15.035 Discussion Questions

Spring 1996

The bottom-line assignment for most cases we're discussing in class is to develop a marketing strategy -- including a pricing strategy -- and to be prepared to defend it, quantitatively where possible. The questions posed below are intended to develop useful intermediate steps in case analysis and to focus on key issues raised by assigned articles. Only class sessions that have discussion assignments, beginning with February 28, appear below.

7. Cost and Demand Dynamics I (February 28)

Discuss: Cumberland Metal Industries: Engineered Products Division, 1980 [580-104].

What is incremental manufacturing cost?
What do we know about value to potential buyers?
How large is the potential market?
What are the main obstacles to penetration?
Should we plan on raising or lowering price over time?
What marketing strategy should we adopt?

8. Cost and Demand Dynamics II (March 4)

Discuss: R.H. Coase, "Durability and Monopoly," Journal of Law and Economics, April 1972.

What theoretical problem is raised by Coase?
Is this ever a real problem? If so, what can be done about it?

9. Negotiation (March 6)

Discuss: Charlestown Chemical, Inc. [9-590-024].

How strong are Puritan's and Todd's bargaining positions when Puritan first announces the price increase?
How strong are these positions (and Lee's) as of September?
How did Todd do it?
What does Todd want now?
What should he do?

11. Determinants of Price Sensitivity (March 13)

Discuss: G. Kalyanaram and R.S. Winer, "Empirical Generalizations from Reference Price Research," Marketing Science, 1995.

What is a "reference price"?
Is their use consistent with rational behavior?
Which of the author's conclusions seem persuasive?
What managerial implications, if any, do you draw from this article?

13. Assessing Demand Conditions (April 1)

Discuss: American Repertory Theater [9-580-133].

What do we know about cost?
What did Guckenheimer know before the survey?
What do you think of the design and reliability of the survey?
What did Guckenheimer learn from the survey?
How should subscriptions be priced?
What marketing strategy should ART adopt?

14. Segmentation and Discrimination (April 3)

Discuss: Polyfiber Industries, Inc. [9-513-144].

Can the market for Zytene be usefully segmented for pricing purposes?
Should price discrimination be employed? If so, how?

15. Couponing and Dealing (April 8)

Discuss: C. Narasimhan, "A Price Discrimination Theory of Coupons," Marketing Science, Spring 1984. (Skim the math; focus on the story and the empirics.)

What is the basic theory?
Does the evidence persuade you that the theory is right?
If it is right, what are the managerial implications?

16. Airlines' Yield Management (April 10)

Discuss: American Airlines, Inc.: Revenue Management [9-190-029]. (The other readings will be particularly useful.)

How did deregulation affect pricing?
What sorting device or devices are used to discriminate?
What is the key tradeoff in yield management?
What are "buckets"?
How should American react to Continental's Chicago - West Coast pricing?
What are the issues in the New York - San Juan decision?

17. Everyday Low Prices (April 17)

Discuss (briefly): P&G and Everyday Low Prices [9-593-108]

What are the likely costs and benefits to P&G of EDLP?
How and why might these differ for other firms?

Discuss: American Airlines' Value Pricing (A) [9-594-001], materials to be handed out in class.

In what respects, if any, does Value Pricing resemble EDLP?
What could American have been trying to accomplish by moving to Value Pricing?
What has to happen for Value Pricing to be profitable for American?
What do you think is likely to happen next?

19. Pricing Multiple Products (April 24)

Discuss: Loctite Corporation: Industrial Products Group [581-066].

If the Bond-A-Matic 2000 (BAM) is going to be introduced, how should it be marketed? (This includes a pricing strategy.)
How, if at all, would implementing your strategy affect other Loctite products?
Should the BAM be introduced?

21. Segmentation by Product Line Design (May 1)

Discuss: Cambridge Software Corporation [9-191-072].

If Cambridge Software Corporation (CSC) offers only one version, which one should it offer and at what price?
If CSC offers multiple versions, which ones should be offered and at what prices?
Which policy is better -- and why?

22. Pricing and Promotion (May 6)

Discuss: Raymond Mushroom Corporation [9-584-093]

What aspects of the industry's situation and RMC's situation are relevant to judge the likely effects of the proposal?
Evaluate the proposal and its chances of success. Can you suggest a better alternative? (Exit is not an option.)

23. Pricing in the Distribution Channel (May 8)

Discuss: Hartman Luggage Company: Price Promotion Policy [581-068].
How is Hartman positioned in the luggage market?
How are buying decisions made in that market?
Did Hartman's 1978 promotion increase profits?
What should Hartman do now? (If you recommend a promotion, be specific about coverage, discount level, timing, and communications.)

24. Pricing at Retail (May 13)

Discuss: Randall's Department Stores [9-593-032]

Why did EDLP generally not work?
Why did it work in the childrens' department?
What sort of pricing policy should they adopt now? If you think they should try again to stabilize prices, be specific as to how and why you think your proposal might succeed.

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