Chapter 19: Pricing Concepts
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Great Ideas for Teaching Chapter 19
Philip R. Kemp, DePaul University
Survival Barter Exercise
Survival is a group exercise in which student teams must use the barter system to gather the
necessary items in order to survive. Each group is given a list of six items on a sheet of paper or
The ideal size of each student team is five or six students; one member of the team is assigned
the task of bookkeeper, and another is assigned the task of observer. At the end of the exercise,
After the teams have been formed and the roles of bookkeeper, group observer, and overall
observer have been assigned, the class is instructed that they have 20 minutes to complete the
After the exercise is over, ask each bookkeeper to give an account of the items and amounts of
each item his or her team has gathered. A matrix with teams on the top and items on the side
serves as an excellent visual aid to show the national accounts (see Table 1). The class is
After the national accounts have been shown, ask this question of the class: What would have
helped you to accomplish your teams’ survival in this exercise? The usual answers to this
question are the following:
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Chapter 19: Pricing Concepts
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better communications
All of these responses then can lead into a discussion of the exchange function, central markets,
the function of money within an economy, and how middlemen can assist in increasing the
The overall exercise dynamic usually runs as follows: Team members gather in their respective
groups, then one member of the team goes to other teams to determine what they have to trade
When more than one team member is sent out of the group, typically a central market forms (all
the teams gather in a section of the room, which looks like the trading floor of a commodities
exchange pit). Finally, the central marketplace disbands and the teams then reform. Using
diagrams on the blackboard with circles as the groups and lines with arrows as the traders, one
It is an excellent icebreaker for the first class meeting.
Table 1
Team 1
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Chapter 19: Pricing Concepts
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You need the following You now have the following
3 cords of wood 1 cord of wood (–2)
Team 2
You need the following You now have the following
3 cords of wood 1 cord of wood (–2)
Team 3
You need the following You now have the following
3 cords of wood 2 cords of wood (–1)
Team 4
You need the following You now have the following
3 cords of wood 5 cords of wood (+2)
200 lbs. of meat 400 lbs. of meat (+200)
Team 5
You need the following You now have the following
3 cords of wood 3 cords of wood (+1)
200 lbs. of meat 50 lbs. of meat (–150)
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Chapter 19: Pricing Concepts
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Team 6
You need the following You now have the following
3 cords of wood 5 cords of wood (+2)
200 lbs. of meat 100 lbs. of meat (–100)
National accounts (key)
Team 1 Team 2 Team 3 Team 4 Team 5 Team 6 Total
Wood 3 3 3 3 3 3 18
Laura Balus, Central Community College
Pricing: An Art or a Mathematical Formula?
To introduce pricing, I gather various products from my home and office. Some of these products
include grocery items, toys, office equipment, and computer software. Various products were
I announce to the class that I am conducting a silent auction of sorts. Each student is asked to file
by the table of products and write down what each believes to be the purchase price of each
Members of each team take turns at being either the game show host or the contestant. The game
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Chapter 19: Pricing Concepts
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show host selects one product from the table and the accompanying recipe card of information
The excitement increases with each round of price guessing until all of the products are used.
The activity proceeds with an explanation of how pricing is indeed a game in itself. I refer to our
study of the consumer’s “black box” and how research and creativity go hand-in-hand when
I stress to the class that our silent auction resulted in quite extreme price differences between
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Chapter 19: Pricing Concepts
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PART 6: Integrated Case Assignments
Marketing Miscue
6pm.Com’s $16 Million Pricing Error
Upon arrival at the 6pm.com website, customers are immediately congratulated for the smart
shopping skills that led them to the site. With brands such as Nike, Oakley, Nine West, Stride
Rite, Columbia, and Diesel at discount prices, the website is a mecca for brandaholics seeking
Zappos.com
Zappos.com started as an online shoe retailer. The idea was to create a website that offered the
best shoe selection in terms of brands, styles, colors, sizes, and widths. Since the company’s
origination, the goal has broadened to one in which the company provides the best online service
in many product categories. With fast and high-quality customer service as its mantra, ten years
later the company is now comprised of ten separate companies under the Zappos Family
umbrella:
Zappos.com, Inc. (“the management company”)
Zappos IP, Inc. (“ZiP”)
The rapidity at which the company has grown is attributed in no small part to its CEO Tony
Hsieh (pronounced Shay). In 1999, Hsieh sold the company he co-founded to Microsoft for $265
million. Joining Zappos.com as an advisor and investor, Hsieh later became the company’s CEO
and helped grow the company to over $1 billion in gross merchandise sales annually. In
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Chapter 19: Pricing Concepts
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November 2009, Zappos.com was acquired by Amazon.com in a deal valued at $1.2 billion. The
passion for service was the common connection between Zappos.com and Amazon.com.
This passion for service is exemplified in the core values at Zappos.com:
Deliver “wow” through Service
Embrace and drive change
Delivering on these Values at a Very High Price!
In the wee hours of a May morning in 2010, the Zappos-owned 6pm.com e-commerce site had a
major glitch in its pricing engine. Everything on the 6pm.com website was priced at $49.95 from
The pricing mistake was attributed to an employee error in entering data into the pricing engine.
Hsieh explained the pricing error on a company blog. He said that the current version of the
During the six hours of selling everything for $49.95, much of which was below cost,
Zappos.com lost $1.6 million. While the terms and conditions on the company’s website state
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Chapter 19: Pricing Concepts
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Sources: 6pm.com, www.6pm.com/; Zappos.com, www.zappos.com/; Edward Moyer, “Zappos
Sister Site Zapped by Pricing Glitch,” CNET, May 23, 2010,
Open-Ended Questions
1 What is the relationship between demand and price for products on the 6pm.com
e-commerce site?
Evidently, there is a strong relationship between demand and price on the 6pm.com
2 Should there be any legislation that requires companies to adhere to online prices
even when posted in error?
This is a difficult question to answer since it has to be viewed from both the online
retailer’s and the consumer’s perspective. From the online retailer’s perspective, mistakes
From the consumer’s perspective, however, students might view the situation differently.
Most students will say that they have taken a product to a cash register and had that
It would be interesting to engage students in a discussion about the role of the government
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