Smart Pricing: How Google, Priceline, and Leading Businesses Use Pricing Innovation for Profitability

225 Pages·2010·0.968 MB·English

by  Raju, Jagmohan;Zhang, Z John

Smart Pricing
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Smart Pricing
How Google, Priceline,
and Leading Businesses
Use Pricing Innovation
for Profitability
Jagmohan Raju
Z. John Zhang
Vice President, Publisher: Tim Moore
Associate Publisher and Director of Marketing: Amy Neidlinger
Wharton Editor: Steve Kobrin
Executive Editor: Jeanne Glasser
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© 2010 by Pearson Education, Inc.
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Printed in the United States of America
First Printing April 2010
ISBN-10: 0-13-149418-X
ISBN-13: 978-0-13-149418-3
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Library of Congress Cataloging-in-Publication Data
Raju, Jagmohan Singh, 1954–
Smart pricing : how Google, Priceline, and leading businesses use pricing innovation for
profitability / Jagmohan Raju, Z. John Zhang. — 1st ed.
p. cm.
ISBN 978-0-13-149418-3 (hardback : alk. paper) 1. Pricing. I. Zhang, Z. John. II. Title.
HF5416.5.R35 2010
658.8’16—dc22
2009048017
To our respective families, we dedicate this book.
We understand the price they have paid
for us to write this book.
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Contents
About the Authors . . . . . . . . . . . . . . . . . . . xi
Introduction: Fingerprints of the Invisible Hand. . . . . . 1
Chapter 1: “Pay As You Wish” Pricing . . . . . . . . . . . 19
Chapter 2: Why the Best Things in Life
Are Free. . . . . . . . . . . . . . . . . . . . . . . . . . 41
Chapter 3: The Art of Price Wars . . . . . . . . . . . . . . . 59
Chapter 4: Thinking Small. . . . . . . . . . . . . . . . . . . . . 79
Chapter 5: The Automatic Markdown . . . . . . . . . . 101
Chapter 6: Name Your Own Price. . . . . . . . . . . . . . 119
Chapter 7: Subscribe and Save: Pricing for
Marketing Profitability . . . . . . . . . . . . . 139
Chapter 8: The Snob Premium. . . . . . . . . . . . . . . . 161
Chapter 9: Pay if it Works . . . . . . . . . . . . . . . . . . . . 181
Chapter 10: Conclusion. . . . . . . . . . . . . . . . . . . . . . . 201
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
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Acknowledgments
An old Chinese saying has it that to be a scholar, you must read
ten thousand books and travel ten thousand miles. We must have
accomplished both a long time ago. However, only in recent years did
we realize that we are so indebted to many scholars who had written
the ten thousand books that we should repay the debt by contributing
one. This urge has grown in recent years as the pricing classes we
have taught for more than a decade have grown in popularity.
Altogether, we must have taught pricing to four or five thousand
people—from undergraduates, MBAs, and EMBAs, to professionals
and business executives, both here in the U.S. and in other countries.
Writing this book has been a labor of love for us. In every chapter,
we were reminded of all the students we have taught and who taught
us. Most of the material contained in this book builds on some of
those discussions, which certainly helped to advance our understand-
ing of those issues. For that reason, we want to thank our current and
past students at the Wharton School and also at the Olin School of
Business, Columbia Business School, UCLA, Indian School of Busi-
ness (ISB) in India, and at the China-European International Busi-
ness School (CEIBS) and Cheung Kong graduate School of Business
(CKGSB) in China. We hope that they are still passionate about pric-
ing and that they recognize in this book some of the insights they have
contributed in class.
Over the years, our primary research interest has been in pricing,
and we have collaborated with many first-rate scholars. The contents
of this book reflect their influence as well. We want to thank them for
working with us and for enriching our knowledge in pricing. They will
surely identify their personal and professional influences on us here.
For those scholars whose collaborative projects with us were delayed
as a result of this book, we also want to thank you for indulging us as
we prepared this manuscript. Writing this book turned out to be lot
more absorbing and time-consuming than we had anticipated!