Interactive Marketing week 8 Ethan Chazin


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Great tips, resources, best practices and how-to's on Internet Marketing and Interactive Media esp. on how they affect products to plan launch and grow a wildly successful business.

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Interactive Marketing week 8 Ethan Chazin

  1. 1. How the InternetHow the Internet Affects PricingAffects Pricing
  2. 2. Effects of the 2Effects of the 2IIss on Pricingon Pricing
  3. 3. • Makes it easier to reach a much wider audience • Easier and cheaper to implement dynamic pricing strategies. • Easier and cheaper to adjust pricing based on demand. • Cheaper for consumers to investigate pricing. • Easier to measure customer sensitivity to pricing promotions. • Easier to receive customer feedback on pricing. Interactivity Affects PricingInteractivity Affects Pricing
  4. 4. • Consumers make it easier for companies to convey information on the pricing they are willing to pay for specific products. • Customers can register their preferences with organizations. • Customers can more easily participate in dynamic pricing processes. • The Internet (different websites) makes it much easier to cater to different segments, so firms can set specific pricing by segment. IndividualizationIndividualization
  5. 5. For Discussion Will the InternetWill the Internet commoditize pricing?commoditize pricing?
  6. 6. DynamicDynamic PricingPricing ModelModel
  7. 7. • Firms react to competitor actions such as changes in pricing. • Companies change their offerings, enhance existing products, launch new products, and constantly updates their product portfolios. • 3 Strategies for pricing: – Hi-LoHi-Lo: Prices set high most of the time, then deep discounts set occasionally. – Every Day Low PriceEvery Day Low Price: Everyday prices set low (lower than the High in the Hi-Low approach) – Retail/OutletRetail/Outlet: Regular pricing set at retail stores hardly ever discounted. Merchandise is discounted at the outlet stores. Dynamic PricingDynamic Pricing
  8. 8. • 2011 final ONE day sales of $1.37 billion was 33% more than 2010’s total $1.03 billion. • $198.26 average sale was 2.6% more than last year’s $193.24. • IBM found that about 10.8% of consumers used mobile devices to visit a shopping site while 6.6% made an actual purchase. This increased from 6.9% and 2.3% in 2010. Cyber MondayCyber Monday
  9. 9. • Cost PlusCost Plus: Add a fixed mark up to the cost of making the product. • For service-based firms, you apply the mark up to the employees’ hourly based fee. • Easy to compute but it has a lot of drawbacks. • Not always easy to compute all the costs. • Fixed costs may be applied to expected sales whose forecasts are off. • Doesn’t take into consideration the relationship between price and quantity in the demand curve. Cost Plus Pricing StrategyCost Plus Pricing Strategy
  10. 10. • For mature products/services, you set your pricing to meet/exceed growth rates. • Three elements to adjust include: – Reducing costs; – Growing sales, and/or – Changing prices. • In mature markets, costs are relatively fixed so you can experiment with different pricing strategies. Target Profit Pricing StrategyTarget Profit Pricing Strategy
  11. 11. Brand Pricing
  12. 12. • Setting a high price for a perceived high value brand leads customers to positive feelings of self-worth associated with the value and image of owning the brand. • Through brand-building the firm hopes consumers will pay a premium for the sense of luxury associated with owning their brand. BrandBrand Pricing Strategy
  13. 13. Effects of the Internet on Dynamic Pricing
  14. 14. • Decreased menu costs: pricing can be changed easily via the Internet. • Interactivity: It’s easy for buyers and sellers to interact and agree to pricing online. • Adjusting pricing to market demands can happen in hours, not months or years. • With the Internet, DYNAMICDYNAMIC pricing becomes a reality... InternetInternet on Pricing
  15. 15. • Pricing is NOT set in stone; it’s FLUID. – Few MENU costs, the actual cost associated with changing prices. – The Internet makes it EASY for buyers and sellers all over the world to negotiate prices. • Auctions become a key pricing strategy on the Internet. DYNAMICDYNAMIC Pricing
  16. 16. For Discussion By using the information gathered from customers (from where they live to what they buy to how much they have spent on past purchases) dynamic pricing allows companies to adjust the prices of identical goods to correspond to a customer’s willingness to pay. IS THIS GOOD OR BAD?IS THIS GOOD OR BAD?
  17. 17. Price Discrimination
  18. 18. • Charge customers a different price for the same product. • Is it okay to offer discounts to students? Children? Seniors? What about volume discounts to frequent users/purchasers, Government employees, corporate rates, special rates through online/offline travel rates, calling the hotel directly… Price DiscriminationPrice Discrimination
  19. 19. Bundle Pricing
  20. 20. • Offering pricing based on bundles of products. • Easy to implement for firms. • Mix-match complimentary products. • The bundle price is less than the sum total of all the stand-alone product prices. • Cable company TRIPLE PLAYs. • Web hosting and email service. • Toothbrush & toothpaste. BundleBundle Pricing
  21. 21. • English (ascending/oral) open auctions: competing potential buyers keep raising their prices until only ONE buyer is left. • Reverse-Price auctions: firms submit an RFP/RFQ to initiate a supply auction. The firm that provides the lowest bid to provide the products/services is selected. • Dutch auctions: based on selling tulips in the Netherlands, the auctioneer sets a high price, then comes down until a buyer agrees to the price. – On eBay the auctioneer sells multiple units of the same item InternetInternet Auctions
  22. 22. • First price select bid auctions: sellers offer a good for potential buyers to consider. Each bidder can submit one sealed price bid fort he product by a pre-determined time. InternetInternet Auctions
  23. 23. If you wanted to bid on something online, where would you go FIRST? DISCUSSIONDISCUSSION
  24. 24. Electronic Exchanges, e-Marketplaces
  25. 25. Online Bartering, Swap Marketplaces