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Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
1
Instructor’s Manual: Implementation
Guide
This improved Instructor’s Manual (IM) contains more than just summaries of key concepts and features from the
sixth edition of M: Marketing that can be used as springboards for class discussion; it also provides best practices for
how to utilize the full product suite (from the textbook to SmartBook® to Connect®). In addition, this manual
includes a variety of supplemental teaching resources to enhance your ability to create an engaging learning
experience for your students. Regardless of whether you teach in face-to-face traditional classrooms, blended
(flipped) classrooms, online environments, or hybrid formats, you’ll find everything you need in this improved
resource.
The IM follows the order of the textbook outline for each chapter and is divided into sections for each learning
objective. To ease your class preparation time, we’ve included references to relevant PowerPoint slides that can be
shown during class. Note that you can adjust slides as needed to ensure your students stay actively engaged
throughout each session.
AVAILABLE INSTRUCTOR RESOURCES
Within the Instructor Resources Tab, located in the Connect® Library, you will find the following Instructor
Resources:
▪ Instructor’s Manual
▪ PowerPoint Presentations (Accessible)
▪ Test Bank
▪ Author Newsletter Blog
▪ Video Library
▪ Connect Content Matrix
Instructor’s Manual
This Instructor’s Manual is posted by chapter. Within each section of the IM you will find an assortment of feature
summaries, examples, exercises, and Connect® Integration assignments intended to enhance your students’ learning
and engagement.
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
2
PowerPoint Presentations
A set of ADA-accessible PowerPoints is available with each chapter and covers:
▪ Chapter Learning Objectives
▪ Key examples
▪ Key exhibits
▪ Key concepts and frameworks
▪ Progress checks
▪ Glossary terms
Some slides include teaching notes to guide your discussion of the content that appears on each slide.
Test Bank
Test Bank questions are posted by chapter. You will find a variety of question types within the test bank such as
Matching, Ranking, Multiple Choice, Select-All-That-Apply, True/False, Short Answer, and Essay to test student
mastery across Bloom’s Taxonomy (i.e., Understand, Apply, and Analyze). Due to the evolving needs around
generating high-quality print test experiences, McGraw-Hill Education provides a free copy of the industry-leading
test generation software TestGen® to users (more details can be found within the Instructor Resources tab under
“Test Bank”). Furthermore, due to its limitations to function with the latest browsers and operating systems,
McGraw-Hill Education has discontinued EZ-Test Online. Some of the robust new features present in TestGen®,
include:
▪ Cross-platform software compatibility with Windows and Mac
▪ Multiple LMS export formats, including Blackboard, Moodle, Desire2Learn, and Sakai
▪ Highly customizable formatting and editing option
Video Library
The Video Library provides links to all the assignable videos in Connect®, as well as legacy videos that are no
longer available as assignments, but that remain available as an additional resource. These videos can be directly
streamed from within the library that is located in the Instructor’s Resource tab. Accompanying each video is a brief
video guide that summarizes the key concepts of the video.
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
3
Connect Content Matrix
The Connect Content Matrix provides a brief overview of all the application exercises available in the course. It
lists the Learning Objectives, topic tags, Bloom’s levels, and difficulty levels associated with each exercise.
Connect®, McGraw-Hill’s online assignment and assessment system, offers a wealth of content for both students
and instructors. Assignable activities include the following:
USING SMARTBOOK® TO ENHANCE STUDENTS’
PERFORMANCE
The LearnSmart®-powered SmartBook® is assignable through Connect. One of the first fully adaptive and
individualized study tools designed for students, it creates for them a personalized learning experience, giving them
the opportunity to practice and challenge their understanding of core marketing concepts. The reporting tools within
SmartBook® show where students are struggling to understand specific concepts.
Typically, SmartBook® is assigned by module (chapter), and you can set which learning objectives to cover as well
as the number of probes the student will see for each assignment. You can also set the number of points a
SmartBook® module is worth in the course. Usually, applying a minimal number of points for completion of each
module is enough to encourage students to read the chapter. Many instructors assign these modules to be completed
before the class or online session.
SmartBook® provides several diagnostic tools for you to gauge which concepts your students struggle to understand.
Below is the set of adaptive assignment reports available in SmartBook®:
▪ Progress Overview: View student progress broken down by module
▪ Student Details: View student progress details plus completion level breakdown for each module
▪ Module Details: View information on how your class performed on each section of their assigned modules
▪ Practice Quiz: This gives you a quick overview of the quizzes results for your students
▪ Missed Questions
▪ Metacognitive Skills
The Module Details report shows you the results for the students in the class overall. These details reveal where in
the chapters students might be struggling. The module gives the chapter section, average time spent, average
questions per student correct/total, and the percentage of correctness (based in number of assigned items).
Information about the most challenging sections for students can help you refine the focus of the next face-to-face,
hybrid, or online session.
The Metacognitive Skills report captures students’ confidence in their competency of the materials. Below you will
find a recreation of the Metacognitive Skills report. In it, you can see that the second student is confident and mostly
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4
correct (see the 91% in the Correct and Aware column) while the first student “doesn’t know what she doesn’t
know” (see the 39% in the Incorrect and Unaware column).
STUDENT
CORRECT
and
AWARE
CORRECT and
UNAWARE
INCORRECT
and
AWARE
INCORRECT and
UNAWARE
Student 1
61%
0%
0%
39%
Student 2
91%
0%
3%
5%
Student 3
81%
0%
0%
19%
Student 4
83%
0%
0%
17%
Student 5
76%
0%
3%
21%
Student 6
66%
0%
9%
25%
Student 7
77%
0%
3%
12%
Student 8
91%
0%
2%
7%
Student 9
93%
0%
2%
5%
Student 10
70%
0%
6%%
25%
APPLICATION EXERCISES, QUIZZES, AND TEST BANK
Book-level Resources
Application Exercises require students to apply key concepts to close the knowing and doing gap; they provide
instant feedback for the student and progress tracking for the instructor. Before getting into chapter-level
assignments, let’s first look at the book-level assignments available.
Three exercise types are available for instructors to assign beyond the chapter materials. These are 1) Marketing
Plan Prep Exercises, 2) Marketing Analytics Exercises, and 3) Marketing Mini Simulation.
1) Marketing Plan Prep exercises use guided activities and examples to help students understand and
differentiate the various elements of a marketing plan.
2) Marketing Analytics exercises are data analytics activities that challenge students to make decisions using
metrics commonly seen across the marketing professions. The goal of these activities is to give students
practice analyzing and using data to make marketing decisions.
3) Marketing Mini Simulation helps students apply and understand the interconnections of elements in the
marketing mix by having them take on the role of Marketing Manager for a backpack manufacturing
company. The simulation can be assigned by topic or in its entirety.
Chapter-level Resources
Chapter-level Application Exercises are built around chapter learning objectives, so you can choose which ones to
assign based on your focus for each specific chapter. Several types of Application Exercises are available in each
chapter. These are 1) iSeeit! Animated Video Cases, 2) Case Analyses, 3) Video Cases, and 4) Click-and-Drag
exercises.
1) The iSeeit! Video series comprises short, contemporary animated videos that provide engaging
introductions to key course concepts. These are perfect for launching lectures and assigning as either pre-
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
5
or post-lecture activities. Each animation is accompanied by three to four multiple-choice questions to
check student attention and comprehension.
2) Case Analyses and Video Cases each feature real-world firms and industries different than those discussed
in the textbook. Each case analysis and video case is accompanied by questions that ask students to analyze
and apply marketing theory and concepts.
3) Click-and-Drag exercises help students actively demonstrate their understanding of the associated learning
objectives. Some require students to match examples to concepts, to place series of steps in the correct
sequence, or to group examples together under their correct categories.
Application Exercises can be assigned as preparatory exercises due before class (this is especially good for flipped
classrooms), or after class as concept comprehension checks. Consider assigning two or three Application Exercises
per chapter.
Applications Exercises will generally be assigned as homework or practice as part of the overall class grade. A
general rule of thumb would be to make application exercises worth 5 to 10 points each, since these require more
time and thought than a test bank question might.
To find the Applications in Connect®, go to “Add Assignment” and select “Question Bank.” Within this question
bank will find a drop-down menu of all the book-level assignments and chapter-level assignments. You can then
select the ones you wish to assign.
Chapter-level quizzes and full chapter test banks are also found in the Question Bank’s drop-down menu. Apply a
relatively low value to each question—for example, 1 or 2 points each—since numerous questions are typically
assigned for each chapter. You can decide when to surface the feedback to students. Selecting to display feedback
after the assignment due date helps to prevent cheating; that is, it keeps students from sharing the correct answers
with other students while the questions are still open and available. For this reason, it is suggested that no feedback
to quizzes and test bank exams be made available until after the assignment is due.
ASSIGNING EXERCISES AND GRADING POLICIES: BEST
PRACTICES
To fully utilize the power of the digital components, it is recommended that you assign the SmartBook® reading and
adaptive learning probes before class meets. Application Exercises can be completed either before or after class; if
they are completed before class, they can sometimes serve as good springboards for class discussions. The chapter
quiz makes a good check on comprehension of the material and may work best if assigned after each class period.
The test bank serves as a good resource for building mid-term or final exams.
More detailed information on SmartBook® and Connect® is available through several resources at McGraw-Hill. A
good starting point is your local Learning Technology Representative, who can be found here:
http://www.mheducation.com/highered/platforms/connect/features-educators.html
Connect® gives instructors a wide array of flexibility in making assignments and creating grading policies.
Instructors may choose to:
• assign as many assignments as appropriate given the level and time commitment expected for the class,
• determine point values for each question/application that works within the total course percentages,
• make available multiple attempts per assignment with options of accepting the highest score or averaging all the
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
6
attempts together (several attempts are particularly good for homework assignments),
• deduct points for late assignment submissions (percentage deduction per hour/day/week/etc.) or create hard
deadlines thus accepting no late submissions,
• show feedback on application/questions immediately upon submission or at the time the assignment is due for
the whole class, create new assignments or questions from scratch, or edited versions from a variety of provided
resources.
Throughout the IM for each chapter, we integrate materials from the PowerPoint slides and provide summaries for
each of the Connect® Application Exercises at the end of each chapter. These summaries are intended to give you a
sense of the learning goal behind each exercise. We hope this integration of resources will help you to convey core
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
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7
Chapter 14
Pricing Concepts for Establishing Value
Tools for Instructors
• Chapter Overview
• Brief Chapter Outline
• Learning Objectives
• Extended Chapter Outline
• PowerPoint Slides
• Additional Resources
• Connect Application Exercises
Chapter Overview
This chapter introduces students to the economic influence of setting prices. Students often find these
concepts difficult to grasp. Also introduced are the five Cs of pricing, company objectives and strategy
implications, and break-even point calculations.
Brief Chapter Outline
The Five Cs of Pricing
Pricing Strategies
Legal and Ethical Aspects of Pricing
Learning Objectives
LO14-1 List the four pricing orientations.
A profit-oriented pricing strategy focuses on maximizing, or at least reaching a target, profit for the
LO14-2 Explain the relationship between price and quantity sold.
LO14-3 Explain price elasticity.
Changes in price generally affect demand; price elasticity measures the extent of this effect. It is based
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
9
✓
Progress Check: Several questions are offered for students to check their understanding of core
concepts.
1. What are the five Cs of pricing?
2. Identify the four types of company objectives.
B. Customers (PPT 14-12)
Adding Value 14.1: Changing Once, Changing Twice, Changing 3 Million Times: How Amazon
Prices to Win considers how Amazon leverages its renowned algorithms to develop a sophisticated
value-based pricing strategy. What are the advantages and disadvantages of this pricing strategy?
1. Demand Curves and Pricing (PPT 14-13, 14-14)
2. Price Elasticity of Demand (PPT 14-15, 14-16)
Marketing Analytics 14.1: Airlines Use Price Elasticities to Price Tickets explains how the travel
industry and airlines maximize their profits by using data-based pricing strategies. Have students used
kayak.com to purchase airline tickets?
Factors Influencing Price Elasticity of Demand (PPT 14-17)
a. Income Effect (PPT 14-17)
b. Substitution Effect (PPT 14-18)
c. Cross-Price Elasticity (PPT 14-19)
✓
Progress Check: Several questions are offered for students to check their understanding of core
concepts.
1. What is the difference between elastic demand and inelastic demand?
2. What are the factors influencing price elasticity?
C. Costs (PPT 14-21)
2. Fixed Costs
3. Total Cost
D. Break-Even Analysis and Decision Making (PPT 14-22)
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
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E. Markup and Target Return Pricing
✓
Progress Check: Several questions are offered for students to check their understanding of core
concepts.
1. What is the difference between fixed costs and variable costs?
2. How does one calculate the break-even point in units?
F. Competition (PPT 14-25)
✓
Progress Check: Several questions are offered for students to check their understanding of core
concepts.
1. What are the four different types of competitive environments?
G. Channel Members (PPT 14-27)
II. Pricing Strategies (PPT 14-28)
A. Everyday Low Pricing (EDLP) (PPT 14-29)
B. High/Low Pricing (PPT 14-29)
C. New Product Pricing Strategies (PPT 14-31)
1. Penetration Pricing
2. Price Skimming
✓
Progress Check: Several questions are offered for students to check their understanding of core
concepts.
1 Explain the difference between EDLP and high/low pricing.
Answer: With an everyday low pricing (EDLP) strategy, companies stress the continuity of their
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
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11
2 What pricing strategies should be considered when introducing a new product?
III. Legal and Ethical Aspects of Pricing (PPT 14-33)
A. Deceptive or Illegal Price Advertising (PPT 14-34)
1. Deceptive Reference Prices
3. Bait and Switch
B. Predatory Pricing (PPT 14-35)
C. Price Discrimination (PPT 14-36)
D. Price Fixing (PPT 14-37)
Ethical & Societal Dilemma 14.1: The Verdict: Apple Conspired to Raise Prices on eBooks details
how Apple and several publishing agencies have engaged in vertical price fixing, according to the U.S.
Department of Justice. Do students agree that this is price fixing?
1. Gray Market Pricing (PPT 14-38)
Ethical & Societal Dilemma 14.2: Impeding the Gray Market for Luxury Goods discusses how luxury
goods marketers and manufacturers are trying to beat the gray market in Asia. What danger does the
gray market pose to these manufacturers?
✓
Progress Check: Several questions are offered for students to check their understanding of core
concepts.
1 What common pricing practices are considered to be illegal or unethical?
Additional Resources
The five Cs of pricing are critical for students to understand. Students often don’t realize that other factors
other than cost factors influence the pricing strategy. Reviewing the five Cs of pricing and having students
come up with examples will help to enhance understanding of these concepts.
It is important for students to also understand that there may be other objectives other than maximizing
profit margin. Amazon.com in its first years purposely used a competitor–oriented approach and
sacrificed profit loss. The company was ridiculed by other dot-coms until Amazon.com revealed their
strategy: To have households identify with the brand name. By pricing products and shipping low, it would
increase usage of the site. Thus, the strategy was to sacrifice profits to have Amazon.com become the
market leader and gain household brand name recognition for online purchases.
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
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The break-even point graph is often difficult for students to understand unless they have had an
economics course. Instructors will need to weigh the importance of teaching the graph, the BEP formula,
or both. Some time will need to be spent by the instructor explaining the graph. It is wise to give students
a BEP problem such as the one listed in the application problems and have them graph it if the instructor
chooses to also teach the dynamics of the graph.
Should students need additional help in pricing, turn to the testing materials, select some multiple choice
BEP and pricing concept (equilibrium, profit, loss, fixed cost, variable costs) types of problems, and create
a worksheet where students can work on it either independently or in small groups in the class. Often,
students can help each other in understanding these concepts and small groups are recommended.
Online Tip: Have students develop a marketing-related word problem using BEP analysis. Have them
post it to the discussion board. Have other learners solve the problem. Have the student that created the
word problem come back and give feedback. You may want to pair students up as partners in the online
environment.
Slide 17 in the Instructor’s PowerPoints for this chapter includes a link to an ad for Walmart that stresses
good service in the holiday season, but as always, ends their ad with messaging related to their low-price
offerings AND the importance of low price (live better) (https://www.youtube.com/watch?v=H3TZ-
8rhpVQ). Is it possible to offer good service and low prices?
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
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13
Connect Application Exercises
This section summarizes each Application Exercise available with this chapter. Each summary comprises
an introduction to the exercise, concept review, and follow-up activity. Associated details related to the
learning objectives, activity type, AASCB category, and difficulty levels are also included. These
summaries are intended to guide your course planning; perhaps you want to assign these exercises as
homework or practice, before or after class. For best practices on how and when to assign these
exercises, see the IM Implementation Guide at the beginning of this chapter.
Activity
Type
Learning Objectives 14-
01
02
03
04
05
06
07
08
Taco Bell: Pricing for Value
Video Case
X
X
X
The 5 Cs of Pricing
Click & Drag
X
U.S. Cellular: Matching Price with
Perceived Value
Video Case
X
X
X
X
Planet Fitness: Pricing for Success
Case Analysis
X
X
X
Pricing: SBC
Video Case
X
X
X
Deceptive or Illegal Pricing
Click & Drag
X
Taco Bell: Pricing for Value
▪ Activity Type: Video Case
▪ Learning Objectives: 14-01, 14-02, 14-05
▪ Difficulty: Medium
▪ Activity Summary: Explores Taco Bell’s value-based pricing initiatives. After the video ends,
students are asked questions about the video and related course concepts.
Activity
▪ Introduction: Offering quality food at a great price is nothing new to Taco Bell. Founded in 1962,
Taco Bell pioneered value-based pricing with its three-tiered menu, offering food choices for 59, 79,
and 99 cents. Taco Bell's director of marketing discusses how value plays a key role in the firm's
pricing strategies.
▪ Concept Review: Of the four Ps—product, price, place, and promotion—price is the most
challenging to manage, partly because it is often the least understood. Historically, managers have
treated price as an afterthought to their marketing strategies, matching competitors' prices or, worse
yet, by adding up their costs and tacking on a desired profit to set the sales price. Prices were rarely
changed except in response to radical shifts in market conditions. Even today, pricing decisions are
often relegated to standard rules of thumb that fail to reflect our current understanding of the role of
price in the marketing mix.
▪ Video: The video is presented to the student below the introductory information. The video plays
embedded on the page, after which questions are presented.
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
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14
Follow-Up Activity
Although the specific price points have changed, Taco Bell still pursues a value menu strategy today
(called the “Why Pay More?” menu), offering individual items from 89 cents to $1.59, and “Why Pay More
Deals” for $2.49 (prices as of spring 2014). Taco Bell has also tested a $1 “Cravings” menu in some
stores.
McDonald’s, though, has chosen to go in a different direction. Assign the following article, discussing a
higher-priced value menu strategy:
http://www.qsrmagazine.com/news/higher-price-point-value-menu-could-be-win
As a class discussion or writing prompt, ask about the issue of price-sensitive customers:
▪ Why might $1 (and less) value menus have been more important in 2009–2010 than they are today?
(Consider the economy then and now)
▪ Are there differences in the Taco Bell and McDonald’s target markets that might also lead to
differences in the strategy?
▪ Comment on this quote from the article:
Kerr says catering to the most price-sensitive guests can be both difficult and dangerous for a brand.
“At some point, operators need to ask themselves if a dollar is realistic,” she says. “Consumers
realize that prices increase, and holding on to the dollar market is not good business. It just doesn’t
make sense.”
The Five Cs of Pricing
▪ Activity Type: Click & Drag
▪ Learning Objectives: 14-01
▪ Difficulty: Medium
▪ Activity Summary: The student is asked to classify four companies’ pricing strategies according to
the pricing orientation represented.
Activity
▪ Introduction: Different firms embrace different goals. Consequently, these goals affect the pricing
strategy. Pricing of a company's products and services should support and allow the firm to reach its
overall goals. In this activity, you will be asked to differentiate among pricing orientations.
▪ Concept Review: Each firm embraces objectives that management believes will make the firm more
successful. These specific objectives usually reflect how the firm intends to grow. Do managers want
it to grow by increasing profits, increasing sales, decreasing competition, or building customer
satisfaction? These questions are answered by a firm's choice of pricing strategy.
Follow-Up Activity
Small group exercise:
▪ Have the students think of a futuristic, revolutionary product (a transporter is one good possibility).
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
15
▪ Ask them to design a short survey to find out how much customers are willing to pay for a ride in a
transporter (or to purchase the futuristic product of their choice).
▪ How much confidence would they have in the answers they got? Why?
A common conclusion is likely to be that customer-oriented pricing is a difficult strategy to employ for a
revolutionary product like this, because customers have neither the experience nor (in many cases) a
good reference point to use to determine the value provided. One thing the marketer can do that may
help is to suggest a reference by comparing the new product to something more familiar to the consumer
that serves a similar purpose. For example, in the case of the transporter, one comparison would be to air
travel, emphasizing the advantages of instant transportation that add value.
U.S. Cellular: Matching Price with Perceived Value
▪ Activity Type: Video Case
▪ Learning Objectives: 14-01, 14-02, 14-03, 14-05
▪ Difficulty: Medium
▪ Activity Summary: This case discusses pricing strategy at U.S. Cellular. After the video ends,
students are asked questions about the video and related course concepts.
Activity
▪ Introduction: U.S. Cellular is a mid-range service provider in the highly competitive cell phone
market. In this market, Verizon Wireless and AT&T are the major players. To compete, smaller firms
like U.S. Cellular must find ways to deliver greater value to their customers. However, price has a
major impact on value perceptions. In turn, value perceptions influence pricing. In 2010, U.S. Cellular
created a pricing strategy known as The Belief Plan, but it confused customers. They perceived that
the price was set too high for the value it offered. This forced U.S. Cellular to rethink its strategy.
Watch the following video to examine the many factors U.S. Cellular needs to consider when setting
price.
▪ Concept Review: Setting price is a formidable challenge for marketers. Knowing how customers
perceive value in the product or service is only one component of the five Cs of pricing. A firm's
overall pricing orientation will depend on the company objectives. Marketers must consider
competitors and their strategies. Markets are characterized by four types of competition: monopoly,
oligopoly, pure competition, and monopolistic competition. Costs are a major element in setting price.
Channel members must also be accounted for. Prices change, and when changing prices, marketers
must be aware of the price elasticity of demand for their particular product or service. When price is
set correctly, firms reap substantial rewards. But when the price is wrong, customer response will be
swift and severe.
▪ Video: The video is presented to the student below the introductory information. The video plays
embedded on the page, after which questions are presented.
Follow-Up Activities
Discussion: Companies need to be careful when adopting innovative pricing plans; as the video case
shows, customers can become confused and be unable to see the value being offered.
One fairly recent example of a company that made this mistake is J.C. Penney. The first part of this article
offers a good summary of the pricing plan and consumers’ response:
Chapter 14 - Pricing Concepts for Establishing Value M: Marketing 6th
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16
http://www.forbes.com/sites/lauraheller/2013/02/08/mission-accomplished-jcpenney-was-the-most-
interesting-retailer-of-2012/
It is a cautionary tale worth sharing.
Planet Fitness: Pricing for Success
▪ Activity Type: Case Analysis
▪ Learning Objectives: 14-01, 14-04, 14-05
▪ Difficulty: Medium
▪ Activity Summary: This case discusses the pricing approaches that have helped Planet Fitness to
achieve success. Students are asked questions applying chapter concepts to the case.
Activity
▪ Introduction: Planet Fitness has adopted an unusual pricing strategy in the fitness market, setting
prices well below those of its major competitors. The goal of this activity is to demonstrate a creative
use of pricing to target a market segment that is not well served by competitors. This activity is
important because, according to marketing managers, pricing is one of the most difficult activities to
perform well, and it is essential to understand the factors that must be considered when choosing a
pricing strategy.
Pricing: SBC
▪ Activity Type: Video Case
▪ Learning Objectives: 14-01, 14-03, 14-04
▪ Difficulty: Hard
▪ Activity Summary: This video explains SBC’s pricing strategy. Although the company provides
products at a variety of price points, pricing focuses primarily on providing value through quality and
innovative features. After the video, students answer questions asking them to apply chapter
concepts to SBC’s strategy.
Activity
▪ Introduction: Specialized Bicycle Components, Inc. (SBC) caters to the experienced cyclist. In this
video, SBC’s brand manager explains the company’s segmentation and pricing strategy. This activity
is important because pricing is one of the most challenging tasks that marketers need to perform. An
understanding of the issues and options when pricing a product is crucial. The goal of this exercise is
to test your understanding of pricing issues and considerations by applying chapter frameworks to the
SBC example.
▪ Video: The video is presented to the student below the introductory information. The video plays
embedded on the page, after which questions are presented.
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17
Deceptive or Illegal Pricing
▪ Activity Type: Click and Drag
▪ Learning Objectives: 14-08
▪ Difficulty: Hard
▪ Activity Summary: Students are asked to classify five deceptive or illegal pricing actions according
to the category it represents.
Activity
▪ Introduction: Firms use many pricing tactics to try to improve their market share. Some are perfectly
legitimate and can be considered fair pricing practices, whereas others are deceptive or even illegal.
For this activity, you will need to review the types of practices associated with illegal and unethical
pricing strategies.
▪ Concept Review: Prices tend to fluctuate naturally and respond to varying market conditions.
Although we rarely see firms attempting to control the market in terms of product quality or
advertising, they often engage in pricing practices that can unfairly reduce competition or harm
consumers directly through fraud and deception. Laws and regulations at both the federal and state
levels attempt to prevent unfair pricing practices, but some are poorly enforced, and others are
difficult to prove.
Follow-Up Activity
Role playing: In pairs or small groups, students develop a short role-playing vignette demonstrating the
unethical pricing practices listed in the activity. The vignette can show a salesperson interacting with a
potential customer, a discussion among employees of the ethics-violating company, or a discussion
between officials from two or more companies that compete with each other. Have the groups perform
their vignettes for the class, who must guess which ethics violation is being dramatized. To make sure all
of the ethics violations are covered, you could give each group a sheet of paper identifying their assigned
violation.
