions? What factors are causing
the industry to evolve in this fashion? What efforts are industry players making to enhance
their organizational effectiveness to price in the new environment?
3. Identify a company that has a reputation in its industry for being smart at pricing.
Profile its pricing practices – strategy, organization, and implementation.

Why has its competition not been able to mimic its success? How much value is smart
pricing adding? What insights can other businesses (beyond this industry) draw from this
company?

4. Identify a situation where a company or an industry moved from a “one-size-fits-

all” approach to pricing to a segmented pricing approach.

What triggered the shift? How successful has it been? What practical challenges came up
in making the transition and how were these addressed? How much value has been created
by the shift to segmented pricing? What integrated strategies across the 4P’s were needed
to implement the change? What other improvements can you suggest in how the
company/industry should approach pricing?

5. Describe the pricing strategy for a recently launched product.

What is the pricing structure and the logic behind it? What did the organization do to
implement its pricing successfully in the marketplace? What was the analysis / decision
making process that the company went through in arriving at the launch price? What role
did competitive pricing behavior play in influencing the success/failure of the product?
What improvements could you suggest on how the company approached pricing and the
actual pricing strategy?

6. Pricing optimization systems are gaining steam in the retail sector.

Demand-Tech, Khi-Metrics, ProfitLogic and Manugistics are among the players that have
introduced systems to help retailers optimize pricing for countless product categories. Pick
a retail segment and analyze the impact pricing optimization has – and will – have on the
industry. How much value is being created? What are the risks, and how could these be
 mitigated? How could you tell if this is the right time to invest in this capability or not for
a player in this segment? What aspects of pricing will pricing optimization automate, and
where is managerial involvement still critical? What do you foresee the scope and impact
of pricing optimization to be in 5 to 10 years within this segment?

7. Managing pricing coherently across channels is a particularly tough challenge for

brands that are distributed via multiple channels.

Common problems include gray markets, and the conflict between a direct channel, such
as the web, with indirect channel partners. Identify a company that has actively worked on
addressing pricing challenges across channels. What factors were behind these challenges
(e.g., self-interested behavior of channel partners)? How did the company address these
issues? How successful has its approach been? Are there other actions it could have taken
that you would recommend? What insights can this offer to other businesses in the same
or other industries?

Note that the questions in each topic are meant to be suggestive, not exhaustive. You should feel
free to add additional analyses/ areas of discussion within the chosen theme – the key is to unearth
insightful findings and conclusions founded on real-world observations and linkages with pricing
concepts.

(c) End Term (15 marks)

End Term open Book Written Examination –Case Analysis shall endeavour to test the students’
comprehension of the concepts taught and assess their ability to connect the same to the case.
It would be a open book application based exam and would constitute 50% of the total
assessment. Students will be assessed on the basis of their performance in the examination with
respect to individual questions. It would be conducted within the scheduled examination
calendar. The exam would follow case based descriptive question answer format where
students shall be required to answer all questions. Exam would enable the students to gauge
their overall conceptual understanding, and analytical ability. It will measure the extent to
which students are deriving conclusions.
Maps

Assessment Map
Module Name: A1 A2 A3 A4 A5

Pricing Strategy    

A1- Individual assignment A2- Group assignment

A3- Open book examinations A4- Closed book examinations
A5- Presentations

Module Name: Pricing Startegy T1 T2 T3 T4 T5 T6

   

T1: Lectures T2: Seminars/Tutorials T3: Projects

T4: Case Discussion T5: Guest Lectures/Industrial Visit T6: Workshop Sessions

Curriculum Map

Programme Learning Outcomes

Module Name: Pricing Strategy L1 L2 L3 L4 L5 L6 L7

Taught   

Assessed    

Covered   

Program Learning Outcomes:

L1 - An understanding of organization and appropriate techniques to allow investigation into

business issues.
L2 - The ability to acquire, analyze and understand data and information for managerial decisions.
L3 - Critical thinking and informed judgment leading to problem solving, negotiation and decision
making skills.
L4 - Cognitive flexibility which enables adaptability to uncertainty in a rapidly changing world.
L5 - An understanding of disruptive and technological change and the ability to seek innovative
and entrepreneurial solutions.
L6 - Emotional intelligence and people’s skills in communicating, working in teams and with
people.
L7 - Be cognizant of the impact of their individual and corporate actions on society, recognize
responsible and inclusive business practices and be sensitive to the social, economic and
environmental responsibilities of business.

Student feedback
The Institute places high priority on approaches to learning and teaching that enhances the
students’ experience. Feedback is sought from students in a variety of ways including on-going
engagement with faculty, the use of online questionnaires and interaction with the
Dean/appropriate authority. This course is regularly revised and updated to reflect student
feedback.

Plagiarism
Please refer to the student handbook, page 30, for details.

Student Responsibilities and Conduct

Students are expected to be familiar with and adhere to Institute's policies in relation to class
attendance and general conduct and behaviour, including maintaining a safe, respectful
environment; and to understand their obligations in relation to workload, assessment and keeping
informed.
Workload: It is expected that you will spend at least ten to twelve hours per week studying for a
course. This time should be made up of reading, research, working on exercises and problems,
online activities and attending classes. In periods where you need to complete assignments or
prepare for examinations, the workload may be greater. We strongly encourage you to connect
with your MS Teams Portal in the first week of semester.
Attendance: Your regular and punctual attendance at lectures and seminars or in online learning
activities is expected in this course. The Institute reserves the right to refuse final assessment to
those students who fails to attend the required minimum number of classes where attendance and
participation is required as part of the learning process (e.g., tutorials, flipped classroom sessions,
seminars, labs, etc.).
General Conduct and Behaviour: You are expected to conduct yourself with consideration and
respect for the needs of your fellow students and teaching staff. Conduct which unduly disrupts or
interferes with a class, such as ringing or talking on mobile phones, is not acceptable and students
may be asked to leave the class.
Health and Safety: IILM requires each person to work safely and responsibly, in order to avoid
personal injury and to protect the safety of others.
Keeping Informed: You should take note of all announcements made in lectures, tutorials or on
the course web site. From time to time, the Institute will send important announcements to your
university e-mail address without providing you with a paper copy. You will be deemed to have
received this information. It is also your responsibility to keep the Institute informed of all
changes to your contact details.