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Cost and Economics in Pricing Strategy

OverviewSyllabusFAQsCreatorsPricingRatings and Reviews

HomeBusinessMarketing

Cost and Economics in Pricing Strategy

University of Virginia, BCG

About this course: 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

Who is this class for: This course is designed for business professionals and those aspiring to a career in marketing.


Created by:  University of Virginia, BCG
University of VirginiaBCG

  • Jean Manuel Izaret

    Taught by:  Jean Manuel Izaret, Senior Partner and Managing Director, Leader of BCG’s Global Pricing Practice


  • Thomas Kohler

    Taught by:  Thomas Kohler, Associate Director, Pricing

    Marketing, Sales & Pricing Practice

  • Ronald T. Wilcox

    Taught by:  Ronald T. Wilcox, NewMarket Corporation Professor of Business Administration & Senior Associate Dean for Degree Programs

    Marketing
Basic Info
Course 1 of 4 in the Pricing Strategy Optimization Specialization
LevelBeginner
Commitment4 weeks of study; 3-4 hours/week
Language
English, Subtitles: Romanian
How To PassPass all graded assignments to complete the course.
User Ratings
4.8 stars
Average User Rating 4.8See what learners said
Syllabus
WEEK 1
Pricing 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, 4 readings, 2 practice quizzes
  1. Video: Introduction to the Specialization
  2. Video: Three Pricing Lenses
  3. Leyendo: Course Overview & Requirements
  4. Leyendo: Survey
  5. Leyendo: Using Discussion Forums to Deepen Your Learning
  6. Cuadro de aviso de la discusión: Meet and Greet
  7. Leyendo: Top Ten Learner Tips
  8. Video: What to Expect This Week
  9. Video: Basic Metrics of Pricing: Margins and Markups
  10. Video: The Relationship Between Price and Quantity: Demand Schedules
  11. Video: The Relationship between Price and Quantity: Functional Form
  12. Video: Cost, Cost Variations and Supply Curves
  13. Cuestionario de práctica: Practice Quiz on Basic Economics
  14. Video: Auctions as a Pricing Mechanism
  15. Video: English Auctions
  16. Video: Dutch Auctions
  17. Video: Sealed Bid Auctions
  18. Video: B2B Auctions
  19. Cuestionario de práctica: Practice Quiz on Auctions
  20. Video: Module 1 Takeaways
Graded: Week 1 Pricing Fundamentals Quiz
WEEK 2
Price 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, 1 reading, 2 practice quizzes
  1. Video: Intro to Price Discrimination
  2. Video: Cost-plus Pricing
  3. Video: Price Discrimination Based on Cost Variation
  4. Video: Price and Margin Waterfall
  5. Cuestionario de práctica: Practice Quiz on Cost-plus Pricing
  6. Video: Product Line Pricing Principles
  7. Video: Product Line Pricing: Paper Towels
  8. Video: Product Line Pricing: Ketchup
  9. Video: Product Line Pricing: Principle 3
  10. Video: Other Incentives That Lower Costs
  11. Video: Field Trip to Kroger's Ketchup Aisle: The Heinz Case
  12. Leyendo: Case Study: Heinz Ketchup: Pricing the Product Line
  13. Video: Heinz Case Debrief
  14. Cuestionario de práctica: Practice Quiz on Product Line Pricing
  15. Video: Module 2 Takeaways
Graded: Quiz on the Heinz Case
Graded: Week 2 Quiz on Price Discrimination
WEEK 3
Common 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, 2 practice quizzes
  1. Video: Intro to Common Pricing Metrics/Elasticities
  2. Video: Calculating Regressions
  3. Video: Interpreting Regression Outputs
  4. Cuestionario de práctica: Practice Quiz: Regressions
  5. Video: Price Elasticities
  6. Video: Cross-Price Elasticity
  7. Video: Income Elasticity
  8. Video: Drivers of Price Elasticity
  9. Video: Drivers of Price Elasticity: Market Share
  10. Video: Drivers of Price Elasticity: Competitors' Prices
  11. Video: Calculus: Taking a Derivative
  12. Video: Price Optimization Considering Demand
  13. Video: Price Optimization Example
  14. Cuestionario de práctica: Practice Quiz on Price Elasticities
  15. Video: Module 3 Takeaways
Graded: Week 3 Quiz on Price Elasticities
WEEK 4
Channel 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, 1 reading, 2 practice quizzes
  1. Video: Intro to Channel and Direct to Consumer Pricing
  2. Video: Double Marginalization
  3. Video: Channel Pricing
  4. Video: Using Time Value of Money to Evaluate a Project
  5. Video: Using Time Value of Money to Compare Different Projects
  6. Video: Customer Lifetime Value (CLV)
  7. Video: Measuring CLV
  8. Video: Measuring CLV Examples
  9. Video: Purchase Occasion Probabilities
  10. Video: Case Application: Retail Relay Intro
  11. Leyendo: Case Study: Retail Relay
  12. Cuadro de aviso de la discusión: CLV for New Retail Relay Customer?
  13. Video: Case Application: Retail Relay Debrief
  14. Cuestionario de práctica: Practice Quiz on Double Marginalization, Time Value of Money, and CLV
  15. Video: Marginal Cost Pricing Defined
  16. Video: Marginal Cost Pricing Airline Industry Example
  17. Video: Peak Load Pricing
  18. Video: Index-Based Pricing
  19. Cuestionario de práctica: Practice Quiz on Pricing Methods
  20. Video: Module 4 Takeaways
Graded: Retail Relay Case Quiz
Graded: Week 4 Quiz on Channel and Direct-to-Consumer Pricing
Graded: Cost-based Pricing

FAQs
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Creators
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.
BCG
The 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.
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Ratings and Reviews
Rated 4.8 out of 5 of 135 ratings

AG

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.

SG

Excellent program. Well delivered and really interesting.

GS

Interesting, Challenging and rewarding. Recommended for all pricing enthusiasts and professionals!

SM

A good course but there were places where I felt things weren't clearly explained. Also, the quiz questions were sometimes somewhat ambiguous.



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