"I came away with new insights into strategic pricing, negotiating and customer behavior. I'm going back to the office armed with creative ideas on how to improve our revenue model."
- Tram Le, Manager of Pricing, Overstock.com
Upon completion of the UC Berkeley Pricing course, participants will:
- Possess a solid understanding of current pricing practices in product and service industries
- Understand when and how to apply state-of-the-art frameworks for optimizing pricing decisions
- Have mastered the essential techniques for making profitable pricing decisions
- Be awarded a certificate of completion by the Haas School of Business, UC Berkeley Center for Executive Education
This hands-on, four-day executive education course equips managers with proven techniques for assessing, formulating, and monitoring pricing strategies. Taught by UC Berkeley faculty and local industry experts, participants will re-examine classic pricing strategies, and will explore inventive approaches that take full advantage of the rapid changes brought about by the information age.
Participants will work in groups and individually to assess the current challenges within their own organizations, and experiment with better approaches to improve their effectiveness.
Pricing Training Topics include:
- Economic Value to the Customer
- Fighting a Price War
- Price Sensitivity Analysis
- Demand Forecasting
- Price Contract Negotiations
- Product Line Pricing, Bundling, and Versioning
- Price Customization
- Licensing Models
- Auctions
- Revenue Management
- Revenue Models
Pricing Program Methodology:
The program engages participants through highly interactive training sessions, enabling you to return to your office and use the concepts and strategies immediately. Sessions include multiple simulations and exercises, peer coaching, peer discussions, lectures, and case studies.
Pricing: Program Schedule
Day 1
Pricing Foundations
Session 1: Introduction and Economic Value to Customers.
The Economic Value to the customer (EVC) is the maximum amount a customer should be willing to pay, assuming that s/he is fully informed about the benefits of the product and the offering of competitors. This session provides several case studies of EVC calculations for various products. By the end of this session, you will be able to complete an EVC analysis for your product(s). This skill enables you to determine the best price for your products (both new and old) and capture the highest profit.
Session 2: How Cost Affects Price.
Not all costs matter in determining the optimal, profit-maximizing price. In this session, we will show you which costs are the most relevant for pricing. In addition, you will learn to use a powerful tool that shows the role of relevant costs in setting the best price. This tool can also be used to quantify the likely profit impact of a planned price change.
Session 3 and 4: Understanding Customer Price Sensitivity
Making profit-maximizing pricing decisions requires that companies understand how their customers respond to changes in price. This session provides a comprehensive treatment of the tools available to managers to rigorously understand how sensitive their customers are to price. You will learn how to use and apply survey methods to gauge price sensitivity, including direct questions and conjoint analysis. You will also find out how to analyze the results from price tests and price experiments. Finally, the session covers how to analyze historical data – often hidden in your own files -- to assess how customers will respond to pricing. Tools will be illustrated with numerous examples, cases, and a short exercise.
Day 2
Putting Pricing Foundations to Work
Sessions 1: Price War Case Study
Avoiding ruinous price competition is obviously essential for a firm's long term competitive success. While making explicit threats and promises with other firms in the same industry violates antitrust laws, it is possible to make implicit threats and promises to improve matters. In this unit, we present an analytic framework for avoiding price competition through leveraging future interactions. We then demonstrate how this is done practically using a case study.
Session 2: Creating a Pricing Framework
This session will explore how creative pricing and contracting can be used to create value for firms engaged in business to business transactions. In a case study, we will explore how one creative pricing technique, revenue sharing, transformed an industry. More generally, we will explore a variety of creative price-contracting approaches, examining how the approach that should be employed depends on the characteristics of the product/service.
Session 3: Revenue Management - A Simulation
In this session, you will employ a pricing technique known as “revenue management.” Revenue management is a powerful tool to generate the maximum revenue from a given capacity by intelligently differentiating amongst discrete customer segments, extracting maximal revenue from each. As we will discuss through examples, proper use of revenue management techniques have been critical to the success of companies in many industries. The inability to appropriately respond to competitors’ use of these techniques has bankrupted multi-million dollar companies. Although the stakes will be smaller in our simulation, the winning team will still win a prize.
Session 4: An Analytical Framework for Strategic Pricing - Case Study
One normally thinks of pricing as a product of competitive advantage. For instance, premium products can typically command premium prices. In this unit, we show how pricing itself can be a form of competitive advantage. Specifically, by utilizing superior information about customers, a firm can create a "pricing culture" allowing it both to price effectively and also compete more effectively with rivals. We illustrate how this can be done practically using a case study of pricing in the insurance industry.
Day 3
Creative Pricing Strategies
Session 1: B2B Pricing
A central problem facing firms is the harmonization of prices up and down the supply chain. Pricing errors upstream result in the destruction of value throughout the chain and lower profits for all. Using a hands-on simulation, we compare standard pricing—quoting a wholesale price and then letting downstream decide on quantity—with more sophisticated pricing strategies involving what is known in the economics literature as “two-part tariffs.” The simulation will demonstrate that a firm using sophisticated pricing to harmonize its supply chain not only unlocks value, but captures a greater portion of that value as well. The unit concludes with a framework for identifying economic conditions where harmonization is especially beneficial as well as determining appropriate price points.
Session 2: Price Contract Negotiation Exercise
How will your contract negotiation influence your profitability? As you negotiate and change details of your contract in order to conclude a deal, you will be changing your profit outcome. In this session, you will learn how to increase the total pie in a B2B channel negotiation and gain a sizable portion of the pie for yourself.
Session 3: Product Line Pricing and Bundling
Different customers have different propensity to pay. Firms that recognize this fact can add significantly more revenue and profit into their business. Customization requires understanding of how you actually deliver value to the customer and their price sensitivity. Prices can be profitably set along different dimensions, across customers, location, time, quantity, product variations, bundles, and so forth. We will examine the profit-enhancing possibilities of price customization using offering structure, price fences, and price structures.
Session 4: Price Customization
The conventional view of competitive strategy holds that price merely reflects a negotiation between an upstream and downstream party. Under that view, a firm’s capabilities can be a source of competitive advantage, but its pricing cannot. In this unit, we debunk this myth. Using experiential simulations and a case study, we identify how a firm with superior information can use this information both offensively, to customize its prices so that it outcompetes its rivals and defensively, by saddling its rivals with undesirable clients and thereby weakening competitors. Together, this creates an opportunity to gain competitive advantage even when traditional strengths, such as lower costs or product differentiation, are absent.
Day 4
Getting to Profit
Session 1: Measuring Willingness to Pay
A fundamental piece of information in optimal pricing is identifying the customer's willingness to pay. While survey techniques are the usual way to obtain this information, these measures suffer from many defects. In this unit, we offer a strategy of using auction based procedures to obtain precise estimates of willingness to pay. Performing these procedures across customer segments allows for estimates of customer demand and price sensitivity across segments--an essential input for optimal pricing. An in class demonstration illustrates practical methods for using these techniques.
Session 2: Revenue Model Design and Wrap-up
Now that you have learned everything you need to know about pricing, this session will provide you the information you need to manage your overall revenue model. In this session, everything that came before will be put together so that you can leave this program with an ability to determine the optimal pricing strategy for your products and company.
