Operation Valuation: Teaching Pricing Concepts in an Experiential Environment
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| Title: | Operation Valuation: Teaching Pricing Concepts in an Experiential Environment |
|---|---|
| Language: | English |
| Authors: | Mills, Adam J., Treen, Emily |
| Source: | Journal of Marketing Education. Aug 2016 38(2):73-82. |
| Availability: | SAGE Publications. 2455 Teller Road, Thousand Oaks, CA 91320. Tel: 800-818-7243; Tel: 805-499-9774; Fax: 800-583-2665; e-mail: journals@sagepub.com; Web site: http://sagepub.com |
| Peer Reviewed: | Y |
| Page Count: | 10 |
| Publication Date: | 2016 |
| Document Type: | Journal Articles Reports - Research |
| Education Level: | Higher Education Postsecondary Education |
| Descriptors: | Marketing, Business Administration Education, Experiential Learning, Class Activities, Assignments, College Instruction, Undergraduate Students, Computer Uses in Education, Statistical Analysis, Qualitative Research |
| DOI: | 10.1177/0273475316649414 |
| ISSN: | 0273-4753 |
| Abstract: | Although marketing education has seen a dramatic shift toward hands-on, experiential learning in recent years, the teaching of pricing has fallen behind complementary elements of the marketing mix in pedagogical execution. Although the teaching of pricing has shifted focus from economic-based models to value-based pricing in theory, available pedagogical tools for teaching value-based pricing are scarce. This article proposes and outlines an experiential class assignment that engages students in a real-world, applied, market exchange environment. While avoiding the inherent risks of using actual money for transactions, this assignment enables students to explore the consumer motivations and perceptions of value central to value-based pricing. |
| Abstractor: | As Provided |
| Number of References: | 36 |
| Entry Date: | 2016 |
| Accession Number: | EJ1108549 |
| Database: | ERIC |
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| FullText | Links: – Type: pdflink Url: https://content.ebscohost.com/cds/retrieve?content=AQICAHj0k_4E0hTGH8RJwT4gCJyBsGNe_WN95AvKlDbXJGqwxwGat9yQBfrSkkXqG1CXvJDdAAAA4jCB3wYJKoZIhvcNAQcGoIHRMIHOAgEAMIHIBgkqhkiG9w0BBwEwHgYJYIZIAWUDBAEuMBEEDIS_ap6NVvvtKz3RJgIBEICBmhHIsyQQq7drgHwkGoKIm4nAekLXlIcDRGXEmCdtoD2Vc2aisPhNwlfOkeGUpnb6TZSxRJ8iwY-v8WzxL7QFu75XiR89una4FzVBBZOYOddKWFUhnCqo3etqjYFxGnK2vE9k0sORVx-HmiIV3wPBgXiNKGL1NWkJYaCdQBOqbu9Ly9iIR6e1AOGw5ycNXSIdoWwbK99aBrDEYNg= Text: Availability: 1 Value: <anid>AN0117028357;mke01aug.16;2016Jul28.05:10;v2.2.500</anid> <title id="AN0117028357-1">Operation Valuation </title> <p>Although marketing education has seen a dramatic shift toward hands-on, experiential learning in recent years, the teaching of pricing has fallen behind complementary elements of the marketing mix in pedagogical execution. Although the teaching of pricing has shifted focus from economic-based models to value-based pricing in theory, available pedagogical tools for teaching value-based pricing are scarce. This article proposes and outlines an experiential class assignment that engages students in a real-world, applied, market exchange environment. While avoiding the inherent risks of using actual money for transactions, this assignment enables students to explore the consumer motivations and perceptions of value central to value-based pricing.</p> <p>experiential learning techniques; innovative teaching methods; simulation/gaming; pricing; course content; consumer behavior</p> <p>Pricing can have an immense impact on the profitability of a company. It is no surprise, then, that considerable effort is dedicated to understanding pricing—the strategic process of establishing, setting, and controlling price points for goods or services—at the conceptual and practical levels, and that entire courses at leading universities have been dedicated to the subject ([<reflink idref="bib29" id="ref1">29</reflink>] ). Since McCarthy’s “Four Ps” of marketing surfaced in 1960, however, much of the teaching of pricing still originates from textbooks and is conceptual in nature ([<reflink idref="bib10" id="ref2">10</reflink>] ). Many other topics in marketing are increasingly being taught through experiential learning ([<reflink idref="bib15" id="ref3">15</reflink>] ). The trend of shifting pedagogical approaches from conceptual to experiential has yet to completely carry pricing with it, and as a result, there has not been an established way to make pricing a more palatable topic in marketing curriculum. We intend to reverse this by illustrating an innovative method of teaching pricing in the classroom by simulating a micro-market experience through the use of bartering.</p> <p>We proceed as follows: First, we discuss pricing and the challenges that arise in university classroom settings when teaching the subject. Then, we review the literature on teaching pricing in business education, and in marketing in particular. Next, we introduce and describe a class exercise called Operation Valuation which can be used to teach, illustrate, and reinforce the principles of value-based pricing in a marketing course. Then, we share some of the results of using the exercise in a number of classes, focusing on overall quantitative results achieved, as well as a content analysis of student comments and experiences. We conclude by acknowledging some limitations of the approach, some advice to marketing professors who might wish to use the exercise, and possible adaptations of the exercise to fit various course modules.</p> <hd id="AN0117028357-2">Pricing in the University Classroom</hd> <p>Amid questions of relevancy of the Four Ps of marketing in 21st-century university curriculum, there is little debate about whether pricing remains an important topic with which marketing students should be well acquainted ([<reflink idref="bib17" id="ref4">17</reflink>] ). Many marketing educators would likely agree from experience, however, that pricing can the most difficult of the four components of the marketing mix to teach, and there are a few reasons for why this is so. First, marketing as a field of study does not tend to rely heavily on mathematics and economics. As a result, students who concentrate in marketing in university are, generally speaking, not necessarily well-versed nor interested in economic theory, which makes up much of the fundamental foundations of pricing. As [<reflink idref="bib31" id="ref5">31</reflink>] points out, without strong backgrounds in economic analysis, students may not be prepared to deal with pricing problems found in the arena of marketing. Similarly, while giving an overview of how to teach pricing to MBA students, [<reflink idref="bib29" id="ref6">29</reflink>] recommends covering economic fundamentals for several classes as a precursor to pricing. [<reflink idref="bib10" id="ref7">10</reflink>] also iterates that pricing comprises “highly complex mathematical concepts [and] intuitive or common sense management issues,” but that “problems exist with integrating these varied issues . . . for those whose main interest is not pricing” (p. 52).</p> <p>Second, in traditional marketing courses, pricing has been a difficult area in which to give students realistic practice in making and testing decisions. While students can easily be required to design and conceptualize new products or formulate advertising campaigns in relatively low-risk ways, giving students hands-on exercises in making pricing decisions often involves real money, with real consequences, and not every marketing instructor would want to take those risks. Despite this challenge, it is nonetheless “important that students understand and experiment with the practical elements of pricing, including fixed and variable costs, financial goals, sales margins, market potentials and sales goals, and breakeven analysis” ([<reflink idref="bib27" id="ref8">27</reflink>] , p. 87).</p> <p>Third, perhaps most simply, a lack of interest and enthusiasm toward pricing theory can be evident on the part of both instructors and students, further making the topic a challenge for the classroom ([<reflink idref="bib10" id="ref9">10</reflink>] ; [<reflink idref="bib27" id="ref10">27</reflink>] ). Perhaps this is due to the conceptual and textbook definition-centric nature of the topic of pricing. Perhaps this is because students tend to find pricing a boring topic ([<reflink idref="bib21" id="ref11">21</reflink>] ). Most likely, this is simply due to the relative lack of cachet or appeal that pricing seems to have, vis-à-vis other marketing topics like promotions and product design.</p> <p>The teaching of pricing also receives comparably less attention in business education scholarship, and in the major marketing education journals (Journal of Marketing Education, Marketing Education Review, and Journal for the Advancement of Marketing Education) in particular. A review of these journals over the past two decades reveals that while topics such as brand management, marketing ethics, selling and sales management, green marketing, and the use of technology in the classroom receive considerable attention, the number of articles specifically addressing the teaching of pricing scarcely reaches double figures in all three marketing education journals combined—10 in total, in fact, by our count.</p> <p>In this article, we hope to move toward filling this gap in the marketing education literature, and mitigating the noted challenges to the teaching of pricing, by introducing an applied pricing and valuation exercise that is fun, interesting, and rewarding for students, that reinforces pricing’s base in economics, which is very realistic, and that focuses on the core principles of value-based pricing.</p> <hd id="AN0117028357-3">Teaching Pricing: Observations From the Literature</hd> <p>As far back as 1949, Seelye (p. 311) noted that because “in the capitalistic economy the mechanism which controls both the allocation of resources and the allocation of output is the price system,” the pricing and price policy sections of marketing courses should not just be descriptive but analytic as well. While there is a need for a pedagogical description of and theoretical overview of pricing in the classroom, in today’s educational landscape it is critical that students obtain an understanding of price making in practice, not simply in theory ([<reflink idref="bib27" id="ref12">27</reflink>] ).</p> <p>Many have noted that pricing is a subject simultaneously difficult for instructors to teach and students to learn. For example, [<reflink idref="bib21" id="ref13">21</reflink>] observes, “Students view pricing as one of the most boring topics of the semester, with most textbooks focusing on lists of concepts” (p. 1). [<reflink idref="bib35" id="ref14">35</reflink>] caution that undergraduate students in introductory marketing classes often have little appreciation for the importance of pricing as an integrated component of marketing strategy formulation, and further suggest that the way pricing is often taught treats pricing as a discrete and separate exercise rather than a deeply integrated component the marketing mix. Pedagogical hurdles to the present approaches to teaching price concepts, according to [<reflink idref="bib27" id="ref15">27</reflink>] , include inadequate classroom time and the complexity of calculations needed for students to fully understand the nature of pricing. For example, foundational topics include break-even analysis, supply and demand curves, price elasticity, channel analysis, and other economic-centric concepts.</p> <p>With the increasing focus on value-based marketing in current marketing textbooks (cf. [<reflink idref="bib16" id="ref16">16</reflink>] ), it seems incongruous with the direction of marketing research that the teaching of pricing continues to focus, primarily, on cost-based and competitive pricing strategies, largely driven by economics. In cost-based (also referred to as cost-plus) pricing strategies, a predetermined markup is added to the total cost of a product or service. This method of pricing is frequently inefficient, since a price that is too low means that the price was not optimal and more revenues could have been acquired, while a price that is too high reduces demand, again not maximizing revenues. While guaranteeing an acceptable profit margin to the firm, cost-based pricing strategies do not take customers or perceived value into account. Competitive, or status quo, pricing strategies—developing a price point based on the brand’s relative competitive position apropos of market average prices—are very commonplace in practice but again, like cost-based pricing, fail to take actual consumer value perceptions and willingness to pay into consideration.</p> <p>Value-based pricing, in recent years, has become a notable alternative to traditional firm-centric models of pricing, and has been widely recognized in marketing literature as superior to cost- and competition-based pricing strategies ([<reflink idref="bib22" id="ref17">22</reflink>] ). Value-based pricing focuses on the customers’ perception of value of the product or service and on creating long-term value for the buyer ([<reflink idref="bib19" id="ref18">19</reflink>] ). For successful implementation of value-based pricing strategies, it is crucial that practitioners truly understand how different customers value specific products or services, and segment the market accordingly. It is critical that marketing educators are enabled to teach students ways to understand these customer value perceptions, in addition to traditional pricing theory ([<reflink idref="bib18" id="ref19">18</reflink>] ). An advantage of teaching value-based pricing, apart from its significant applicability in practice, is that it minimizes the emphasis on economic and mathematical foundations, leaving room for more creativity and for hands-on, experiential approaches to student learning.</p> <hd id="AN0117028357-4">The Need for Experiential Learning</hd> <p>Learning by doing has been an important part of learning at all levels of academic pursuit. [<reflink idref="bib25" id="ref20">25</reflink>] show that assignments taking place outside of the classroom setting have been a part of university learning since the 1930s. Today, many BBA, BComm, and MBA courses include extensive use of case studies, software and market simulations, and “real-life” projects to help students experience challenges in a safe, yet realistic representation of the working world. These methods move students beyond conceptual learning and memorization, into the realm of experiential learning ([<reflink idref="bib4" id="ref21">4</reflink>] ).</p> <p>Experiential learning theory defines learning as “the process whereby knowledge is created through the transformation of experience. Knowledge results from the combination of grasping and transforming experience” ([<reflink idref="bib24" id="ref22">24</reflink>] , p. 41). [<reflink idref="bib24" id="ref23">24</reflink>] asserts that learning through experience is a four-part process that begins with concrete experiences, followed by reflective observations, abstract conceptualization, and finally active experimentation, in order to foster understanding by helping learners connect abstract theory and concepts to personal experience.</p> <p>A number of exercises, involving a range of tools and approaches, that facilitate the teaching of pricing have been described in the business education literature in efforts to bridge the chasm between theory and practice in the classroom. In the field of engineering, [<reflink idref="bib13" id="ref24">13</reflink>] propose an interactive learning approach using specially designed computer simulation software to teach transmission pricing techniques in utilities pricing that enables students to grasp the complexities and interrelationships surrounding power system economics. In managerial accounting, [<reflink idref="bib32" id="ref25">32</reflink>] outline a hands-on approach the teaching of optimal transfer pricing, using small groups to collaboratively work through numerical examples under the supervision of the instructor. In economics, [<reflink idref="bib12" id="ref26">12</reflink>] developed a series of visual aids using Flash animation on PCs to illustrate graphically the concepts of single versus discriminatory pricing, enabling the interactive learning experience related to profit and efficiency maximization.</p> <p>In marketing, educators have employed a number of innovative approaches to teaching marketing strategy that includes price concepts as part of larger strategy formulation. A number of these approaches have utilized games and simulations to teach marketing strategy (e.g., [<reflink idref="bib2" id="ref27">2</reflink>] ; [<reflink idref="bib5" id="ref28">5</reflink>] ; [<reflink idref="bib20" id="ref29">20</reflink>] ), and incorporate pricing as one component of the exercise. For example, [<reflink idref="bib34" id="ref30">34</reflink>] “Bidding for Buyers” game focuses on new product adoption rates, and integrates notions of price and value. [<reflink idref="bib30" id="ref31">30</reflink>] “Student Operated Businesses in a Simulated World” project requires students to develop real products and services to sell on organized market days, where fellow students act as customers. While the project is designed to give students an overall hands-on experience of the fundamentals of marketing strategy, it requires students to understand and experience the notions of price setting and value as part of an integrated strategy. [<reflink idref="bib36" id="ref32">36</reflink>] introduce price-driven online auctions as “living case studies” that have been employed in introductory marketing courses to expose students to all the components of the marketing mix, and to explore aspects of consumer behavior, marketing research, and business ethics. Similarly, [<reflink idref="bib33" id="ref33">33</reflink>] describe a simulation in which the notion of a “lemons market” (price in the absence of quality information) can be illustrated to students.</p> <p>A number of the proposed exercises involve having students set up real online businesses, which inherently requires students to consider pricing issues. These include [<reflink idref="bib8" id="ref34">8</reflink>] method for teaching retailing by enabling students to set up e-commerce businesses for the sale of gift baskets and university paraphernalia, and [<reflink idref="bib3" id="ref35">3</reflink>] similar approach to teaching retailing by having students set up stores to sell their own product designs on http://Zazzle.com, a website that offers on-demand custom printing of clothing and other customizable goods.</p> <p>While the above examples include the teaching of pricing as an element of overall marketing strategy formulation, a significantly smaller number of articles in marketing education research focus on innovative approaches to teaching pricing specifically. Notable among these are [<reflink idref="bib21" id="ref36">21</reflink>] adaptation of the popular television quiz game “The Price is Right” to teach pricing principles in an entertaining way, and [<reflink idref="bib9" id="ref37">9</reflink>] exercise that allows students to make pricing decisions for FMCG products and see the subsequent effects of these decisions on competitor reactions, product supply, and cash flow. [<reflink idref="bib27" id="ref38">27</reflink>] developed a spreadsheet-based assignment to reinforce student learning on key pricing concepts, which is followed by a written assignment in which students are required to demonstrate their understanding of the spreadsheet they have constructed. [<reflink idref="bib35" id="ref39">35</reflink>] describe the use of a case study that enables marketing professors to cover a number of key concepts in pricing in a comprehensive yet succinct manner. While these, and similar, exercises are fantastic ways to introduce students to pricing concepts and theory in a hands-on and experiential way, none has been designed to focus specifically and intentionally on value-based pricing. As such, this current article seeks to add to this critical and growing discussion in marketing education, and add to the marketing instructor’s arsenal, by introducing a new experiential learning exercise focused specifically on value-based pricing.</p> <hd id="AN0117028357-5">Leveraging Online Platforms in Experiential Learning</hd> <p>“Today’s college students, often referred to as the ‘digital generation,’ use an impressive assortment of technological tools in a wide variety of ways” ([<reflink idref="bib6" id="ref40">6</reflink>] , p. 131). The past two decades have seen marketing educators give considerable attention to the increasing use of technology in teaching marketing. This very journal, in fact, recently dedicated a special issue to the topic (see [<reflink idref="bib14" id="ref41">14</reflink>] ). Above, we noted how others have integrated online auction sites ([<reflink idref="bib36" id="ref42">36</reflink>] ) and e-commerce platforms ([<reflink idref="bib3" id="ref43">3</reflink>] ; [<reflink idref="bib8" id="ref44">8</reflink>] ) into classroom exercises. As will be explored below, the exercise presented in this article relies on the use of an online classified advertisement website, Craigslist, to provide a platform for teaching and illustrating the fundamentals of pricing and value in an experiential way.</p> <p>Craigslist is a classified advertising website where anyone can offer almost anything (e.g., housing, personals, for sale, items wanted, services, etc.) to others in exchange for another item or service, for sale at a monetary price, or for free. It is also used to disperse community activities, résumés, discussion forums, and more. Most ads are placed for free, with the website’s only sources of revenue coming from charging for employment, brokered apartment listings, and car dealership ads in certain major cities in the United States ([<reflink idref="bib28" id="ref45">28</reflink>] .). Craigslist was founded by Craig Newmark in 1995 in San Francisco as an e-mail distribution list to friends and became a web-based service in 1996. By 2000, it had expanded to most U.S. cities and is now used in more than 70 countries. The site serves over 50 billion page views per month, putting, making it the 63rd most visited website globally, and is the 11th most visited site among U.S.-based pages with over 60 million unique monthly visitors (http://Alexa.com, [<reflink idref="bib1" id="ref46">1</reflink>] ). Today, Craigslist is the leading classified ads service in any medium.</p> <hd id="AN0117028357-6">The Assignment: Operation Valuation</hd> <p>Inspired by the recent A&amp;E television series Barter Kings (see <ulink href="http://www.aetv.com/barter-kings),">http://www.aetv.com/barter-kings),</ulink> “Operation Valuation” was created as an exercise for an undergraduate capstone marketing strategy course. The goal was to create a real-world, experiential, hands-on opportunity for students to engage in price making and setting, in a market environment that was completely realistic, yet simultaneously free of risk or possibilities of negative financial ramifications, that ultimately served to introduce the concept of value-based pricing.</p> <p>Operation Valuation is assigned to students on the first day of class, with a final deliverable date in the 10th week of the semester when pricing strategy is discussed. Quickly dubbed “The Craigslist Assignment” by students, this is an individual assignment that can be time consuming, so the goal is to allow students to proceed at their own pace with plenty of time.</p> <p>The assignment instructions are straightforward, as follows:</p> <p>Go onto the “Free” section of Craigslist, find something that interests you, and acquire it. We’ll call this Item A.</p> <p>Trade Item A for something else. This will be Item B.</p> <p>Trade Item B for something else, Item C.</p> <p>Sell Item C for as much as you can get for it.</p> <p>Students are instructed to acquire the free item and make trades however they want, and however they feel most comfortable—they can use the “Free” and “Barter” sections on Craigslist, make deals with their classmates, make deals with friends or family, use other social media such as Facebook or Twitter, or any other way in which they can safely exchange items for others with equal or more perceived value. Not leaving common sense to chance, safety and security are underscored in the introductory session, and it is recommended that any meetings for transactions take place in public areas like coffee shops, particularly if these meetings are with unfamiliar people.</p> <p>The caveat for Step 1 is that students must actively acquire something for free—that is, they may not simply start with current possessions or gifts—and this initial item can be absolutely anything at all. Students in a recent class acquired a wide variety of goods ranging from books to furniture to jewelry. The caveat for Steps 2 and 3, very importantly, is that they must be pure trades with no cash involvement whatsoever. As will be discussed below, bartering offers a unique opportunity for both buyer and seller to explore the stories and motivations behind their desired “sale” and “want” items in a richer way than cash dealing, which often requires only simple negotiations.</p> <p>As an aside, some students may recall and mention during the introductory session the somewhat infamous tale of the man who traded a paper clip for a house using Craigslist. Although the story has now become an urban legend with several different beginnings and endings, the story is quite true: Over a 1-year period from July 2005 to July 2006, 25-year-old Montrealer Kyle MacDonald began with a single red paper clip, and over a series of 14 trades increasing in value ended up with a small farmhouse in Kipling, Saskatchewan ([<reflink idref="bib11" id="ref47">11</reflink>] ; [<reflink idref="bib26" id="ref48">26</reflink>] ).</p> <p>For each of the three items the students acquire, they are asked to take a photograph of the item (noting that a cell phone camera quality is acceptable) and then to note three dollar amounts:</p> <p>What they think the item is worth, in dollars, based on market (i.e., status quo) prices</p> <p>What they would ideally like to receive for the item, in dollars, if they were going to post it for sale for cash (i.e., their asking price)</p> <p>And last, what dollar amount they would actually accept for the item, if a buyer offered it to them (i.e., their lowest selling price)</p> <p>Students should have nine numbers by the end of the process, three for each item that they acquire, representing estimated market price, ideal selling price, and lowest selling price.</p> <p>The final deliverable for the project is a brief two-page memorandum in which students are asked, simply, to “tell their story.” Pictures count as appendices and are not included in the page count. This assignment is intended to be engaging and fun for students, so the final deliverable is kept intentionally brief and relatively informal. Students are told in the assignment outline that their memos will likely include information about all of their items, as well as any relevant and interesting information on their process, any pertinent marketing concepts that came into play (promotions, pricing, targeting, sales, etc.), and the final cash amount that they ended up with in the end. Finally, and most important, students are asked to “briefly discuss what you think marketing managers should know about pricing and value, based on your experience.” Although not explicitly stated to the students, this last requirement of the memo is the crux of the assignment, where students are encouraged to shift from their personal experiential processes to more general (less context-specific) theorizing about pricing strategies, market behavior, marketing communications, and value creation. The “lessons” from this section of the class collection of memos are used to stimulate in-class discussion during the session on pricing.</p> <p>In the closing section of the assignment outline, students are given three final notes. First, if it turns out that they are particularly fond of Item C and would like to keep it instead of selling it, this is acceptable as long as they provide a strong, evidence-based valuation of the item’s market price (e.g., the price of a similar new or used item on <ulink href="http://Amazon.com">http://Amazon.com</ulink> or <ulink href="http://eBay.com">http://eBay.com</ulink>). Second, if the students are enjoying the barter process—this could likely be their first exposure to the barter economy—they are welcome to continue making as many trades as they like, provided they conclude the exercise by the due date. Third, students can keep whatever cash, goods, or services that they end with at the conclusion of the assignment for themselves. This is intended to add an incentive and some excitement to the exercise, as it is quite possible for a student to “trade up” from a free item to something quite valuable.</p> <p>Operation Valuation takes students through Kolb’s four-step process of experiential learning from concrete experiences and reflective observations to abstract conceptualization, and finally, active experimentation. First, students experience a genuine, real market scenario through the bartering process that immerses them in a new experience. Second, through the nature of the assignment, students must be reflective of their experiences and articulate their observations to the rest of the class through discussion and deliverables. Third, classroom discussion helps generalize their individual experiences to broader market and pricing concepts, and the nature of the exercise requires them to make decisions and solve problems pertaining to real circumstances that yield real consequences.</p> <p>The due date for the assignment is generally 2 or 3 days before the scheduled class session on pricing, which allows the instructor time to go through each of the memos individually. Below are recommendations for how to prepare for the in-class debrief session, using the submitted student memos:</p> <p>Create a summary document of the managerial implications and marketing lessons created by the students. Students will generally offer two to four key takeaways each, which can lead to a good number of pricing lessons for class discussion.</p> <p>Create a spreadsheet that lists the following information: student name, their three trade items, the value of each item (to track trading “up” or “down”), their final selling price, whether they kept or sold the final item, and which medium they used (generally, Craigslist or friends).</p> <p>Create a list of the more “interesting” trade deals to mention specifically in class. These could be (a) the most financially lucrative, (b) the most unique or funny items, (c) the most interesting approaches to making deals, and (d) if students trade within the class, the story of how an item, or several items, changed hands a number of times and where it fell into the value equation for different students.</p> <p>Create a PowerPoint slideshow of some of the pictures of items provided by students to support the previous points during classroom discussion. Particularly for the unique, funny, or bizarre items, this can create a lot of energy in the classroom.</p> <p>The in-class discussion about the Operation Valuation assignment (60-90 minutes) comprises the second session of the unit on pricing, focusing on value-based pricing; the first session will be lecture-based or case-based, and cover the concepts of cost-based and status quo pricing. Using the preselected examples from the preparatory work to prompt discussion around the key themes and learning takeaways, class discussion here is extremely engaged and enticing. As all students have had parallel experiences, they will generally be very interested in hearing and learning about the stories of their peers, and the various approaches to bartering and selling in the marketplace that their classmates used. Also, by fostering discussion and creating opportunities to learn from each other, students will be exposed to a number of different and unique perspectives on pricing, marketing, and value creation than if the assignment was restricted only to the individual with no class discussion. Students who chose to keep their final item are encouraged to bring it to class to add a “show-and-tell” component to their story and discussion—the more tangible the discussion, the more meaningful it will become.</p> <p>From recent implementations of the Operation Valuation assignment, student learning points, as outlined in detail in the submission memos, included customer segmentation, targeting, and positioning; marketing communication techniques and strategies, both online and offline, and including copywriting; selling and sales tactics, including negotiations; demand estimation; subjective valuation of goods and services, by both buyer and seller; pricing strategies for items with objective versus subjective characteristics; customer expectations based on price; the influence of emotion on willingness to pay and willingness to accept; and value propositions and branding. While the intended learning elements of pricing were central, we find that a range of relevant and strategically complementary marketing concepts also come into play.</p> <p>By partaking in barter deals for goods, rather than simply selling items for cash, students need to spend more time dealing and communicating with potential buyers and sellers. In crafting trade deals, the buyer and seller must first be aligned in desiring the offering of the other party, and second, reach an agreement on the equivalent perceived value of each others’ items. Since the specific dollar value of trade items is often subjective and can be unequal, barter deals require what is known as a double coincidence of wants: The first difficulty in barter is to find two persons whose disposable possessions mutually suit each other’s wants. There may be many people wanting, and many possessing those things wanted; but to allow of an act of barter, there must be a double coincidence, which will rarely happen. (Jevons, 1875, as cited in Cencini, 2002, p. 3)</p> <p>Without currency as a common language for negotiating the value of items, barter deals require students to spend more time investigating understanding the motivations behind the double coincidence of wants with their various prospective trade partners. In a number of cases of “trading up” or “trading down” based on dollar value alone, students found that the crucial pieces of information are the perceived value of the product (to both parties) and the motivations to engage in the economic exchange (again, for both parties). In the class discussion, a lighthearted yet resonant parallel can be drawn between the want/have match seeking of the barter economy and the basic premises of dating.</p> <p>Invoked on a personal level through individual experiences in the market simulation and then shared between classmates through storytelling and words of wisdom, the marketing principles and theories drawn out through the Operation Valuation assignment and subsequent discussion provide students with an engaging and relevant way of learning a significant number of marketing principles. The ultimate goal and key learning objective of this assignment is to crystallize, in an experiential and relevant way, the premise of value-based pricing: That the customer (buyer) is not particularly concerned with what an item is worth to the seller (the manager, the producer, the retailer, etc.) but rather that the customer cares only about what an item is worth to them as the purchaser. It is the job of the marketer to explore customer motivations for purchase intention, and then make the most of these opportunities through creative positioning, in order to maximize the perceived value of a good or service for a specific target customer or group.</p> <p>In the following section, some quantitative and qualitative results of the exercise over a number of semesters and for a number of different classes are presented and discussed, as a means of illustrating the efficacy of the Operation Valuation game.</p> <hd id="AN0117028357-7">Operation Valuation: Results and Discussion</hd> <hd id="AN0117028357-8">Quantitative Results</hd> <p>In this section, some results of the Operation Valuation exercise conducted in five capstone undergraduate marketing strategy classes over five semesters are presented. In total, 126 students took part in the exercise, for an average class size of 25.6 per semester. The total value of the final trades (i.e., what participants would ideally like to receive for the item, in dollars, if they were going to post it for sale for cash, or their “asking price”) was $7939.47. On average, each class generated a total of $1587.89 in value. A distribution of the final values per student is shown in Figure 1.</p> <p>Final values of items by number of students.</p> <p>As can be seen from Figure 1, while most students (64%) achieved trades resulting in final values less than $50, nine students (7%) ended up with value greater than $150. The mean value achieved was $62.52, with a standard deviation of $14.14. The range was $846, with the lowest final value achieved being $4, and the highest, $850. Two students realized values greater than $500. The highest value was $850 for a student who had obtained a 42” flat screen television set, and the second highest was $692, for a student who traded up to a Banana Republic gift card. Between their first and last trades, 88.3% of students had managed to “trade up” (i.e., the market value of their final trade exceeded the market value of their first trade), and only 11.7% had “traded down” (ended up with an item less objectively valuable than their first free item).</p> <p>Out of all the students, 84.17% decided to keep their final item, while only 15.83% sold theirs for cash. This statistic makes for a very poignant point in the class debrief session, as it tangibly illustrates the influence of emotional connection on the perceived value of a good. In the class “show-and-tell” session, the instructor can underscore this point about imbued value by asking students who have kept an item that seems funny, peculiar, or unnecessary why they chose to keep it rather than sell it.</p> <p>Students who used Craigslist exclusively totaled 18.1%, and those who had used a combination of Craigslist, friends, and other social media totaled 27.6%. While all the students attempted to use Craigslist initially, 54.3% ended up not using it to make trades at all, resorting to friends and other social media (particularly Facebook) to make their trades. Three primary reasons were cited in the student memos for the abandonment of the Craigslist platform. First, that it did not have any free items that interested the students or that the students thought they could easily trade; second, that the students did not wish to, or could not, travel long distances to fetch a free (and sometimes bulky) item; and third, that students did not feel comfortable meeting up with and dealing with strangers they had encountered over the Internet. Another point for class discussion, here, is the relevant concept of connections, perceived proximity, and trust as related to both price making and sales.</p> <hd id="AN0117028357-9">Qualitative Results</hd> <p>Drilling down into the managerial implications and marketing lessons invoked by students through the Operation Valuation game, we find a nuanced picture of the relationships between key marketing mix elements, but with, as intended, a clear focus on buyer rather than seller. The goal of this assignment was to create an opportunity for students to learn that value-based pricing is a consumer-oriented and consumer-driven concept, and the managerial implications of the student memos reflect this to a great degree. Students realize that marketers act as the connection agent between the product and the consumer, and that the concepts of value and worth are generated from the consumer’s perspective rather than the marketer’s. Thus, it is the marketer’s task to understand exactly what the consumer’s perceived value of the good is, and why, in order to maximize the efficiency of this connection and the price that is set. The two major themes of the students’ analysis are the benefits and importance of targeting and positioning, and the prominence and centrality of consumers to the value equation.</p> <p>To exemplify student learning takeaways, we offer a few excerpts from the student memos to offer additional perspectives of the learning outcomes of the Operation Valuation game.</p> <p>On value-based pricing versus cost-based and competitive pricing: I realized that when I was pricing my products, I often looked at how much the product was valued to me, which can be misleading and sometimes make the product very hard to sell. Customers are only looking at how much the product was valued to them, regardless of how much we, as the owner of the product, value our own goods. As marketers, we should keep in mind that the worth, or value of a good, is also in the eye of the beholder. From this, we can learn that the price of a good or service should be determined by the significance in value or relevance provided, rather than a markup of the production cost. From my own experiences, marketers should know the cost of the product first, include the production cost, the packaging and so on. Also, marketers should understand the market price for the similar product, as well as the product category. Thirdly, markers should be knowledgeable on what the values that the customers are seeking, their expectations and much more. Also, the values differ from one customer to another, therefore, marketing managers should also understand its target audience, such as their preferences, the needs they are seeking and etc. I believe that the price is what customers pay, and the value is what the customers get. Price is always relative to what the customers perceive the value of the product is. Marketers must always keep in mind that consumers are the ones who are purchasing the products and that the price must be set based on what the consumers value rather than what the marketer believe the product is worth.</p> <p>On the value of marketing and consumer research: If there is one lesson to be learned here, it is that marketing managers need to understand their market and do their research before going out and offering their product or service. One cannot simply guess what someone is willing to pay in exchange for a product or service and expect both sides to be completely happy with what they end up with. Marketing managers must take into account value when deciding on price.</p> <p>On targeting and positioning: There is always demand—be smart about locating your target market. It cannot be expected that people will come flushing in out of nowhere, wanting your product. Sometimes, there won’t be demand right away, but that is not to say that there is zero demand for the product at all. You’ll just have to work a little harder in finding that demand yourself. Know who your target market is, and cater it to them. Because understanding the meaning products hold for certain individuals is so key, correctly identifying your target market is key to maximizing the value of your product. Building a brand story around a product that target consumers can identify with can hold much greater value than providing a better functional product. To understand the value of your product you must first understand your consumer.</p> <p>On sales and selling: After reflecting on this whole process, I have gained a wider perspective on sales. A few things that can be applied from this experience is that marketers should be aware of not only pricing and value of their products and services, but also how it is important to be aware of the implications of audience, medium, and message. In terms of Craigslist, I found that a successful post needs to be carefully crafted, and speak effectively to target consumers. In this way it is very similar to traditional forms of media. Companies only have a short window of time to capture a consumer’s attention, and if that is the case, they need to make it count. Moving forward as an aspiring marketing manager, a takeaway is that relationships are key. Marketing managers always need to be aware of the relationships that they have available to them and use them to their advantage, but without taking advantage.</p> <p>On the role of emotion in marketing exchange: First and foremost it’s all about creating value in the prospects mind, at the same time it’s about appealing to their sense of emotion. Customers are very much relationship-oriented and usually experience a product with others. As marketers we need to paint that picture for our customers. The more of a feel you have for who your customers are, the more you can tie in simple product attributes to a deeper connection within the customer. Eliciting an emotional response in the same way listening to your favorite song creates a response within you, will linger and leave an impression that stays with the customer.</p> <p>On the distinction between price and value: This process was especially interesting to characterize certain distinctions between price and value. Value is a complex concept whose interpretation differs from one customer to the other. Marketers can infer from this that their pricing strategy doesn’t only have to take into account the functional benefits of a product but also its emotional and symbolic value. Product pricing is for the most part determined by perceived value. It is critical for marketers to understand this when developing marketing strategies. I believe that marketing managers should understand that every product has a different value for every group of consumers. Also, managers need to be aware that the price of a product does not necessarily equal the value of that product. The price is a constant characteristic of a product; however, the value is individualized when it comes to each consumer.</p> <p>As illustrated by the above excerpts from students’ memos, the core concepts and drivers of value-based pricing become realized through the process of trading goods for this assignment. Central to most of these student learning points is the key concept that pricing should be motivated by customers’ perceived values of goods, and that it is the marketer’s job to figure out what that value is, and why, in order to set prices optimally. Additionally, most students note that understanding perceived value also requires appreciation of the fact that no two customers are alike, and that segmentation is a critical undertaking, particularly in pricing. A third major theme of the student learning points is the role of the relationship between the marketer, the product, and the consumer, and that the emotion evoked by those relationships is a critical motivating (or deterring) factor in a value exchange. Marketers would thus be wise to appreciate that value-based pricing is, additionally, influenced by the consumer–brand relationship.</p> <p>The quantitative and qualitative results and quotes from student memos serve to illustrate, we hope, not only the efficacy of the Operation Valuation micro-market simulation as an experiential learning tool but the breadth of variety of student learning takeaways from the experience.</p> <hd id="AN0117028357-10">Recommendations for Implementation</hd> <p>It has been a difficult for marketing educators to move beyond core principles of economic theory to teach students about value-based pricing in a realistic, tangible, experiential, and resonant way. Operation Valuation serves as an assignment that is accessible and enjoyable for both students and educators, which offers a means of pushing pedagogy beyond theory and into lived experience.</p> <p>In implementing Operation Valuation, we propose that the assignment offers an extraordinary amount of flexibility for instructors, particularly with respect to scale. While we recommend that the core defining elements of the assignment remain consistent, other elements that do not change the essential nature of the assignment or learning outcomes are quite easily adaptable to suit the needs of each instructor and class. For example, we suggest that two core elements that must remain unchanged are the initial acquisition and trading process. Initial items should be acquired at no cost to the student beyond the amount of time taken to seek and obtain said item, and bartering must only allow for straight goods exchanges with no additional items or services included in the transaction. These two elements are central to the discussions of value perception and creation, and thus the intended learning experiences related to value-based pricing. However, other elements of the assignment process may well be adjusted and adapted to suit various instructors’ preferences and needs, without any negative influence on the core barter elements of the exercise. We offer three examples of such opportunities here. First, in our version of the assignment, students are able to keep the final item they end up with if they choose; the assignment could very well require that all final items be sold for cash, thus focusing students on market value rather than intrinsic value. Furthermore, each student having a final cash balance offers the instructor an objective measure of performance across the class. Second, as we found that about half of all students ended up using personal connections over Craigslist to find trading partners, the assignment could be adapted to focus explicitly on trading with personal contacts rather than strangers, thus further underscoring the importance of relationships in marketing transactions. We also note that two other variables may affect the choice whether to use the Craigslist platform in particular: First, the popularity of Craigslist (which relies on network effects) may be greater, and thus more practical, in some cities than others, and second, the proximity of campus to a larger metropolitan area and thus accessibility to nonstudent trading partners. Third, particularly for larger classes, it may be suitable to have students run the assignment in pairs or even small groups. For logistical reasons working in pairs or small groups may be beneficial as it leads to a smaller volume of final assignments (which streamlines both the debrief session and instructors’ marking time investments) and increases the size of the network of people within which the students may find trading partners.</p> <p>In terms of deliverables, we have opted to keep the assignment to a two-page memo for three primary reasons: to have the students’ focus on key personal learnings (framed as managerial takeaways), to use the class session with shared learning experiences as the “grand finale” of the assignment, and, logistically, to keep the instructor’s marking time investment brief. This said, it would be both easy and suitable to scale up the final assignment to a significantly longer deliverable with a more comprehensive rubric or outline. This rubric could include more detailed questions about pricing strategy, price setting, value perception, subjective versus objective valuation, the double coincidence of wants, and reapplying learnings back to a currency-based market environment. If appropriate, an expanded assignment rubric could also include other, broader marketing concepts beyond pricing that may be relevant to the course material and helpful to the instructor’s learning objectives for the course module—some complementary marketing topics as mentioned in the student memos, for example, are targeting, positioning, consumer expectation management, promotional strategies, sales strategies, or buyer–seller interactions.</p> <p>In the spirit of the nature of this assignment, focusing not on the value of goods and services to the producer but rather to the consumer, we thus conclude not with our own ruminations about the value of this assignment to students and instructors but with an excerpt from a senior marketing major that captures and illustrates the value of this assignment to students, and, we hope, to you: My take away regarding price and value would be that value is an intangible word that directly relates to the marketers ability to create something from nothing. However the challenge here is the marriage between creating relevant value in order to justify price. This comes back to what level of intimacy do you have between yourself and your targeted customer. People love to feel like they matter and the more you know about who your customer is on a deeper level, the more opportunity you can create for yourself (by effectively using the customer data you have to make intimate connections) and thus justify your set price. However, this is more applicable to the role of personal selling and is much more challenging on a larger scale where you have millions of potential customers. Understand who the customers are as a person, use sincerity in your pursuit when determining why it’s important to understand them, it’s easier to be successful if you as a marketer care about your objective. Show you understand by personalizing your marketing. This inherently creates value, as the customer feels like they matter a little bit more to you. Then use what you know about them to tie in the benefits of the product you are selling by connecting it to their lifestyle. Once that emotional connection is made your customer sees specific value to them even if the product attribute performs the same function for millions of other customers. And you can now command a price equal to that of the value you determine by your marketing efforts. Personalize things.</p> <hd id="AN0117028357-11">Footnotes</hd> <ref id="AN0117028357-12"> <title>References</title> <blist> <bibl id="bib1" idref="ref46" type="bt">1</bibl> <bibtext>Alexa.com. (2015). How popular is Craigslist.org? Retrieved from <ulink href="http://www.alexa.com/siteinfo/craigslist.org">http://www.alexa.com/siteinfo/craigslist.org</ulink></bibtext> </blist> <blist> <bibl id="bib2" idref="ref27" type="bt">2</bibl> <bibtext>Appell A. L. (1997). Income based pricing: An additional approach to teaching the subject of pricing in marketing courses. 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(2002). Monetary macroeconomics: A new approach (Vol. 15). London, England: Routledge. </bibtext> </blist> <blist> <bibl id="bib8" idref="ref34" type="bt">8</bibl> <bibtext>Daly S. P. (2001). Student-operated Internet businesses: True experiential learning in entrepreneurship and retail management. Journal of Marketing Education, 23, 204-215. </bibtext> </blist> <blist> <bibl id="bib9" idref="ref37" type="bt">9</bibl> <bibtext>Ducoffe S. J. S., Tucker M. (2004). Is the price right? A marketing exercise in setting a selling price. Marketing Education Review, 14(1), 13-19. </bibtext> </blist> <blist> <bibl id="bib10" idref="ref2" type="bt">10</bibl> <bibtext>Duke C. R. (1991). Price presentations structured with strategy. Journal of Marketing Education, 13(3), 52-65. </bibtext> </blist> <blist> <bibl id="bib11" idref="ref47" type="bt">11</bibl> <bibtext>From paper-clip to house in 14 trades. (2006, July7). CBC News. 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| Items | – Name: Title Label: Title Group: Ti Data: Operation Valuation: Teaching Pricing Concepts in an Experiential Environment – Name: Language Label: Language Group: Lang Data: English – Name: Author Label: Authors Group: Au Data: <searchLink fieldCode="AR" term="%22Mills%2C+Adam+J%2E%22">Mills, Adam J.</searchLink><br /><searchLink fieldCode="AR" term="%22Treen%2C+Emily%22">Treen, Emily</searchLink> – Name: TitleSource Label: Source Group: Src Data: <searchLink fieldCode="SO" term="%22Journal+of+Marketing+Education%22"><i>Journal of Marketing Education</i></searchLink>. Aug 2016 38(2):73-82. – Name: Avail Label: Availability Group: Avail Data: SAGE Publications. 2455 Teller Road, Thousand Oaks, CA 91320. Tel: 800-818-7243; Tel: 805-499-9774; Fax: 800-583-2665; e-mail: journals@sagepub.com; Web site: http://sagepub.com – Name: PeerReviewed Label: Peer Reviewed Group: SrcInfo Data: Y – Name: Pages Label: Page Count Group: Src Data: 10 – Name: DatePubCY Label: Publication Date Group: Date Data: 2016 – Name: TypeDocument Label: Document Type Group: TypDoc Data: Journal Articles<br />Reports - Research – Name: Audience Label: Education Level Group: Audnce Data: <searchLink fieldCode="EL" term="%22Higher+Education%22">Higher Education</searchLink><br /><searchLink fieldCode="EL" term="%22Postsecondary+Education%22">Postsecondary Education</searchLink> – Name: Subject Label: Descriptors Group: Su Data: <searchLink fieldCode="DE" term="%22Marketing%22">Marketing</searchLink><br /><searchLink fieldCode="DE" term="%22Business+Administration+Education%22">Business Administration Education</searchLink><br /><searchLink fieldCode="DE" term="%22Experiential+Learning%22">Experiential Learning</searchLink><br /><searchLink fieldCode="DE" term="%22Class+Activities%22">Class Activities</searchLink><br /><searchLink fieldCode="DE" term="%22Assignments%22">Assignments</searchLink><br /><searchLink fieldCode="DE" term="%22College+Instruction%22">College Instruction</searchLink><br /><searchLink fieldCode="DE" term="%22Undergraduate+Students%22">Undergraduate Students</searchLink><br /><searchLink fieldCode="DE" term="%22Computer+Uses+in+Education%22">Computer Uses in Education</searchLink><br /><searchLink fieldCode="DE" term="%22Statistical+Analysis%22">Statistical Analysis</searchLink><br /><searchLink fieldCode="DE" term="%22Qualitative+Research%22">Qualitative Research</searchLink> – Name: DOI Label: DOI Group: ID Data: 10.1177/0273475316649414 – Name: ISSN Label: ISSN Group: ISSN Data: 0273-4753 – Name: Abstract Label: Abstract Group: Ab Data: Although marketing education has seen a dramatic shift toward hands-on, experiential learning in recent years, the teaching of pricing has fallen behind complementary elements of the marketing mix in pedagogical execution. Although the teaching of pricing has shifted focus from economic-based models to value-based pricing in theory, available pedagogical tools for teaching value-based pricing are scarce. This article proposes and outlines an experiential class assignment that engages students in a real-world, applied, market exchange environment. While avoiding the inherent risks of using actual money for transactions, this assignment enables students to explore the consumer motivations and perceptions of value central to value-based pricing. – Name: AbstractInfo Label: Abstractor Group: Ab Data: As Provided – Name: Ref Label: Number of References Group: RefInfo Data: 36 – Name: DateEntry Label: Entry Date Group: Date Data: 2016 – Name: AN Label: Accession Number Group: ID Data: EJ1108549 |
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| RecordInfo | BibRecord: BibEntity: Identifiers: – Type: doi Value: 10.1177/0273475316649414 Languages: – Text: English PhysicalDescription: Pagination: PageCount: 10 StartPage: 73 Subjects: – SubjectFull: Marketing Type: general – SubjectFull: Business Administration Education Type: general – SubjectFull: Experiential Learning Type: general – SubjectFull: Class Activities Type: general – SubjectFull: Assignments Type: general – SubjectFull: College Instruction Type: general – SubjectFull: Undergraduate Students Type: general – SubjectFull: Computer Uses in Education Type: general – SubjectFull: Statistical Analysis Type: general – SubjectFull: Qualitative Research Type: general Titles: – TitleFull: Operation Valuation: Teaching Pricing Concepts in an Experiential Environment Type: main BibRelationships: HasContributorRelationships: – PersonEntity: Name: NameFull: Mills, Adam J. – PersonEntity: Name: NameFull: Treen, Emily IsPartOfRelationships: – BibEntity: Dates: – D: 01 M: 08 Type: published Y: 2016 Identifiers: – Type: issn-print Value: 0273-4753 Numbering: – Type: volume Value: 38 – Type: issue Value: 2 Titles: – TitleFull: Journal of Marketing Education Type: main |
| ResultId | 1 |
