Week 8: Pricing strategies

Question 1

What are the 3 pricing pitfalls?

Answer 1

1. Using a “seat-of-the-pants” approach
2. Blindly chasing after market-share
3. Relying too much on costs

Question 2

What is the “seat-of-pants” approach?

Answer 2

• managers don’t use a systematic approach to pricing
• they setup an initial price within a middle range, usually based on what they have charged in the previous year
• Then they tinker with their prices make ( e.g., incremental adjustments or deductions depending on how they perceive the market demand)
• This approach sacrifices long-term profits