January 8, 2018
Forty-one Full-Time MBA students completed a new course this past semester, equipping them with the skills they need in day-to-day management.
Taught by Assistant Professor in the Practice of Marketing Saloni Firasta Vastani, the course, Pricing Strategy and Analytics, enables students to learn about an integrated framework to make pricing decisions as well as provides them with the latest thinking on pricing issues.
“The primary purpose of the course is to enable the students to learn how to integrate pricing decisions vis-à-vis synthesizing big data, accounting, financial information, market conditions, and legal and corporate agreements,” Firasta Vastani said.
While the first part of the course provides the theory, models and analytical tools needed to understand the multidimensional and multifunctional nature of pricing, the second part of the course focuses on applying these strategies and theoretical frameworks to solve a pricing issue using real data.
“The course brings together diverse viewpoints to integrate theory and practice to create a meaningful, educational experience,” Firasta Vastani said.
Pricing is becoming increasingly important as it has a direct impact on profitability, and pricing algorithms drive business models of many companies, she said. During the course, students learn a variety of pricing models such as dynamic pricing/revenue management, freemium and outcome-based pricing.
“From a company viewpoint, price is a powerful lever for profitability that needs to consider marketing, financial and legal implications,” she said. “Additionally, historical and in contemporary research, there are conceptual and operational conflicts in theory and practice between economist and marketers that need to be understood and tackled.”
While pricing is one of the four “P’s” of marketing, Firasta Vastani said it is often misunderstood when making business decisions.
“After taking the course, students are able to develop pricing strategies to capture maximum value of their products and services in the marketplace, understand the impact of pricing on not only revenue but overall profitability, and effectively use pricing analytics techniques to understand behavioral pricing.
December 19, 2018
Too often managers think about pricing as solely a quantitative or economic variable problem. However, pricing is a strategic lever for profitability with several factors impacting a firm’s pricing decision.
A study done by the McKinsey Company in 2003 looked at 1,500 Standard & Poor’s 500 index companies and explored various things the firms could do to increase profits. They could improve their fixed-cost position; they could improve their variable costs or price by one percent each. But the thing that had the most impact was if they were able to improve their final realized price by only one percent, they were able to increase their operating profit by about eight percent. Price is such a critical lever for profitability and yet it is the most overlooked.
For many companies, pricing decisions are made arbitrarily. Competitor A is charging $500, competitor B is charging $300, so they just choose $400, without any rationale or data analytics. Or some companies, engage in cost-plus pricing, something that does not maximize profitability.
When pricing only to cover costs, managers leave money on the table. By pricing to match competitors, a company may give away created value.
At Goizueta, MBA students are studying pricing in its various dimensions in the course Pricing Strategy and Analytics. They have spent the last few months learning the right way to set a price and understanding ways to get the price in the marketplace.
To effectively learn the complexities of pricing decisions, students study under a different teaching method that Assistant Professor in the Practice of Marketing Professor Saloni Vastani called “live cases.” Prior to the semester, the faculty and the TA team worked together with several top Atlanta companies experiencing pricing challenges. Throughout the semester, student teams study the issue, explore solutions and then present recommendations to the company’s executive teams. The firm representatives then have an opportunity to provide feedback and share the nuances of what actually happens in a company when it’s faced with a real pricing strategy decision.
During the semester, students worked on live cases with four companies — Chick-fil-A, Delta Airlines, Cox Communications and Deloitte. Students worked on developing a menu board pricing strategy, dynamic pricing in competitive markets and digital marketplaces, market research with conjoint analysis and pricing analytics using large datasets covering B2B and B2C.