Introduction

The purpose of any business is to add some value, in some way, to someone outside of itself. However, the business cannot survive—let alone thrive—unless it is also able to monetize some of that value – in order to generate sufficient funds to pursue future innovations, repay and reward investors, or support social and environmental initiatives.

Accordingly, Pricing Strategy: Monetizing and Growing the Business will help you understand how organizations of any shape, size, and industry affiliation should go about capitalizing on their efforts to stand out in the market and serve customers. In other words, the course studies the “back end” of a company’s relationship with its customers. It is exactly at this moment, when a company asks individuals or other businesses to trade good money for the products and services it offers, that ineffective pricing practices tend to creep in and value regrettably “leaks out” of the relationship—making both parties, and often also society, worse off.

The course goes well beyond the mechanics of setting prices, and pushes students to think critically about a company’s customer advantage in the marketplace and what monetization approach can most effectively capitalize on this advantage, thus helping the firm achieve its overarching goals.

Career Focus

Pricing Strategy is highly appropriate for students who see themselves in careers where they will be directly responsible for setting the revenue policies and top-line growth of a product or service, as well as for senior management roles that involve setting monetization direction and overseeing the pricing approach proposed. The course is also relevant for students who anticipate starting their own enterprise or seek a career as external consultants or investors, whereby the revenue or monetization model decision is critical for new venture success.

Educational Objectives

Unfortunately, many business leaders apply the wrong logic when thinking about prices and pricing. In particular, they often fail to think strategically about the challenge. Rather, one witnesses collections of tactics held together by questionable assumptions and crude heuristics that, by shunning customers and obsessing over just about everything else, put financial and brand health in jeopardy.

To counter this predicament, this course will equip you with concepts and frameworks to tackle contemporary pricing issues with confidence and to craft a sound monetization strategy. In particular, the course addresses questions such as:

• What is the right revenue model for our business? Should we link prices to our ability to deliver greater access or to outcomes that customers truly desire?
• Are we making the most of the customer and competitive advantage we worked so hard to establish?
• Which costs matter from a pricing standpoint? How should we use cost information to set our prices?
• How should we estimate and act on valuations and willingness to pay information?
• Are there opportunities to serve different prices to different customers? How can we do this without damaging our image or inciting backlash?
• Does it matter that our relationship with customers passes through an intermediary? What are the best price arrangements to align channel partners?
• What are best practices to act against competitors’ pricing moves?
• How do we stand our ground against customers who demand lower prices? Is it possible to discount our offerings without eroding the brand?
• What is the impact of our pricing decisions beyond the company-customer relationship? Is there anything we can do to improve our societal and environmental “footprint” through our pricing approach?

Content and Organization

Pricing Strategy: Monetizing and Growing the Business builds on the critical premise that a business cannot improve its ability to earn revenue from customers unless its decisions are guided by and for customers—what they value, why they value it, when and how they value it, and so on. This logic is intuitive, yet seldom put into practice. Many organizations tend to anchor their pricing decisions on an estimate of unit costs and a target margin or use competitors’ prices as the benchmark. They want to “keep things simple,” but in so doing forget or neglect that customers drive demand in a market, and demand ultimately marks the commercial opportunity. A business that sets prices with a poor grasp of the opportunity it faces is bound to make suboptimal, perhaps even dangerous decisions.

In comparison, a customer-centric approach to pricing starts by understanding “value” from the perspective of customers and, importantly, how this value flows to organizations in the form of income. The course takes you across the different steps in this sequence, identifying the most common problem areas and searching for practical and effective solutions.

A key takeaway is that decisions about prices are far more strategic and consequential than typically assumed, as they impact the way organizations relate with customers from as early as product or service design to beyond the moment of purchase. A second important message is that prices serve not only to allocate value among the different actors in a market (i.e., slicing the pie), but also to grow the overall value that is realized in an exchange (i.e., baking a bigger pie). We will spend most of our time understanding these two core functions of pricing.

From a practical standpoint, the 14 sessions of the course comprise case study discussions, exercises, interactive lectures, and contributions from guest speakers. The goal of the case discussions and exercises is to examine important concepts in different managerial settings, and to sample making decisions based on both qualitative and quantitative data. The interactive lectures and guest speakers complement this effort by presenting frameworks, analytical techniques, practical insights, and pertinent real-world examples.

Grading

Grading is based on class participation (50%) and a take home exam (50%). Interested students can request to substitute the exam with a project that reviews the pricing performance of an organization and formulates thoughtful recommendations for changing the monetization scheme.

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