MT 330
Marketing in the Technology Enterprise

Session 21:
Pricing and Economic Analysis (II)
Constructing a Business Model for the Technology Company

In Part I of the lecture on pricing and economic analysis, we developed several key concepts
associated with pricing, and examined the competing forces that determine price levels in a
market. Now we’re going to use these concepts to help us build a business model for the technology enterprise. Business models come down to this -- Can you price the product to pay your bills, get your investment back, and make a profit, while remaining competitive (recall the four requirements for pricing from the last lecture)? In this lecture we'll look at two "pure" pricing strategies and three combination (hybrid) strategies. To provide a feel for the potential range of pricing strategies, the reading for this session offers 22 (!) alternative business models.

Readings: ® = required; scan = read introduction and conclusions; scan inside pages;
                  (o) = optional

Required for Class Discussion:

• McWilliams, Gary, "Lean Machine: How Dell Fine-Tunes Its PC Pricing to Gain Edge in a Slow Market --- Working With Suppliers, It Quickly Passes Changes In Costs to Customers --- Three Prices for One Product," Wall Street Journal; New York, N.Y.; Jun 8, 2001.

Scan:

• Slywotzky, Adrian J. et al., The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits, NY: Times Books, 1998, Chapter 3

Lecture Notes:

  Pricing (II): Constructing a Business Model for the Technology Company

Discussion Question:

Is the Dell pricing model the future? Will it force every industry to adopt its model? Is there any alternative? 

Market Plan:

• All: Complete through Section 10.
• This week's presenter: Post to Prometheus on Monday of this week. 
• Others: comment on this week's presentation.