Pricing drives three of the most important elements of firm success: revenue and profits, customer behavior and firm image. This book provides an introduction to the basic principles for thinking clearly about pricing. Unlike other marketing books on pricing, the authors use a more analytic approach and relate ideas to the basic principles of microeconomics. Rakesh Vohra and Lakshman Krishnamurthi also cover three areas in greater depth and provide more insight than may be gleaned from existing books: 1) the use of auctions, 2) price discrimination and 3) pricing in a competitive environment.

"Many businesses focus on driving volume or reducing costs rather than increasing price under the mistaken belief they have greater control over volume and costs than price. Yet, a 1% increase in price (holding volume fixed) has a greater impact on operating profit than a 1% increase in volume or a 1% decrease in cost. By not seizing the initiative on price, businesses abrogate decisions about price to competitors, customers, and the channel. A careful analysis and understanding of those same actors could help them price in a more profitable manner. Hence, this book, which is designed to communicate the fundamental principles of pricing. In marked contrast to other books on pricing, this one is based on economic theory. This is not to deny the value to be had from looking at pricing through other lenses. It is simply that these other lenses do not yet provide a systematic and organized way to think about pricing. Economic theory does. Its power is not in the provision of to-do lists or the Gradgrind-like accumulation of facts.8 Rather, it is in generating the right questions to be asked. Both our own experiences and that related to us by our students who have taken our classes has confirmed us in this view. A second point of contrast with other treatments of pricing is that we convey principles through stylized examples rather than anecdotes"--

The Legends in Marketing series captures the essence of the most important contributions made in the field of marketing in the past hundred years. It reproduces the seminal works of the legends in the field, which is supplemented by interviews of these legends as well as by the opinions of other scholars about their work. The series comprises various sets, each focused on the multiple ways in which a legend has contributed to the field. This fifth set in the series, consisting of nine volumes, is a tribute to Philip Kotler. Known as one of the foremost authorities on marketing, a great listener and speaker, and a truly pioneering author, Professor Kotler is ranked as one of the six most influential business thinkers.

We investigate how adoption of a retailer's factory outlet channel impacts customers' spending in the retailer's traditional retail store channel. In recent years, many retailers have added exclusively sourced factory outlet stores into their channel mix to achieve market expansion and customer segmentation. However, the impact of adoption of this lower-quality, lower-price alternative channel on spending at the retailer's higher-quality, higher-price retail store channel is not clear. Customers adopting the outlet channel might increase their spending in the retail store channel due to the opportunity to become familiar with the brand at a lower price point or transfer of positive associations formed through patronage of the outlet channel to the store channel. Customers adopting the lower quality channel might also decrease their spending in the retail store channel due to brand dilution or cannibalization. In order to investigate this issue, we use a unique individual level panel data set from a specialty apparel retailer from a period during which it opened many factory outlet stores. This allows us to study how the purchase behavior changes after customers adopt the outlet channel while carefully controlling for alternative explanations including customer heterogeneity and selection effects. We find that although customers who adopt the outlet channel spend less with the retailer compared to store-only customers, the difference cannot be attributed to the impact of adoption of the outlet channel. After controlling for heterogeneity and selection effects, we uncover a positive spillover to the retail store channel from adoption of the outlet channel. Customers who adopt the outlet channel not only make incremental purchases at the outlet channel but also increase their spending in the retail store channel after adoption. The increase in spending is due to more frequent retail store purchases and not due to larger per purchase expenditure.

In this research, we develop an analytical model to investigate how the content of Online Word of Mouth (OWOM) impacts prices, product adoption, and profit when consumers have uncertainty about both the product quality and their own appreciation of quality. We consider how pricing is impacted by the presence of both satisfaction- and information-focused OWOM content with preference correlation between OWOM senders and receivers. There are several findings from this research. First, we find that when there is a mix of OWOM content, increasing the proportion of satisfaction-focused OWOM will increase price and profit for the low-quality firm, but has a U-shaped impact on the high-quality firm profit. Second, we find that profitability can be increased by restricting the type of OWOM content. Specifically, both high- and low-quality firms earn greater profit from an online platform with only satisfaction-focused OWOM than from a platform with a mix of both satisfaction- and information-focused OWOM. However, only the high-quality firm can earn greater profit from a platform with only information-focused OWOM than a firm with a mix of each, and this greater profit is only achieved if consumers have a strong enough incentive to send OWOM. Third, we find that preference similarity between senders and receivers of OWOM negatively impacts the low-quality firm but has a U-shaped effect on the profitability of the high-quality firm. Moreover, preference similarity can not only impact the consumers' incentive to send a satisfaction vs. information review, it also affects how receivers of the OWOM update their beliefs about product quality and their own appreciation of quality. We discuss how firms can formulate appropriate strategies in response to OWOM by understanding its different dimensions (valence, focus, and similarity among senders and receivers).