How much should you charge for your products and services? Traditionally, businesses have answered this question based on the cost to produce or provide their goods and services. This course shows you the economic factors behind pricing based on cost and the pros and cons of a cost-based pricing approach. Led by Darden faculty and Boston Consulting Group global pricing experts, the course provides the practical and research-based models and methods you need to set prices that maximize your profits.
By the end of this course, you’ll be able to:
--Apply knowledge of basic economics to make better pricing decisions
--Recognize opportunities for price discrimination—selling the same product at different prices to different buyers—and recommend strategies to maximize sales and profits
--Calculate three types of price elasticities to determine the impact of price on demand
--Analyze and apply different pricing models
-Cost-plus pricing
-Marginal cost-plus pricing
-Peak-load pricing
-Index-based pricing
--Evaluate the impact of channel intermediaries and customer lifetime value on pricing
This course is part of the Pricing Strategy Optimization Specialization
Cost and Economics in Pricing Strategy
Offered By
University of Virginia
BCG
About this Course
4.8
208 ratings
What you will learn
How to apply knowledge of basic economics to make better pricing decisions
How to recognize opportunities for price discrimination and recommend strategies to maximize sales and profits
How to calculate three types of price elasticities to determine the impact of price on demand
How to analyze and apply different pricing models, including: cost-plus pricing, marginal cost-plus pricing, peak-load pricing, index-based pricing.
Skills you will gain
Cost-Based PricingChannel and Direct-to-Consumer PricingPricing StrategiesPrice DiscriminationPrice Elasticity Of Demand
Syllabus - What you will learn from this course
Week
1Pricing Fundamentals
Welcome to the first week of Cost and Economics in Pricing Strategy course! We'll begin our study of pricing by looking at some basic economic principles relevant to pricing, such as cost and cost variations and what that implies about the supply curve. Then we'll take a closer look at one pricing mechanism: auctions. You will never look at eBay the same!
13 videos (Total 55 min), 4 readings, 3 quizzes
13 videos
Three Pricing Lenses4m
What to Expect This Week1m
Basic Metrics of Pricing: Margins and Markups5m
The Relationship Between Price and Quantity: Demand Schedules5m
The Relationship between Price and Quantity: Functional Form5m
Cost, Cost Variations and Supply Curves4m
Auctions as a Pricing Mechanism3m
English Auctions3m
Dutch Auctions3m
Sealed Bid Auctions6m
B2B Auctions7m
Module 1 Takeawaysm
4 readings
Course Overview & Requirements10m
Survey10m
Using Discussion Forums to Deepen Your Learning10m
Top Ten Learner Tips10m
3 practice exercises
Practice Quiz on Basic Economics18m
Practice Quiz on Auctions12m
Week 1 Pricing Fundamentals Quiz36m
Week
2Price Discrimination
This week we'll tackle three areas that will help you improve the effectiveness of your pricing strategy. First, we'll take a look at price discrimination and how to set prices for different customer segments to maximize profits. You'll learn about the price and margin waterfall and how creating one for your business can help identify "leaks" that you can prevent. Then we'll examine volume-based pricing, or pricing differently for different volumes to encourage consumption, of a consumer product: Heinz Ketchup. When we're done, you'll be very aware of the impact package size has on your own consumption--and how to use this knowledge to price products.
12 videos (Total 40 min), 1 reading, 4 quizzes
12 videos
Cost-plus Pricing5m
Price Discrimination Based on Cost Variation4m
Price and Margin Waterfall4m
Product Line Pricing Principles4m
Product Line Pricing: Paper Towels6m
Product Line Pricing: Ketchup5m
Product Line Pricing: Principle 31m
Other Incentives That Lower Costs3m
Field Trip to Kroger's Ketchup Aisle: The Heinz Case1m
Heinz Case Debrief1m
Module 2 Takeawaysm
1 reading
Case Study: Heinz Ketchup: Pricing the Product Line15m
4 practice exercises
Practice Quiz on Cost-plus Pricing15m
Quiz on the Heinz Case20m
Practice Quiz on Product Line Pricing15m
Week 2 Quiz on Price Discrimination30m
Week
3Common Pricing Metrics: Elasticities
This week we'll dive deep into the world of demand modeling. We'll start with a brief overview of regressions--what they are, why they're useful and how to calculate them using Excel. Then you'll get a chance to use regressions as you learn about three types of elasticities--relationships between demand and price or other factors--and the drivers of these elasticities. We'll finish with a price optimization based on demand models--a truly useful method for pricing based on economic factors. By the end of this week, you'll be able to impress your colleagues and friends with your knowledge of mathematical models and how to use them to inform your pricing strategy!
13 videos (Total 67 min), 3 quizzes
13 videos
Calculating Regressions9m
Interpreting Regression Outputs5m
Price Elasticities8m
Cross-Price Elasticity6m
Income Elasticity4m
Drivers of Price Elasticity3m
Drivers of Price Elasticity: Market Share4m
Drivers of Price Elasticity: Competitors' Prices4m
Calculus: Taking a Derivative3m
Price Optimization Considering Demand8m
Price Optimization Example4m
Module 3 Takeaways1m
3 practice exercises
Practice Quiz: Regressions12m
Practice Quiz on Price Elasticities15m
Week 3 Quiz on Price Elasticities30m
Week
4Channel and Direct-to-Consumer Pricing
Welcome to our final week together in this course! We'll finish by discussing key concepts related to channel pricing--or pricing through the supply chain. You'll learn about double-marginalization, time value of money, and customer lifetime value (CLV)--not only what they are, but how to use them to improve pricing decisions. Then we'll show you three different pricing techniques that you can use to improve direct-to-consumer pricing. You'll finish with a real-world case analysis of Retail Relay, an online grocery ordering and delivery service. You'll be able to recommend a viable approach to their pricing dilemma based on knowledge from this course. Enjoy!
16 videos (Total 77 min), 1 reading, 5 quizzes
16 videos
Double Marginalization9m
Channel Pricing3m
Using Time Value of Money to Evaluate a Project3m
Using Time Value of Money to Compare Different Projects4m
Customer Lifetime Value (CLV)8m
Measuring CLV3m
Measuring CLV Examples7m
Purchase Occasion Probabilities9m
Case Application: Retail Relay Intro1m
Case Application: Retail Relay Debrief1m
Marginal Cost Pricing Defined2m
Marginal Cost Pricing Airline Industry Example5m
Peak Load Pricing3m
Index-Based Pricing5m
Module 4 Takeaways1m
1 reading
Case Study: Retail Relay10m
4 practice exercises
Retail Relay Case Quiz20m
Practice Quiz on Double Marginalization, Time Value of Money, and CLV15m
Practice Quiz on Pricing Methods15m
Week 4 Quiz on Channel and Direct-to-Consumer Pricing30m
4.8
48 Reviews33%
started a new career after completing these courses
83%
got a tangible career benefit from this course
29%
got a pay increase or promotion
Top Reviews
By MP•May 8th 2018
Concepts in this course are challenging but the class is setup for students to succeed. I really enjoyed this course and would recommend it to anyone looking to learn more about pricing strategy.
By AG•Apr 6th 2018
Even if you are familiar with the basics of microeconomics, and cost structures, this course combines it all together to provide a new perspective of using these models and concepts in pricing.
Instructors
Jean Manuel Izaret
Senior Partner and Managing Director, Leader of BCG’s Global Pricing Practice
Thomas Kohler
Associate Director, PricingMarketing, Sales & Pricing Practice
Ronald T. Wilcox
NewMarket Corporation Professor of Business Administration & Senior Associate Dean for Degree ProgramsMarketing
About University of Virginia
A premier institution of higher education, The University of Virginia offers outstanding academics, world-class faculty, and an inspiring, supportive environment. Founded by Thomas Jefferson in 1819, the University is guided by his vision of discovery, innovation, and development of the full potential of students from all walks of life. Through these courses, global learners have an opportunity to study with renowned scholars and thought leaders.
About BCG
Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy.
We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with offices in more than 90 cities in 50 countries. For more information, please visit bcg.com.
About the Pricing Strategy Optimization Specialization
In this Specialization, we show you techniques to increase price realization and maximize profits. Learn from Boston Consulting Group's global pricing experts and University of Virginia Darden School of Business faculty, who share the frameworks, tips and tools we use in our business and research environments. We will look at pricing through BCG's proprietary and time-tested three “lenses”—cost and economics, customer value, and competition—to build your understanding of the strategic power of pricing. You’ll leave the Specialization with a portfolio-building presentation that demonstrates your ability to price strategically.
Frequently Asked Questions
When will I have access to the lectures and assignments?
Once you enroll for a Certificate, you’ll have access to all videos, quizzes, and programming assignments (if applicable). Peer review assignments can only be submitted and reviewed once your session has begun. If you choose to explore the course without purchasing, you may not be able to access certain assignments.
What will I get if I subscribe to this Specialization?
When you enroll in the course, you get access to all of the courses in the Specialization, and you earn a certificate when you complete the work. Your electronic Certificate will be added to your Accomplishments page - from there, you can print your Certificate or add it to your LinkedIn profile. If you only want to read and view the course content, you can audit the course for free.
What is the refund policy?
Is financial aid available?
More questions? Visit the Learner Help Center.
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