HAAS SCHOOL OF B USINESS
MBA PROGRAM
BA 268
Marketing Seminar: Pricing Strategy
Fall 2001
(2 units)
David Robinson
www.haas.berkeley.edu/~robinson
www.haas.berkeley.edu/Courses/BA268/
Class Meets
Instructor:
Wednesday 4:10 - 6:00 p.m.
Cheit 330 Haas School
D. Robinson robinson@haas.berkeley.edu
Office: F 543 Haas 643-0325
Mondays 2:10 – 4:00 p.m. and by appointment
Texts
Required Text:
Nagle, Thomas T. and Holden, Reed K. The Strategy and Tactics of
Pricing, Second Edition 1995, Prentice Hall. (The Third Edition is due fall,
2001. Either is acceptable—the chapter numbers in this syllabus refer to the
Second Edition.)
Also Recommended
Dolan, Robert J. and Simon, Hermann. Power Pricing: How
Managing Price Transforms the Bottom Line. 1997, Free Press.
Reader
There is a reader of Harvard cases available from COPY CENTRAL on
Bancroft. Additional short cases will be handed out in class. Please,
do not violate copyright © on Harvard cases by re-Xeroxing
without paying the permission fee.
Course Overview
This is a seminar for MBA students who have completed the core
marketing course. The course takes a “strategy” view of pricing (as
compared with an “economics” viewpoint.) There is a combination
of case work, short lectures and simple in-class exercises.
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Course Objectives
1. To develop a thorough understanding of the complexities of the
pricing decision from a managerial perspective and to be able to
analyze pricing environments.
2. To demonstrate the elements of a comprehensive conceptual
model of the pricing decision.
3. To understand the range of legal competitive pricing tactics
available to successful firms.
4. To apply the elements of marketing strategy from the core
course.
Work Products
Formal examinations There are no mid-terms or final in this course.
Mid-term paper: (30 percent) e-pricing: Charging for Internet Information
Services You may do this project as a “partnership” of two or three people.
Many Internet services planned to attract “eyeballs” and make money by selling
advertising. Although this model may work for a few giant “portals” such as
Yahoo!, it’s becoming clear that advertising is insufficient to support the costs of
running a site which provides information to the general public. On the other
hand, Internet users have balked at paying subscription fees for on-line content
(the WALL STREET JOURNAL Interactive Edition is a singular exception.)
This summer, two information sites, Craig’s List and Britannica.com, announced
that, due to insufficient ad revenue, they would have to begin charging for
services. Choose one of these two companies and write a briefing with your best
recommendations for a pricing strategy. Although you will probably make a
specific pricing recommendation, this is not as important as your
recommendation for the overall strategy. You should base your
recommendations on thorough research—don’t forget that not all print media
are archived to the Internet, so some library research should be part of your
approach.
The due date for the project is shown in the timetable, and the format will be
discussed in class. In general length is not a virtue, and completeness of effort
and thoughtfulness of your analysis and conclusions are much more important
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than any particular page count. However, uncertainty leads to anxiety, so a
median of 12 pages with a range of 6 – 24 pages is offered as a guide.
Group presentation (30 percent) We will divide the class into voluntary groups
and each group will be assigned one of the cases market G1 to G9 in the
timetable. Groups will begin the class with a presentation of 25 to 45 minutes.
Please provide the instructor with a (paper) copy of exhibits for the purpose of
giving feedback, but you do not have to submit a written report.
Take the role of students presenting to a group of their peers in a world-class
MBA program. (That is, you can be somewhat “academic” in your discussion of
concepts and allusions to other cases we have studied.) In this class don’t take
the usual role of consultants to the decision-maker. The most effective
presentations are those that seamlessly blend the contributions of all the
members of a team. Your analysis should be full and complete, and explore
alternatives and apparent successes and failures of the company assigned,
including financial projections wherever possible. Make specific
recommendations but be prepared to evaluate the pros and cons of all other
possible strategies and tactics brought up by the class as a whole. Comparison
with the solution of similar problems by other firms is appropriate and some
modest literature search may—or may not—be appropriate to the situation you
are considering. The goal is to encourage healthy debate, rather than come to one
stock answer. A group grade will be given which reflects the completeness of
preparation and the effectiveness of the presentation.
Individual written brief: (20 percent) Choose one of the cases market marked G1
to G9 on the timetable below, and write a one-page brief (plus exhibits), due at
the start of class on the day the case is called. Of course, you may not write your
individual brief on the same case your group is presenting. A separate hand-out
(green) shows the scheme of analysis you should use for this class.
Format: Your brief should be one to two pages, identified with the case
and your name. Use single spacing within paragraphs, double spacing
between paragraphs in a serif font (e.g. Garamond, Book Antiqua) point
size of 12 or greater—that is, exactly like this syllabus. You may append
any number of exhibits. Please do not use a cover page or binder.
Class participation (20 percent) A subjective grade which depends on the “three
P’s”: Presence, Preparation and Participation.
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Policies
Late work Late work is hard to grade fairly. If you have a personal circumstance
that causes individual hardship, please discuss it ahead of time.
Absence Many students have important interests and commitments outside of
the program. However, absence from class not only limits your ability to master
the material but also robs your peers of your insights and experience. Excessive
absence will diminish your class participation grade. Excessive absence from
class is defined as missing more than two classes for any reason. Your instructor
does not require prior notification of absence, but a friendly e-mail assists the
efficient administration of the class.
Class participation and cases Please take responsibility for being appropriately
prepared on days when you are not presenting. Your questions and insights are
gifts that only you can give to your classmates.
Group work. Groups should be formed by mutual agreement, according to free
market principles. It will increase your preparation depth and efficiency to meet
with group members to discuss any work in the course, including the individual
or partnership work. The standard for the individual briefs is that you may
discuss the cases to any length with your group, but once your fingers touch the
keyboard, this should be your own work. In particular, do not submit common
exhibits.
For the group presentations, all members of the group will receive the same
grade, with no discount or premium based on individual effort. “Free riders” are
to be handled by peer pressure, although the instructor is willing to act as a
consultant if the team effort is unrewarding.
•
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Week and Date
Theme
1. 29 August
Introduction
2. 5 September
Pricing
Model
3. 12 September
4. 19 September
5. 26 September
6. 3 October
Pricing
strategy
7. 10 October
8. 17 October
9. 24 October
10. 31 October
11. 7 November
12. 14 November
13. 21 November
Note this class will be
rescheduled if the majority
of the class agrees
14. 28 November
15. 5 December
Pricing
tactics
Topic
Case: (* Distributed in class)
Reading
(Nagle & Holden);
Assignment Due
Pricing goals; common mistakes
in pricing; course objectives
Universal model of pricing;
psychology of pricing
Costs relevant and not relevant
* Person Children’s Learning
Center
Customers’ perception of value
* Biopure
Managing the reference price
G1American Airlines
® in Reader
® McNealy
Ch. 1, 12
Pricing as a market follower:
G2 Steamboat ski corporation
Price discrimination between
customers
G3 Stock Bank
Bid pricing
G4 Computron
Internet pricing revolution
G5 Priceline
The price for information;
legal issues in pricing
Ch. 7, 11
Managing price change
G6 Philip Morris Marlboro Friday
Reacting to a competitor
price-change:
G7 Southwest Airlines CA
Discussion of student papers
recommending subscription rates
e-pricing for information service
Price promotion, bundling
G8 McDonald’s 55 cent
Hamburger promotion
International pricing
G9 Pacific Western Brewing Co.
Ch. 2
® Sinha
 Groups formed
Ch. 3, 4
Ch. 5
Ch. 6, 9
Ch. 8
® Baker
Ch. 13, 14
® Shapiro
 Paper due
Ch. 12
® Rao
Ch. 10