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How has the recession affected pricing?

Biography

A pricing and marketing management expert, John’s research focuses primarily on competitive pricing strategies, the design of pricing structures, and channel management. He has taught at the Olin School of Business of Washington University in St. Louis and Columbia Business School. John is the coauthor of the book Smart Pricing: How Google, Priceline and Leading Business Use Pricing Innovation for Profitability.

Wharton School of Business
Murrel J. Ades Professor

Professor Z. John Zhang's research focuses on targeted pricing and other pricing strategies, competitive strategies, market entry and channel and retail management. Recent work probed the complex, unintended pitfalls of targeted pricing the process of targeting a competitor's customers with lower prices in the fastmoving Internet age. Zhang's research suggested that while this approach isn't for every business, it can be an effective tool under the right circumstances. Zhang also provided guidelines to help companies understand when targeted pricing might play an effective role in their marketing strategy.

Professor Zhang's research has been published in toptier academic journals including Marketing Science, Management Science and the Journal of Marketing Research. He also serves as Area Editor for Marketing Science, Management Science_and _Quantitative Marketing and Economics, and has won numerous academic and teaching awards.

Professor Zhang currently teaches Marketing Management to EMTM students, and Pricing Strategies to undergraduate and MBA. He also teaches pricing strategies to executives in China in Chinese.

Professor Zhang received a PhD and MA in economics from the University of Michigan , a PhD and MA in History and Sociology of Science and Technology from the University of Pennsylvania , and a BA in Engineering Automation from Huazhong University of Science and Technology in Hubei, China.

Current Projects:  Targeting and channel strategies; behaviorbased targeted pricing; demand collection systems.

Yuxin Chen and Z. John Zhang (Working), Targeted Pricing and Channel Management.

Z. John Zhang and Dongsheng Zhou (Working), The Art of Price War: a Perspective from China.

Yuxin Chen, Sridhar Moorthy, Z. John Zhang (Working), A NonPriceDiscrimination Theory of Rebates.

Yunchuan Liu and Z. John Zhang (Working), The Benefit of Targeted Pricing in a Channel.

Upender Subramanian, Jagmohan Raju, Z. John Zhang (Working), Customer Value Based Management: Competitive Implications.

Abstract: Many ?firms today quantify the value of individual customers and serve them differentially; providing better service, prices and other inducements to high value customers. We refer to this practice as Customer Valuebased Management (CVM). While previous research and popular press has strongly advocated CVM, ?firms have often met with mixed results. One possible reason why actual outcomes differ from anticipated results could be that ?firms often implement CVM in a competitive environment. Our objective is to study CVM explicitly in a competitive setting. We find that while some recommendations and prescriptions from past research continue to apply in a competitive environment, some others do not. For example, we find that one of the benefits of CVM in a competitive setting is that it can discourage the rival from competing intensely, by increasing the rival’s chances of acquiring unprofitable customers. In this context, lowvalue customers can play an important strategic role by limiting the intensity of rival’s poaching. Consequently, ?firing low value customers or even increasing their value may prove counterproductive.

Z. John Zhang (Working), Dominant Retailer and Channel Coordination.

Z. John Zhang and Gila E. Fruchter (Working), Dynamic Targeted Promotions: A Customer Retention and Acquisition Perspective.

Abstract: This research analyzes the strategic use of targeted promotions for customer retention and acquisition in a dynamic and competitive environment. We develop suitable differential games for both finite and infinitetime problems and provide analytical solutions in each case for defensive and offensive Nash equilibrium closedloop strategies. Our analysis shows that a firm's optimal targeting strategies, both offensive and defensive, in a dynamic setting depend on its actual market share, the relevant redemption rate of its targeted promotions, the value of its market share increase, and the effectiveness of its targeted promotions. Optimal targeting strategies call for a firm to increase its expenditure on defensive (offensive) targeting relative to offensive (defensive) targeting, thus focusing more on customer retention (customer switching), when its market share becomes larger (smaller). These optimal strategies have the attractive feature of being an adaptive control rule. A firm can operationalize these strategies by adjusting its planned promotional incentives on the basis of the observed differences between actual and planned market shares and between actual and planned redemption rates. In the long run, a focus on customer retention is not an optimal strategy for all firms. A firm with a sufficiently large market share should stress customer retention, whereas a firm with a small market share should stress customer acquisition. When market shares are more evenly divided in a market, firms are better off in the long run if they all focus on customer acquisition. Our analysis also suggests that to build a longrun market share advantage in the age of informationintensive marketing, a firm must strive to improve its targeting effectiveness and increase its unit profit margin. We illustrate the results through a numerical example and show the trajectories of a firm's market share, promotional expenditures, and profits as competing firms use targeted promotions optimally over time.

Yuxin Chen, Yogesh Joshi, Jagmohan Raju, Z. John Zhang (Forthcoming), A Theory of Combative Advertising , Marketing Science, 2006.

Vibhanshu Abhishek, Kinshuk Jerath, Z. John Zhang (Under Review), Platform Selling or Reselling? Channel Structures in Electronic Retailing (under review).

Vibhanshu Abhishek, Kinshuk Jerath, Z. John Zhang (Forthcoming), Platform or Wholesale: Channel Structures in Electronic Retailing , CIST 2011.

Past Courses

MKTG254 PRICING POLICY

The pricing decision process including economic, marketing, and behavioral phenomena which constitute the environment for pricing decisions and the information and analytic tools useful to the decision maker.

MKTG288 PRICING STRATEGIES

This course is designed to equip students with the concepts, techniques, and latest thinking on pricing issues, with an emphasis on ways in which to help a firm improve its pricing. The orientation of the course is about practice of pricing, not theory. We will focus on how firms can improve profitability through pricing, look at how firms set their prices and how to improve current practices to increase profitability. The first part of the course focuses on how to analyze costs, customers, and competitors in order to formulate proactive pricing strategies. The second part focuses on price promotions, price bundling, price discrimination, versioning, nonlinear pricing, pricing through a distribution channel, dynamic pricing, etc.

MKTG399 INDEPENDENT STUDY

MKTG754 PRICING POLICY

The course provides a systematic presentation of the factors to be considered when setting price, and shows how pricing alternatives are developed. Analytical methods are developed and new approaches are explored for solving pricing decisions.

MKTG899 INDEPENDENT STUDY

A student contemplating an independent study project must first find a faculty member who agrees to supervise and approve the student's written proposal as an independent study (MKTG 899). If a student wishes the proposed work to be used to meet the ASP requirement, he/she should then submit the approved proposal to the MBA adviser who will determine if it is an appropriate substitute. Such substitutions will only be approved prior to the beginning of the semester.

MKTG999 INDEPENDENT STUDY

Requires written permission of instructor and the department graduate adviser.

  • Finalist for the O’Dell Award for the Most Impactful JMR Paper Five Years Later, 2007
  • Wharton EMBA Electives Teaching Award., 2003
  • Frank Bass Award for the Best Dissertation Paper, 2001
  • John Little Award for the Best Paper in Marketing Science, 2001
  • Eugene Lang Research Fellowship, Columbia University, 2000
  • Eugene Lang Research Fellowship, Columbia University, 1999
  • Rackham Fellowship, University of Michigan, 1992
  • Maas Research Fellowship, University of Michigan, 1990
  • Pensfield Fellowship, University of Pennsylvania, 1987
  • The Newcomen Award for Best Essay in History of Technology, 1987
  • Mellon Fellowship, University of Pennsylvania, 1986
  • Dean’s Fellowship, University of Pennsylvania, 1985

How Lenovo Is Leveraging the Brand from East to West, Knowledge@Wharton 09/21/2005

Knowledge @ Wharton

  • Why Budget Airlines Are Flying High, Knowledge @ Wharton 06/13/2017
  • Mobile Money in India: Does Digitalization Follow Demonetization?, Knowledge @ Wharton 05/30/2017
  • Why Retailers Could Pay a Price for Not Accepting Mobile Payments, Knowledge @ Wharton 11/22/2016
  • The FacebookPayPal Partnership: Who Benefits Most?, Knowledge @ Wharton 10/26/2016
  • The Great Economic Recasting: Can China Pull It Off?, Knowledge @ Wharton 01/07/2016
  • U.S.China Business Relations: Rough Waters Ahead?, Knowledge @ Wharton 12/12/2014
  • Alibaba’s Next Move: Grow Abroad, or Go Deeper into China?, Knowledge @ Wharton 10/01/2014
  • Why Consumers Aren’t Buying the Idea of Mobile Wallets – Yet, Knowledge @ Wharton 08/13/2014
  • Amazon vs. Hachette: The Battle for the Future of Publishing, Knowledge @ Wharton 06/18/2014
  • Anonymous Sharing Apps: Will They Live Up to the Rumors?, Knowledge @ Wharton 03/12/2014
  • China’s Bitter Medicine for Foreign Drug Companies, Knowledge @ Wharton 09/27/2013
  • Advice for YouTube: Find a Subscription Model to Keep Viewers Clicking, Knowledge @ Wharton 07/17/2013
  • On Samoa Air, Fatter People Pay More to Fly: Good Business or Bad Customer Relations?, Knowledge @ Wharton 04/10/2013
  • Mexican Multinationals Target China’s Most Adventurous Consumers, Knowledge @ Wharton 02/06/2013
  • Can Gap, Inc. Fill the Luxury Gap?, Knowledge @ Wharton 01/08/2013
  • Estee Lauder’s New Skin Care Brand in China: The Potential for Highrisk, Highreward, Knowledge @ Wharton 10/16/2012
  • Turning the Retail ‘Showrooming Effect’ into a Valueadd, Knowledge @ Wharton 09/26/2012
  • Is Burberry the Canary in the Luxury Coal Mine?, Knowledge @ Wharton 09/24/2012
  • Why Going Private Won’t Solve All of Best Buy’s Challenges, Knowledge @ Wharton 08/10/2012
  • Ebook PriceFixing: Finding the Best Model for Publishers — and Readers, Knowledge @ Wharton 04/25/2012
  • Starbucks Moves to the ‘Espresso’ Lane in China, Knowledge @ Wharton 04/11/2012
  • Starbucks Moves to the Express(o) Lane in China, Knowledge @ Wharton 04/03/2012
  • Best Buy — the Shrinking Big Box, Knowledge @ Wharton 04/02/2012
  • China’s Consumer Culture Comes of Age, Knowledge @ Wharton 02/29/2012
  • Smucker’s in a Jam?, Knowledge @ Wharton 02/20/2012
  • Free Trade Between China and Taiwan: This Season’s ‘Mega Trend’?, Knowledge @ Wharton 07/01/2011
  • Back to the Future: Will Rising Commodities Prices Create a New ‘Inflation Generation’?, Knowledge @ Wharton 04/13/2011
  • China’s Rare Earth Dominance: Another Global Resource Scramble in the Making?, Knowledge @ Wharton 04/05/2011
  • The HuObama Summit: Big on Symbolism, Less So on Substance, Knowledge @ Wharton 02/02/2011
  • Computer Compatriots: Taiwan and China Draw Economically Closer, Knowledge @ Wharton 09/01/2010
  • Computer Compatriots: Taiwan and China Draw Economically Closer Despite Military and Diplomatic Tensions, Knowledge @ Wharton 09/01/2010
  • Betting on Future Movie Receipts: Beware the Hollywood Lemons, Knowledge @ Wharton 04/28/2010
  • How Much Should You Charge? Why ‘Smart Pricing’ Pays Off, Knowledge @ Wharton 04/14/2010
  • Google’s Next Search: A New China Strategy?, Knowledge @ Wharton 03/31/2010
  • China’s Rebalancing Act: How Much Do Consumers Stand to Gain?, Knowledge @ Wharton 01/06/2010
  • This Means (Price) War!, Knowledge @ Wharton 10/19/2009
  • The iPhone in China: Will Apple Connect with the World’s Biggest Mobile Market?, Knowledge @ Wharton 09/16/2009
  • The Economic Incentives of the ‘StorewithinaStore’ Retail Model, Knowledge @ Wharton 09/02/2009
  • How Hyundai Sells More When Everyone Else Is Selling Less, Knowledge @ Wharton 06/10/2009
  • Rising Giants: Industrial Clusters Are Changing the Face of Chinese Manufacturing, Knowledge @ Wharton 06/03/2009
  • Chinese Manufacturing in an Age of Resource Price Volatility, Knowledge @ Wharton 06/03/2009
  • Best Buy vs. WalMart: Is There Room for Both, and Others?, Knowledge @ Wharton 04/01/2009
  • CocaCola’s Failed Bid for China Huiyuan Juice: The Return of Protectionism?, Knowledge @ Wharton 04/01/2009
  • Backlash: How Early Adopters React When the Mass Market Embraces a New Brand, Knowledge @ Wharton 03/18/2009
  • How About Free? The Price Point That Is Turning Industries on Their Heads, Knowledge @ Wharton 03/04/2009
  • When the Going Gets Tough, the Tough Don’t Skimp on Their Ad Budgets, Knowledge @ Wharton 11/26/2008
  • Navigating Olympic Sponsorship: Marketing Your Brand without Alienating the World, Knowledge @ Wharton 04/16/2008
  • Why Firing Your Worst Customers Isn’t Such a Great Idea, Knowledge @ Wharton 12/12/2007
  • Who Owns You? Finding a Balance between Online Privacy and Targeted Advertising, Knowledge @ Wharton 12/12/2007
  • Retail Price Maintenance Policies: A Bane for Retailers, but a Boon for Consumers?, Knowledge @ Wharton 08/08/2007
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