The Strategy and Tactics of Pricing audiobook cover - A Guide to Growing More Profitably

The Strategy and Tactics of Pricing

A Guide to Growing More Profitably

Thomas Nagle, John Hogan & Joseph Zale

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Marketing & Sales

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The Strategy and Tactics of Pricing
Core Philosophy+
Pricing Mistakes to Avoid+
Three Dimensions of Strategic Pricing+
Five Steps of Strategic Pricing+
Psychology of Pricing+

Quiz — Test Your Understanding

Question 1 of 10
How did Apple's initial high pricing strategy for the iPhone ultimately benefit the company's sales?
  • A. It guaranteed they would cover their high manufacturing costs immediately.
  • B. It established a high reference point so later price drops seemed like brilliant bargains.
  • C. It prevented competitors from entering the smartphone market.
  • D. It allowed them to eventually transition into a low-cost provider.
Question 2 of 10
What is the core mechanism behind Walmart's highly successful pricing strategy?
  • A. Discounting essential everyday items to draw customers in, while marking up other items to recoup losses.
  • B. Using the cost-plus method to ensure every single item generates a fixed 15% profit margin.
  • C. Asking customers what they are willing to pay and pricing all items according to survey results.
  • D. Slashing prices on luxury goods to make them accessible to the general public.
Question 3 of 10
Why does the book argue that the popular 'cost-plus' pricing method is fundamentally flawed?
  • A. It relies too heavily on aggressive competitor undercutting.
  • B. It assumes customers are completely rational when making purchases.
  • C. It makes it impossible to calculate exact profit margins.
  • D. It requires predicting exact sales volumes to ensure profitability, which is impossible to know for certain.
Question 4 of 10
Why shouldn't companies base their prices solely on what customers say they are willing to pay?
  • A. Customers usually overestimate their own purchasing power.
  • B. Customers often have no idea about a product's actual value, especially for innovative new items.
  • C. Competitors can easily manipulate customer surveys to sabotage pricing.
  • D. It is illegal in many markets to use consumer surveys to set fixed prices.
Question 5 of 10
Alan Mulally's strategy as CEO of Ford Motor Company is an example of 'profit-based pricing' because he:
  • A. Lowered the prices of all Ford vehicles to maximize total sales volume.
  • B. Scaled down the number of models offered to focus on profitability over market share.
  • C. Matched General Motors' prices exactly to avoid losing loyal customers.
  • D. Anticipated a recession and introduced a new loyalty program to retain buyers.
Question 6 of 10
According to the text, how should a clever pricing strategist determine the base 'economic value' of a product?
  • A. By calculating the exact cost of production and adding a 50% markup.
  • B. By measuring the maximum emotional satisfaction a user gets from the product.
  • C. By looking at the price of the purchaser's best alternative and adding a markup for differentiation.
  • D. By finding the average price of all similar products in the global market.
Question 7 of 10
What is the primary danger of setting a single, middle-ground price for a product instead of using price segmentation?
  • A. It alienates customers willing to pay less, while leaving money on the table from those willing to pay more.
  • B. It violates value-based pricing laws in the airline and hospitality industries.
  • C. It significantly increases the 'relative cost of search' for the average consumer.
  • D. It forces the company to rely entirely on emotional value rather than economic value.
Question 8 of 10
How should marketers approach pricing and promotion for 'experienced goods' (like a gym membership) compared to 'search goods'?
  • A. They should hide the price until the customer has committed to a purchase.
  • B. They should rely solely on listing technical specifications and features.
  • C. They should offer free samples or trials so customers can assess the benefits themselves.
  • D. They should increase the relative cost of search to make the product seem more exclusive.
Question 9 of 10
How do restaurants use the psychological principle of 'reference pricing' on their wine menus?
  • A. By only offering wines that are priced exactly the same to avoid decision fatigue.
  • B. By placing an extremely expensive bottle on the menu to make the other bottles look cheap in comparison.
  • C. By pricing their house wine below cost to drive food sales.
  • D. By offering a cash discount to make customers feel like they are winning.
Question 10 of 10
When launching a new product, what does the book suggest doing instead of offering a heavily discounted introductory price to encourage trials?
  • A. Offer non-financial incentives like free gifts to encourage trials without devaluing the product.
  • B. Double the price initially so that early adopters perceive it as a luxury good.
  • C. Use a cost-plus method for the first six months before switching to value-based pricing.
  • D. Undercut the leading competitor's price by exactly 10% to guarantee market entry.

The Strategy and Tactics of Pricing — Full Chapter Overview

The Strategy and Tactics of Pricing Summary & Overview

The Strategy and Tactics of Pricing (2010) reveals the fundamental importance of how you price your products. By exposing common misconceptions, explaining the three dimensions of effective pricing and the five steps you can take to achieve it, these blinks are an essential guide to maximizing your profits through clever pricing.

Who Should Listen to The Strategy and Tactics of Pricing?

  • Business students hoping to understand the underlying principles of pricing
  • Entrepreneurs planning to launch a new product and struggling to find the right price
  • Any shopper curious about how price tags are set

About the Author: Thomas Nagle, John Hogan & Joseph Zale

Thomas Nagle, John Hogan and Joseph Zale are industry leaders in strategic pricing, having made significant contributions to the theory and practice of pricing, as well as the development of software to aid businesses around the world. Hogan and Zale are partners at Monitor Deloitte, a leading strategy consulting practice based in Cambridge, Massachusetts.

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