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The Strategy and Tactics of Pricing, 5th Edition

Book Description

For undergraduate introduction to Market Pricing courses.

A comprehensive and practical, step-by-step guide to pricing analysis and strategy development.

The Strategy and Tactics of Pricing shows readers how to manage markets strategically—rather than simply calculate pricing based on product and profit—in order to improve their competitiveness and the profitability of their offers.

The fifth edition contains a new chapter on price implementation and several updated examples on pricing challenges in today’s markets.


NEW! Show students how proper pricing can increase profitability—New Chapter on Price Implementation.

A completely new chapter on implementing pricing strategy identifies the challenges involved in embedding strategic pricing principles within an organization. This chapter also describes how managers can lead a structured change process to build a more profitable commercial organization.

NEW! Offer access to pricing software—Three-Month Trial of LeveragePoint Software.

This edition is now available with software for creating and communicating economic value estimations systematically—from LeveragePoint Innovations Inc. While versions of this software that enable sharing require corporate contracts for access, versions for individual student and practitioner use are available without charge for three months with the purchase of The Strategy and Tactics of Pricing

NEW! Make pricing theory relative—Updated Examples of Pricing.

Helping connect pricing theory to what students are familiar with, this edition includes updated examples with more topical illustrations of current pricing challenges such as:
•    iPhone pricing
•    New models for pricing music
•    Services pricing

NEW! Present the latest information—Heavily Revised Chapters.
The revised chapter on Pricing Policy provides a theoretically-grounded framework to describe specific policies for managing price changes for situations such as:
-Cost-based price increases
-Price reductions in a recession

The chapter on Value Creation now addresses the difference between how to consider value when it is driven by tangible monetary drivers (saving money on gas) versus the more subjective psychological drivers (doing the right thing for the environment).

The chapter on Value and Price Communication has been substantially revised to describe how to communicate value in a wide variety of product and customer contexts. This chapter also demonstrates how to target communications to affect specific behaviors throughout the customer’s buying process.
The chapter on Price Setting has been expanded to provide a robust process for setting prices that can be widely applied to consumer and business markets.

Table of Contents

  1. Cover
  2. Half Title
  3. Title
  4. Copyright
  5. Brief Contents
  6. Contents
    1. Cost-Plus Pricing
    2. Customer-Driven Pricing
    3. Share-Driven Pricing
    4. What Is Strategic Pricing?
    5. Value Creation
    6. Price Structure
    7. Price and Value Communication
    8. Pricing Policy
    9. Price Level
    10. Implementing the Pricing Strategy
    11. Summary
    12. Notes
    1. The Role of Value in Pricing
    2. How to Estimate Economic Value
    3. Competitive Reference Prices
    4. Estimating Monetary Value
    5. Monetary Value Estimation: An Illustration
    6. Estimating Psychological Value
    7. Psychological Value Estimation: An Illustration
    8. The High Cost of Shortcuts
    9. Value-Based Market Segmentation
    10. Step 1: Determine Basic Segmentation Criteria
    11. Step 2: Identify Discriminating Value Drivers
    12. Step 3: Determine Your Operational Constraints and Advantages
    13. Step 4: Create Primary and Secondary Segments
    14. Step 5: Create Detailed Segment Descriptions
    15. Step 6: Develop Segment Metrics and Fences
    16. Summary
    17. Notes
    1. Price-Offer Configuration
    2. Optimizing an Offer Bundle
    3. Designing Segment Specific Bundles
    4. Unbundling Strategically
    5. Price Metrics
    6. Creating Good Price Metrics
    7. Performance-Based Metrics
    8. Tie-Ins as Metrics
    9. Price Fences
    10. Buyer Identification Fences
    11. Purchase Location Fences
    12. Time of Purchase Fences
    13. Purchase Quantity Fences
    14. Summary
    15. Notes
    1. Value Communication
    2. Adapting the Message for Product Characteristics
    3. Adapting the Message to Purchase Context
    4. The Buying Process
    5. Multiple Participants in the Buying Process
    6. Price Communication
    7. Proportional Price Evaluations
    8. Reference Prices
    9. Perceived Fairness
    10. Gain-Loss Framing
    11. Summary
    12. Notes
    1. Policy Development
    2. Policies for Responding to Price Objections
    3. The Problem with Ad Hoc Negotiation
    4. The Benefits of Policies for Price Negotiation
    5. Policies for Different Buyer Types
    6. Policies for Dealing with Power Buyers
    7. Policies for Managing Price Increases
    8. Policies for Leading an Industry-Wide Increase
    9. Policies for Transitioning from Low One-Off Pricing
    10. Policies for Dealing with an Economic Downturn
    11. Policies for Promotional Pricing
    12. Summary
    13. Notes
    1. The Price-Setting Process
    2. Defining the Price Window
    3. Establishing an Initial Price Point
    4. Pricing Objectives
    5. Defining the Price-Volume Trade-off
    6. Estimating Consumer Response
    7. Communicate New Prices to the Market
    8. Summary
    9. Notes
    1. New Products and the Product Life Cycle
    2. Pricing the Innovation for Market Introduction
    3. Communicating Value with Trial Promotions
    4. Communicating Value with Direct Sales
    5. Marketing Innovations Through Distribution Channels
    6. Pricing New Products for Growth
    7. Pricing within a Differentiated Product Strategy
    8. Pricing within a Cost Leadership Strategy
    9. Price Reductions in Growth
    10. Pricing the Established Product in Maturity
    11. Pricing a Product in Market Decline
    12. Alternative Strategies in Decline
    13. Summary
    14. Notes
    1. Organization
    2. Organizational Structure
    3. Decision Rights
    4. Pricing Processes
    5. Motivation
    6. Customer Analytics
    7. Process Management Analytics
    8. Performance Measures and Incentives
    9. Managing the Change Process
    10. Senior Management Leadership
    11. Demonstration Projects
    12. Summary
    13. Notes
    1. The Role of Costs in Pricing
    2. Determining Relevant Costs
    3. Why Incremental Costs?
    4. Why Avoidable Costs?
    5. Avoiding Misleading Accounting
    6. Estimating Relevant Costs
    7. Activity-Based Costing
    8. Percent Contribution Margin and Pricing Strategy
    9. Managing Costs in Transfer Pricing
    10. Summary
    11. Notes
    1. Break-even Sales Analysis: The Basic Case
    2. Break-even Sales Incorporating a Change in Variable Costs
    3. Break-even Sales with Incremental Fixed Costs
    4. Break-even Sales Analysis for Reactive Pricing
    5. Calculating Potential Financial Implications
    6. Break-even Sales Curves
    7. Watching Your Baseline
    8. Covering Nonincremental Fixed and Sunk Costs
    9. Summary
    10. Notes
    11. Appendix 10A
    12. Derivation of the Break-even Formula
    13. Appendix 10B
    14. Break-even Analysis of Price Changes
    1. Understanding the Pricing Game
    2. Competitive Advantage: The Only Sustainable Source of Profitability
    3. Reacting to Competition: Think Before You Act
    4. How Should You React?
    5. Managing Competitive Information
    6. Collect and Evaluate Information
    7. Selectively Communicate Information
    8. When Should You Compete on Price?
    9. Summary
    10. Notes
    1. Types of Measurement Procedures
    2. Uncontrolled Studies of Actual Purchases
    3. Experimentally Controlled Studies of Actual Purchases
    4. Uncontrolled Studies of Preferences and Intentions
    5. Experimentally Controlled Studies of Preferences and Intentions
    6. Using Measurement Techniques Appropriately
    7. Using Judgment for Better Measurement
    8. Using Internet-Based Techniques
    9. Outside Sources of Data
    10. Selecting the Appropriate Measurement Technique
    11. Summary
    12. Notes
    1. Ethical Constraints on Pricing
    2. The Legal Framework for Pricing
    3. The Effect of Sarbanes-Oxley on Pricing Practices
    4. Price-Fixing or Price Encouragement
    5. Horizontal Price-Fixing
    6. Resale Price-Fixing or Encouragement
    7. Vertical Price-Fixing
    8. Direct Dealing Programs
    9. Resale Price Encouragement
    10. Price and Promotional Discrimination
    11. Price Discrimination
    12. Defenses to Price Discrimination
    13. Promotional Discrimination
    14. Competitive Injury, Defenses, and Indirect Purchasers
    15. Using Nonprice Variables to Support Pricing Goals
    16. Vertical Nonprice Restrictions
    17. Nonprice Incentives
    18. Other Pricing Issues
    19. Predatory Pricing
    20. Price Signaling
    21. Summary
    22. Notes