UTS24760 Pricing and Revenue Management

How UTS24760 is assessed

What UTS24760 covers

24760 clusters its topics into five modules across twelve Spring weeks. Module 1 establishes why price is the strongest profit lever, the four pillars of the value pricing framework, the arithmetic of a price change, and how company strategy governs pricing. Module 2 walks the three basic methods: cost based, competition based and value based.

Module 3 turns to pricing a new product through acquisition spending, customer relationships and customer lifetime value. Module 4 asks how a firm can measure willingness to pay, and answers with direct and indirect discovery methods. Module 5 closes on pricing psychology and bundling. There is no exam: the mark comes from a 70% individual portfolio and two group case analysis reports worth 15% each.

Delivery is split. Online content including recorded lectures is released each Wednesday and the weekly pre-work is a mix of readings, videos, business cases and lecture notes; face to face workshops then run fortnightly for three hours on Thursdays and are built around in-class exercises, group discussion and case presentations rather than delivery.

Some weeks carry no lecture at all, only class discussion based on the pre-work, so the pre-work is not optional. The prescribed text is Utpal Dholakia's How to Price Effectively (2017), and a coursepack on Canvas holds the cases and the supporting readings. The intellectual spine of the subject is the value pricing framework and its four pillars.

Costs normally establish the floor; what a buyer would part with for the practical and emotional benefits received fixes the ceiling; reference prices, meaning competitor prices, the firm's own historical prices and any other price the buyer encounters before purchase, set the comparison the buyer makes; and the value proposition governs how much weight each of the other three carries in a given decision.

Almost every question the subject asks is a question about which of those four inputs should dominate, and the quantitative work exists to make that choice defensible.

You will compute price elasticity, the break even volume change that a price cut or rise has to clear, unit contribution and break even volume, customer lifetime value on both a finite and an infinite horizon, and the economic value your product creates for a specific buyer relative to a named competitor.

Module 4 then asks how anyone knows what a customer will pay and answers with three named methods: the Van Westendorp price sensitivity meter and the Becker DeGroot Marschak procedure as direct methods, and conjoint analysis as an indirect one. There is no exam. On the subject schedule the row for the week beginning 2 November reads NO Exam, and the only thing due that week is the Final Executive Summary.

The mark is built from a 70% individual Portfolio and 30% of group case work. The Portfolio is two reflective summary notes of at most 600 words each, worth 15% apiece, plus a 2,000 word Final Executive Summary worth 40% in which you write as if applying for a role at a pricing consultancy and synthesise the notes against the three subject learning objectives.

The Case Analysis Reports are worth 30% as two group reports at 15% each: groups of three to four members submit a deck of 10 to 15 slides excluding appendices before 2:00 pm on the Thursday the case is due, and every report must carry a compulsory Model and Decision Audit slide covering assumptions, uncertainties, tools used and where managerial judgement changed the answer.

Five business cases are discussed across the session and every student is expected to read all five, but each group writes only its two assigned reports. Groups that submit but are not selected to present become the Management Assessment Team, separately assessed out of 2 marks. Two rules shape how you should plan the session.

A reflective summary note may only be written about a class you attended, so attendance and marks are directly linked, and four of the note's fifteen rubric points ride on specific references to at least two workshop moments. And the subject states plainly that no late submission will be marked and no email submission is accepted, which makes a missed deadline a lost component rather than a lost few percent.

No hurdle requirement is stated anywhere in the subject materials, so confirm that, along with every date and weight, in your own Subject Outline, which the subject names as the definitive source in the event of any difference.

Worked example · free

Was the price cut effective? Margin arithmetic on a four branch service business

Key terms

Value pricing framework

An organised, adaptable and complete way of arriving at sound prices and then carrying them into the market, built on four pillars: costs, customer value, reference prices and the value proposition. The first three are inputs; the value proposition decides how much weight each input carries in a particular decision.

Customer value

The total amount of money a customer is willing to pay for the functional and hedonic benefits received from a product. It normally establishes the ceiling, the most that could ever be asked, and it differs from buyer to buyer for the identical item.

Reference price

Any price a customer compares yours against before purchase, including competitor prices, the company's own historical prices and prices encountered elsewhere. Reference prices explain why a technically justified price can still be rejected as unfair.

Price elasticity of demand

The ratio of the relative change in volume to the relative change in price, so it measures the slope of the demand curve in percentage terms. It is unit free, which allows comparison across markets without standardising units, and business to consumer elasticities have a published mean of minus 2.62 and median of minus 2.22.

Break even volume change

The percentage volume change a price change must produce for profit to be unchanged, computed as minus the percentage price change divided by the sum of the gross profit margin and that price change. It sets a hurdle without requiring any estimate of customer behaviour.

Customer lifetime value

The present value of the stream of revenue a customer produces, net of the cost of serving them and of the cost of acquiring them. Over an unbounded horizon with stable revenue and cost it equals margin per period divided by the sum of the churn rate and the discount rate, less acquisition cost.

Economic value to the customer

The price of the closest competing offer, plus the money value of everything your product does better, minus the money value of everything it does worse. It is the maximum a fully informed buyer should pay, and the price is then set by deciding how much of the value created to share with the buyer.

Value proposition

A focused and targeted explanation of the main reasons a customer should buy this product instead of a competing offer, describing specific features, the benefits they deliver, and the point of difference relative to competitors from the customer's point of view. It sets guidelines and constraints for all pricing activity.

Van Westendorp price sensitivity meter

A survey method that asks four questions about the prices at which a product becomes too expensive, expensive, inexpensive and so inexpensive that quality is doubted, then reads four price points off the intersections of the cumulative response curves: the indifference price point, the points of marginal cheapness and expensiveness, and the optimal price point.

UTS24760 FAQ

Questions students ask in each UTS24760 chapter

Why does price beat volume by so much?

Because an extra dollar of price carries no extra variable cost while an extra unit does. Adding one percent to price adds one percent of revenue straight to contribution; adding one percent to volume adds only one percent of the contribution margin. The ratio between the two is price divided by unit contribution, which is one divided by the gross margin percentage. At a 36% margin the price lever is worth 2.8 times the volume lever, and at a 10% margin it is worth ten times as much. That is also why the published company results are widest for the thinnest margin retailer in the sample. Chapter 01 · Pricing as the Profit Lever

Why is the value proposition treated differently from the other three pillars?

Because it does not supply a number, it supplies a weighting. Suppose costs rise 8% while the nearest competitor cuts price 5%. Cost says raise, reference price says cut, and nothing in the numbers breaks the tie. What breaks it is the firm's stated reason for being in the market: a cost leadership proposition must follow the competitor down and find the saving elsewhere, while a premium branding proposition holds its price and accepts the volume loss rather than teach buyers that its price is negotiable. Both answers are defensible; only one is defensible for a given firm. Chapter 02 · The Four Pillars of the Value Pricing Framework

What is the difference between elasticity and margin arithmetic?

Elasticity is a description of customer behaviour, estimated from data; margin arithmetic is a requirement computed from your own margin. Elasticity tells you what volume response to expect, and it is unstable enough that two adjacent years of the same product can give very different answers. Margin arithmetic tells you what volume response you would need, and it cannot be wrong because no behavioural assumption enters it. The strongest case answers use both: compute the hurdle from margin arithmetic, then convert it into the elasticity the market would have to exhibit and compare that against something real. Chapter 03 · Price Elasticity and Margin Arithmetic

Is tactical pricing always a mistake?

No. A promotion to clear seasonal stock, a discount to win a strategically important first account, or a quick match in a commodity category can all be correct. The problem is not the individual decision but the absence of a test. A tactic is safe when it is consistent with the standing tactic set the firm's proposition licenses, and dangerous when it is borrowed from a different proposition. Ask what claim the tactic makes to the customer, then ask whether that is the claim the firm wants to be making. Chapter 04 · From Company Strategy to Pricing Strategy

Why is this a pricing topic rather than a strategy topic?

Because of the reference price. A firm that accepts the value cost trade off chooses a point on the price value map and defends it against the same set of competitors, so its price is judged against their prices. A firm that reconstructs the factors an industry competes on changes what the customer is comparing against: the wine entrant benchmarked its price against a premium six pack of beer, not against other wine, which is why a price rise was available to a producer with no marketing budget. You do not win a price argument by being cheaper than the comparison, you win it by changing the comparison. Chapter 05 · Blue Ocean Strategy and Price Positioning

If cost plus is so flawed, why do most firms use it?

Because it is simple, internally defensible and safe in a narrow sense: if the volume assumption holds, the price guarantees a return over allocated cost. It also requires no research into demand and no competitive intelligence, so it can be applied by anyone with the accounts. The usage figures in this subject are 75% of restaurants and 60% of manufacturers, with retailers commonly applying a double markup of 100% on wholesale cost and restaurants working to benchmarks such as twice for food and five times for liquor. Widespread use is a fact about cost of analysis, not evidence of accuracy. Chapter 06 · Cost and Cost Based Pricing

How do I tell a loss leader from predatory pricing in a case?

Ask two questions. Can the customer actually transact at the advertised price, in reasonable quantity and for a stated period? If not, it is bait pricing. What is the stated purpose and how long will it run? A temporary below cost price intended to build traffic is a loss leader; a sustained one whose purpose is to remove a rival is predatory. Both tests rest on facts a case will give you, such as stock levels, promotion length and internal statements of intent, rather than on the size of the discount. Chapter 07 · Competition Based Pricing and Price Tactics

Why is the order of the six steps so important?

Because steps five and six have no meaning without steps one and two. Step one decides whose value you are measuring, and the same product creates very different economic value for different segments. Step two decides what you are measuring against, and the entire bridge is built on the focal competitor's price. A student who jumps straight to quantifying benefits ends up with a number that is an average over an undefined population measured against no baseline, which cannot be defended when the tutor asks where it came from. Chapter 08 · Value Based Pricing Step by Step

If incentives attract weaker customers, why does anyone use them?

Because the effect is invisible at the point of sale. In the bank study cited here, 71% of 300 new customers were firm determined and 29% self determined, and immediately after joining there were no statistically significant differences between the two groups on initial profitability, accounts opened, satisfaction, loyalty intentions or referral intentions. The divergence appears a year later, by which time the promotional campaign has already been judged a success on sign up numbers. A firm that measures acquisition by volume rather than by cohort retention will keep repeating it. Chapter 09 · Acquisition Pricing and Customer Relationships

Why is the survival exponent period minus one rather than period?

Because the customer is certain to be present in the first period, having just been acquired, so the survival weight in period one is the retention rate raised to the power zero, which is one. They survive to period two with probability equal to the retention rate, to period three with its square, and so on. Using the period itself as the exponent discounts the first period twice and understates lifetime value systematically. It is the single most common error in this calculation and it is easy to check: your first period margin should be undiscounted by survival. Chapter 10 · Customer Lifetime Value and Break Even Analysis

Why does the subject say customer value is unstable?

Because it moves in ways you can anticipate, and those movements should steer the price rather than being ignored as though value were a fixed property of the product. Some variation is seasonal and some is triggered by an occasion, and the useful part is that both are foreseeable. The two instructions that follow are practical: build a structure of price levels that tracks those foreseeable shifts, and identify the triggers so the incentives are held back while value is high. Discounting into a peak gives away money the customer had already decided to spend. Chapter 11 · Customer Value and Willingness to Pay

Why are there four questions rather than two?

Because resistance comes from both directions. Two questions probe resistance from above, at the point where a product becomes expensive and then too expensive to consider, and two probe it from below, at the point where it is a bargain and then so inexpensive that quality is doubted. The fourth is the one students find surprising, and it is the quality signalling effect the price value map predicts: a price can be too low, and the meter turns that into a measurable quantity rather than an observation. Chapter 12 · Price Discovery: Van Westendorp and BDM

How to prepare for the assessments

Treat 24760 as a subject you do rather than read. The assessed surfaces are a group deck, two short reflective notes and one long synthesis, and all four reward the same thing: a defensible pricing recommendation built on a calculation you can show. Build that capability in three layers.

First, get fluent with five calculations, because they recur in every case: unit contribution and the profit identity, the break even volume change, price elasticity from two observations, customer lifetime value on an infinite horizon with and without a contract, and the economic value bridge from a competitor price through differentiators and deficiencies.

Do each one in a spreadsheet rather than on paper, since three of the subject's own exercises are spreadsheet exercises and case reports are expected to show the working in an appendix. If your spreadsheet skills are slow, fix that in the first fortnight, not during a case week. Second, run the workshop as an assessment rehearsal, not as a class.

A reflective summary note may only be written about a class you attended, and four of its fifteen points come from specific workshop moments, so capture three lines immediately after each session: what was calculated, what your group disagreed about, and what you got wrong.

That file solves the note and then becomes the evidence base for the Executive Summary, where every capability claim must be supported by evidence from your own work in the subject. Third, practise the sentence that earns the recommendation marks. Every case answer should contain a line of the form: we recommend price X, because input Y should dominate this decision, accepting risk Z.

Getting there means classifying the pricing occasion first, since the four pillars carry different weights for a new product, a new version, a change in business conditions and a change in customer preferences.

Keep the compulsory Model and Decision Audit slide in mind while you analyse rather than after: every assumption you make is a line on that slide, and a group that records assumptions as it goes writes the slide in ten minutes. Finally, protect the deadlines. Case reports are due at 2:00 pm on a Thursday, not at the end of that day, and the subject states that no late submission will be marked and no email submission accepted.

Put all seven dates in a calendar in Week 1, note that the schedule and the Canvas assignment page disagree on the first reflective note deadline, work to the earlier one, and confirm everything against your Subject Outline, which the subject names as the definitive source.

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