Abstract

This is a collection of three caselets that would help highlight the issues involved in pricing a product or service. The first caselet is about Priceline.com (Priceline) and its revolutionary ‘Name Your Own Price’pricing system. Some analysts had raised concerns that a business model based on the path-breaking NYOP system might not be sustainable. Priceline had since moved beyond the NYOP system by providing customers with the option of choosing from a list of published prices for its travel products and services as well. In a bold move in end2007, the company permanently eliminated all booking fees on published airfares taking the analysts and competitors by surprise. The second caselet is about Apple Inc.’s (Apple) pricing of iPhone in the US. In 2007, Apple raised many eyebrows by reducing the price of its much hyped iPhone by one-third within 10 weeks of the launch. While some analysts felt that adoption of such market skimming strategies and subsequent price cuts by companies selling technological devices was nothing new, others felt that Apple’s decision to reduce the price so drastically just a few weeks after the launch was a public relations fiasco. The third caselet is about F. Hoffman-La Roche’s (Roche) pricing strategy for its path-breaking anti-AIDS drug, Fuzeon. Despite being a major innovation Fuzeon has consistently failed to match up to the initial sales expectation since it was launched in 2003. Some analysts felt that Roche’s strategy of launching Fuzeon at a premium price, almost twice the price of the next high priced anti-AIDS drug, was partly responsible for the company’s woes. The company had also faced a lot of social criticism for setting such a high price for the drug, taking it out of reach of people who needed it the most.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the issues and challenges in Pricing a product or service (pricing decisions, premium pricing, market skimming, etc)
• Analyze dynamic pricing systems such as the Name Your Own Price (NYOP) pricing system
• and Understand how pricing could affect product adoption and diffusion.

Keywords

Pricing, Pricing strategy, Pricing policy, Premium price, Market skimming strategy, Name Your Own Price, NYOP, Threshold price, Demand and supply, Business model, e-commerce, Priceline, Early adopter, Public relations, iPhone, Apple, Fuzeon, Roche, Innovation