{"content":{"sharePage":{"page":0,"digests":[{"id":"47706642","dateCreated":"1323217194","smartDate":"Dec 6, 2011","userCreated":{"username":"cdmuhlenkamp","url":"https:\/\/www.wikispaces.com\/user\/view\/cdmuhlenkamp","imageUrl":"https:\/\/ssl.wikicdn.com\/i\/user_none_lg.jpg"},"monitored":false,"locked":false,"links":{"self":"https:\/\/mbaeconfall2011.wikispaces.com\/share\/view\/47706642"},"dateDigested":1532762572,"startDate":null,"sharedType":"discussion","title":"Strategic Pricing Final Blog","description":"Strategic Pricing
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\nIntroduction
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\nWith today\u2019s economy, it has become even more difficult to successfully run a profitable company of any kind. There are a number of different ways that companies have tried to gain an edge and one of the most important things they have done is used strategic pricing. This is done in order to help maximize profit. This can be done by having the knowledge to increase their price or done by attempting to increase sales by decreasing the price of the good being sold.
\n Our book talks about a handful of different strategies and what each means. For example, a dominant strategy is a strategy that results in the highest payout regardless of the opponents actions. Secure strategy is the highest payout given the worst case scenario. With much of the book content being somewhat hard to relate to real-life situations, I will try to relate these situations with real-life examples.
\n There are hundreds of topics that you could relate to strategic pricing. There are so many strategies that different types of companies and industries use towards pricing. With that being said, it is hard to only discuss a few. For this assignment, I am going to focus on a few of the main topics that I feel are of importance. I will also give a examples of how some companies used strategic pricing.
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\nWhat is strategic pricing?
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\n As stated earlier, it is important to remember that strategic pricing is an extremely large topic to cover. I think that a lot of what a company does can be considered strategic pricing. It answers why their price is what it is, why it changes, and could even explain sales they hold.
\n Found below is the link to the strategic pricing pyramid that I thought did a good job of describing this concept. I found in an article from the Strategic Pricing Group based in Boston, Massachusetts.
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\nhttp:\/\/www.imakenews.com\/strategicpricing\/e_article000406013.cfm?x=b11,bbH759jg,w<\/a>
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\n As shown on the link, the first step of strategic pricing is found at the bottom of the pyramid, which is Value Creation. This is important because it will be informative for you to know the true value you offer your customers. It is also important that the proper research is done and you do not just use a biased opinion of what you think you are offering.
\n The next step of the pyramid is the Pricing Structure. This is a piece that needs to match up with the value that you are offering. If you have different segmentation, it is important that your pricing reflects the different values. The next step, Price & Value Communication, is somewhat of a continuation of the price structure. This step in the pyramid, in simple terms, is making your customers and potential customers aware of what you are offering. It is great if you have a product that has a lot of features and can do a lot for a buyer, but if they do not know then the price will not seem worth the assumed value. This is another area that strategic pricing stretches across business units of a company and can benefit from things like marketing.
\n The next step on the pyramid is Pricing Policy. What this means is that a company needs to have a policy and try to stick with it. An example of why this is important is because if a company drops their prices significantly after a period of time, customers will catch on and wait to buy. Lastly, the final step is the Price Level. This is simple to understand, but is not always simple to apply. This is maximizing profit by finding the right mix of how high you can sell your good or service in consideration of volume. Finding if it is more beneficial to sell a little at a high cost, sell a lot at a lower cost, or somewhere in between is how this is done (Nagal, and Hogan).
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\nThe Pricing Checklist
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\n After knowing about what strategic pricing is, the next question might be how to go about strategically pricing for your own benefit. Because this topic is so broad, it can be so difficult to manage that it is hard to answer that question. I did some research on some of the most important topics when strategically pricing and found a very help article titled, A Winning Tool to Manage Price: The Pricing Checklist. This article touches on the importance of value and what your goals are when pricing something. An example is the following: Do you want to make as much money as you possibly can or do you want to have the most integrity you can and give more value for the price? There is a trade-off and benefits from both in the short and long term.
\n The pricing checklist touches on six main points. The first point on the checklist is knowing your business model. This means you should be educated on your own business. Know what you\u2019re good at, what you\u2019re not good at, and what you plan to do. The second point is establishing a strategic objective. This means you need to know what your goals are and how you are going to do it. For example, knowing if you plan to do it with penetration pricing or price skimming is important.
\n The third check is identifying the value of your product or service. Knowing if what you are offering is going to be highly valuable to people will help you with check number four, which is positioning your pricing strategy. It is important to make sure the strategy is in line with your business model, and will be successful. Step five is price with integrity and test as you go. This step includes setting the price and sharing the value of what you\u2019re offering. It also includes making adjustments to help reach goals or to improve success. Consulting with customers and truly caring is one of the best ways to go about doing this.
\n The sixth and final check is making pricing a part of your culture. You need to have constant feedback from customers and employees about pricing. One of the most important things is always having the value of the customer in mind (Louie, and Jasso). With that being said, I agree with it completely and would recommend to any company. Pricing is one of the most important ways to get brand loyalty. With social media and the internet as powerful as it is, people are very informed. It is also vital to be a company that has integrity, even when it comes to pricing.
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\nCollege Tuition and Strategic Pricing
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\n The first two points that I covered talked about the generic definition of strategic pricing and how it can be strategized. There is an article inside In The Money which talks about strategic pricing for college tuition that may make it easier to understand than a generic example. College tuition is an important topic and continues to be as college prices go up and the economy continues to seemingly drop. When a school is trying to decide their prices, this article touches on a few strategic measures to follow.
\n The first question in the article is whether or not the school is worth the price that they charge. This makes sense and goes back to the idea of a money value that equals the actual value. The next important point is if potential students see your school as being affordable. If it has a reputation of being over-priced, potential students will not see the tuition as being worth the value. This will result in fewer students and, in turn, less interest in the school. The final point that the article talks about is if the school is spending their aid dollars efficiently. This is where the school uses the aid money to get as many potential students out of it as they can. All of these points are relatable to almost any business, as well as the generic examples (Scannell, and Kurz).
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\nConclusion
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\n There is an abundance of research about strategic pricing and the consulting of pricing has become extremely popular. There are also numerous companies that you can hire to do this kind of pricing for you. As a result, this can be somewhat risky because you may not always know what you are going to get when you hire a company. You may need to research if it is better to just do it on your own. I also think one of the most important things when it comes to pricing is staying up to date with it. The economy is constantly changing and a company\u2019s pricing strategy needs to change, too. It also needs to be company-wide. The pricing needs to be tied into all departments, similar to how an IT department works. For example, it needs to be connected to marketing, finance, and all other areas. It is important to know your current pricing strategy and be able to make changes. Making sure that the value you offer equals the price is vital. Consumers are aware of what they buy more than ever, with increasing online presence. They also have more options when purchasing things. This makes it important to give value, and do it at a price that benefits you as well.
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\nMultiple Choice
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\n1. Companies with market power should charge a single price to all customers where marginal revenue equals _?
\na) The cost function
\nb) Marginal cost
\nc) The inverse demand
\nd) Elasticity of demand
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\n2. The practice of charging different prices to consumers for the same good or service is known as ?
\na) Price matching
\nb) Pricing strategy
\nc) Low price guarantee
\nd) Price discrimination
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\n3. Two part pricing strategy is when consumers are charged a <\/u> fee for the right to purchase a product, plus a per-unit charge for each unit purchased.
\na) Variable
\nb) Fixed
\nc) Total
\nd) Sunk
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\n4. It is important for consumers to believe that the price of a good or service should be worth the ?
\na) Cost
\nb) Value
\nc) Brand
\nd) Marginal Cost
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\n5. A dominant strategy is a strategy that results in the __ payout regardless of the opponents actions.
\na) Highest
\nb) Lowest
\nc) Same
\nd) None of the above
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\n1. B) Found on page 398, under \u201cThe Basic Rule of Profit Maximization\u201d
\n2. D) Found on page 404, under \u201cExtracting Surplus from Consumers\u201d
\n3. B) Found on page 410, under \u201cTwo-Part Pricing\u201d
\n4. B) This was discussed in the blog, and is a growing part of strategic pricing.
\n5. A) Found on page 355, under \u201cTheories\u201d
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\nReferences
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\nNagal, Tom, and John Hogan. "What is Strategic Pricing?." (2005): n. page. Web. 1 Dec. 2011. <http:\/\/www.imakenews.com\/strategicpricing\/e_article000406013.cfm?x=b11,bbH759jg,w<\/a>>.
\nLouie, Peter, and Sean Jasso. "A Winning Tool to Manage Price: The Pricing Checklist." Graziadio Business Review. 9.1 (2006): n. page. Web. 1 Dec. 2011. <http:\/\/gbr.pepperdine.edu\/2010\/08\/a-winning-tool-to-manage-price-the-pricing-checklist\/<\/a>>.
\nScannell, Jim, and Kathy Kurz. "Strategic Tuition Pricing & Discounting." University Business 6.2 (2003): 16. Academic Search Premier. Web. 4 Dec. 2011.","replyPages":[{"page":0,"digests":[],"more":0}]},{"id":"45878674","dateCreated":"1320790197","smartDate":"Nov 8, 2011","userCreated":{"username":"cdmuhlenkamp","url":"https:\/\/www.wikispaces.com\/user\/view\/cdmuhlenkamp","imageUrl":"https:\/\/ssl.wikicdn.com\/i\/user_none_lg.jpg"},"monitored":false,"locked":false,"links":{"self":"https:\/\/mbaeconfall2011.wikispaces.com\/share\/view\/45878674"},"dateDigested":1532762572,"startDate":null,"sharedType":"discussion","title":"David Bauders Discusses Pricing","description":"David Bauders, President of Strategic Pricing Associates, Inc discusses strategic pricing for wholesalers.
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\nhttp:\/\/www.youtube.com\/watch?v=IyM8Yug7AhA<\/a>","replyPages":[{"page":0,"digests":[],"more":0}]},{"id":"45210938","dateCreated":"1319828692","smartDate":"Oct 28, 2011","userCreated":{"username":"cdmuhlenkamp","url":"https:\/\/www.wikispaces.com\/user\/view\/cdmuhlenkamp","imageUrl":"https:\/\/ssl.wikicdn.com\/i\/user_none_lg.jpg"},"monitored":false,"locked":false,"links":{"self":"https:\/\/mbaeconfall2011.wikispaces.com\/share\/view\/45210938"},"dateDigested":1532762572,"startDate":null,"sharedType":"discussion","title":"Recent Apple Pricing Strategy","description":"The following is an example of how Apple changed their pricing strategy in 2009 after the profits of selling music dropped.
\n
\nhttp:\/\/online.wsj.com\/article\/SB123126062001057765.html<\/a>","replyPages":[{"page":0,"digests":[],"more":0}]},{"id":"44507424","dateCreated":"1318975021","smartDate":"Oct 18, 2011","userCreated":{"username":"cdmuhlenkamp","url":"https:\/\/www.wikispaces.com\/user\/view\/cdmuhlenkamp","imageUrl":"https:\/\/ssl.wikicdn.com\/i\/user_none_lg.jpg"},"monitored":false,"locked":false,"links":{"self":"https:\/\/mbaeconfall2011.wikispaces.com\/share\/view\/44507424"},"dateDigested":1532762572,"startDate":null,"sharedType":"discussion","title":"Trends in Strategic Pricing","description":"Here is an interesting powerpoint that I found from an Accenture employee. Accenture is one of the top consulting companies in the world, and strategic pricing is something that is important for them to know in and out.
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\nhttp:\/\/www.servigistics.com\/news\/pdf\/PricingTrendsAccenture.pdf<\/a>
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\nHere are some of the key topics that I found most interesting...
\n-benefits beyond revenue (asset productivity, cost containment)
\n-B2B2C
\n-Accenture's pricing model
\n-Case example","replyPages":[{"page":0,"digests":[],"more":0}]},{"id":"44054026","dateCreated":"1318368795","smartDate":"Oct 11, 2011","userCreated":{"username":"cdmuhlenkamp","url":"https:\/\/www.wikispaces.com\/user\/view\/cdmuhlenkamp","imageUrl":"https:\/\/ssl.wikicdn.com\/i\/user_none_lg.jpg"},"monitored":false,"locked":false,"links":{"self":"https:\/\/mbaeconfall2011.wikispaces.com\/share\/view\/44054026"},"dateDigested":1532762572,"startDate":null,"sharedType":"discussion","title":"Strategic Pricing","description":"Studying a large number of topics in any class can prevent you from learning how in-depth some areas can go. I have found that how intense strategic pricing can be by researching classes that cover the one topic.
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\nhttp:\/\/irc.caltech.edu\/p-163-strategic-pricing.aspx<\/a>
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\nAs you can see from the link above, California Institute of Technology offers this as a class. It is interesting to see the number of topics that can be discussed within the topic.
\n
\nHere are a few...
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\nStrategic Pricing: The Importance of a Value-Based Approach
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\n Linking pricing to strategy and the significance of segmentation
\n The 3C\u2019s of pricing\u2014customer value, competitors\u2019 prices, and your costs
\n Creating a framework to evaluate where to set price: based on customer value, costs, the
\n differential advantage (competitors), and the company\u2019s strategic objectives
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\nImproving Pricing Decisions: Why You Must Relate Benefits and Customer Value to Price
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\n Measuring customer value\u2014tools that rely on managerial judgment and formal market research
\n Distinguishing between attributes, benefits, and values for effective pricing
\n Segmenting based on customer dimension\u2014the foundation for effective pricing
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\nUsing Tools to Measure Value
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\n Conducting a perceived value analysis
\n Evaluating the perceived value map to develop strategic pricing options
\n Measuring price elasticity
\n Conducting a break-even analysis
\n Performing trade-off analysis
\n Conducting a pricing study with market research tools
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\nPricing Through the Product or Service Life Cycle
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\n Determining your position on the product or technology life cycle
\n Pricing new technologies and new product introductions
\n Pricing during competitive turbulence
\n Pricing for mature markets
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\nIncreasing Prices
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\n Assessing your leadership in the market
\n Understanding the link between pricing, strategy, and segmentation
\n Determining pricing latitude relative to elasticity
\n Evaluating other pricing influences
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\nStemming Price Erosion: How to Evaluate a Pricing Problem
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\n Evaluating your differentiation
\n Assessing the impact of branding and loyalty
\n Identifying switching costs
\n Determining if you have a pricing problem
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\nIntegrating Strategic Pricing Into Your Corporate Environment
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\n Creating a culture for effective pricing
\n Linking pricing to your corporate objectives
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\nPricing Workshop
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\nThe application workshop helps you to: measure customer values, segment based on these values,
\ndetermine the best price, and assess price sensitivity.
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\nParticipants will determine:
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\n What customers value versus the features and benefits we provide
\n How customers perceive value
\n How our offer compares with those of competitors
\n What strategic pricing options they may consider","replyPages":[{"page":0,"digests":[{"id":"44202168","body":"Check out the following article regarding Amazon and the new Kindle.
\n
\nhttp:\/\/www.economicsofinformation.com\/<\/a>
\nKindle-ing Competition","dateCreated":"1318537438","smartDate":"Oct 13, 2011","userCreated":{"username":"MJWagner74","url":"https:\/\/www.wikispaces.com\/user\/view\/MJWagner74","imageUrl":"https:\/\/ssl.wikicdn.com\/i\/user_none_lg.jpg"}}],"more":0}]}],"more":false},"comments":[]},"http":{"code":200,"status":"OK"},"redirectUrl":null,"javascript":null,"notices":{"warning":[],"error":[],"info":[],"success":[]}}