Pricing

Assignments

Cases

Each group will be required to hand in three case write-ups. All teams must do Colonial Homes since this is a case which requires price elasticity analysis. You may then choose any two of the following four cases:

Virgin Mobile
Keurig
EA Sims
Cigarette Wars

The reports should be 2 pages long. This space constraint is designed to ensure that you think hard about the most important points to write down.

Your reports must be handed in at the start of the class in which the case will be discussed. These cases will be graded and will determine 36% of your overall grade. For the three written cases you should discuss the cases only within your group.

Use the case questions to guide your reports (and to help prepare for our discussion of the other cases). Some additional recommendations:

1. Separately answer each discussion question.
2. Do not omit the obvious, but omit needless words.
3. Use numerical analysis wherever possible. Describe the steps you took to reach your numerical conclusions.

Case Questions

Case: Virgin Mobile USA (Pricing a product for the first time)

1. What does the case suggest that customers do not like about current cell phone pricing schemes?
2. What pricing scheme could Virgin introduce to best address these concerns?
3. How can Virgin profit from introducing a pricing scheme that challenges the status quo?

Case: Colonial Homes (Real-world measurement of price elasticities)

1. Calculate price elasticities using both the projections in Table A and the actual sales figures in Exhibit 1.
2. How would you use these projections to guide future pricing strategy?
3. What challenges do you see in using these projections as a basis for Colonial’s future pricing policy?

Case: Keurig (Pricing complementary products)

1. What price for a brewer and for the portion pack (K-cup/Keurig-Cup) do you recommend?
2. Under your pricing strategy, how profitable are coffee sales and brewer sales for Keurig?

Case: Electronic Arts Introduces The Sims Online

1. Who would be ideal early adopters for the Sims online?
2. What pricing strategy should EA use to entice their target customer?
3. What challenges do you see in using their pricing strategy to reflect network effects?

Case: Philip Morris: Marlboro Friday A (When is price-cutting a good idea?)

1. Should Philip Morris (PM) have cut prices?
2. Having cut prices, what should they do now?