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Pricing Strategies - Lesson Plan: 2 x 1 hour lessons

A series of 'off the shelf' lesson plans and resources for use in the classroom. These lessons deal with Pricing Strategies and are relevant to the following specifications:

• AQA: Module 1, 10.3
• Edexcel: Unit 2, Section 4
• OCR: Module 2872 and 2874

Aim:

The aim of these lessons is to investigate pricing strategies, covering all the main types, both from a cost base and a market base. The subject matter is introduced via the PowerPoint Presentation - there are 35 slides so it is advisable to break it up as suggested below.

The associated Activity provides two case studies that encourage students to think about the key strategies they will have covered in the Presentation. The first case study looks at PlayStation 2. The table provides a list of various prices at major retailers and Internet retailers. There is also some additional information provided about the original launch price of PlayStation 2 and the fact that it had to be rationed on first release! The prediction that price would fall below £100 in 2004 gives students the opportunity to relate market skimming as a possible price strategy but why might this not have occurred?

The second case study focuses on a flight from London to New York. Two dates have been chosen and the price differences are marked. Students are asked, again, to consider the pricing strategies behind the case study. The expectation is that students can relate the principle of price elasticity of demand to this case study. The initial dates chosen (February 14th - 21st) coincide with the half term holidays for schools and colleges in the UK and also Valentines Day on February 14th. The noticeable difference between the prices in the week after the school and college holidays can be partly explained by a different price elasticity during those two weeks as the nature of demand changes.

The second case study also allows students to look at pricing issues that are more heavily weighted towards cost rather than the market.

The initial discussion section requires the collection of some newspaper or magazine adverts showing different prices. It is advisable to go through the Presentation prior to the lesson to ensure that you have at least one example of a real product to highlight each strategy.

Learning Objectives:

At the end of the lessons, students should:

• Understand the basic principles behind the range of different pricing strategies used by firms
• Understand the difference between cost based and market based pricing strategies
• Be able to apply understanding of pricing strategies to different business situations
• Understand other key factors that go into pricing decisions by firms

Resources:

• PowerPoint Presentation - Pricing Strategies [695 KB] (basic version also available for quicker download [384 KB])
• Mind Map - Pricing Strategies
• Activity - Pricing Strategies
• Projector and PC
• PCs for student research
• Some newspaper adverts highlighting different pricing examples for use with the Presentation and for initial discussion

Lesson Structure:

Lesson 1

1. Using one of the adverts (or if you are feeling generous some chocolate bars or similar handed out to the students) ask the question 'why is this item priced at £xxx?' Get feedback from students and discuss results. (10 minutes)
2. Hand out other examples collected and ask students to consider what the reasons might be for the pricing decisions in the cases used. (15 minutes)
3. Introduce the subject of pricing strategies using the PowerPoint Presentation. As you are going through the Presentation, keep engaging the students in discussion using the adverts collected or ask students to go through the magazines, etc. provided to find examples of their own to highlight the strategy. Get students to write the strategy on a large sheet of paper and then stick the examples underneath - these should be put around the room to act as peripheral learning devices and reinforcement throughout the two lessons (and beyond if there is space!). (35 minutes)

Lesson 2

The second lesson can be attacked in a variety of ways to suit the needs of the group.

1. Review the learning outcomes from the last lesson, reminding students of the practical examples highlighting the strategies. (5 minutes)
2. The remainder of the lesson can be followed in a flexible manner. (45 minutes)
   • Introduce the Activity and go through the two case studies. Students can either be set the task or it can be the basis for some discussion prior to students writing down some information. The Activity can be used as a discussion base only without the need for any written output.
   • Students could be split into groups to consider their response to the case study and a representative feedback the group ideas to the rest of the class. The main points should be highlighted on the board or flip chart to enable the outcomes to be discussed. Highlight the different emphasis given by different groups - the aim is to drive home the principle that there is no right answer to such questions but that students need to be confident in making judgements and supporting those judgements.
3. Finish off the lesson with a review of the key learning outcomes - give a short question and answer session to assess the extent of the learning that has taken place. (10 minutes)