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E Marketing Week09

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Pricing strategies

Week 9 of 13 of the 2007 Internet Marketing Course. Content is based in part on Dann, S and Dann S 2004 Strategic Internet Marketing 2.0, Milton: Wiley. Diagrams taken from the Dann and Dann text are copyright to their respective copyright holders.

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E Marketing Week09

  1. 1. MKTG7037 / MKTG2032 E-marketing Week 00111001
  2. 2. Course Structure Chapter 15 International marketing 21 May 12 Chapter 14 Relationship marketing 28 May 13 Chapter 13 Services marketing online 14 May 11 Chapter 12 Distribution 7 May 10 Chapter 11 Pricing strategies 30 April 9 Chapter 10 Promotion 2: the internet as a promotional medium 23 April 8 Chapter 9 Promotion: the internet in the promotional mix 2 April 7 Chapter 8 The role of product in internet marketing 26 March 6 Chapter 7 The internet in marketing strategy 19 March* 5 Chapter 6 Applications for business and non-business 12 March 4 Chapter 5 Creating cybercommunities 5 March 3 Chapter 4 Consumer behaviour 26 February 2 Chapter 3 Unique features of internet-based marketing 19 February 1 Topic(s)/Task(s) Week beginning Week No
  3. 3. Assessment Due Dates <ul><li>Task Weighting Due </li></ul><ul><li>Essay Registration 01 March 16 </li></ul><ul><li>Solo Assignment 20 March 26 </li></ul><ul><li>Group-Optional Essay 29 May 21 </li></ul><ul><li>Final Examination 30 June </li></ul><ul><li>Online Forum 20 During semester </li></ul>
  4. 4. Forum Discussion Anonymity? Good, bad or please don’t do that again?
  5. 5. Exam Preparation <ul><li>Post graduate Students (MKTG7037) </li></ul><ul><ul><li>International online marketing (Chapter 15) </li></ul></ul><ul><ul><li>Lu and Yeung’s (1998) framework (Chapter 10) </li></ul></ul><ul><ul><li>Applications for business and non business (Chapter 6) </li></ul></ul><ul><ul><li>Distribution (Chapter 12) </li></ul></ul><ul><ul><li>Consumer Behaviour </li></ul></ul><ul><ul><li>Innovation adoption (Chapter 4) </li></ul></ul><ul><ul><li>Pricing (this week) </li></ul></ul><ul><ul><li>Social media marketing (throughout the course) </li></ul></ul>
  6. 6. Exam Areas (Undergrads) <ul><li>Cybercommunities </li></ul><ul><li>Applications of the internet </li></ul><ul><li>Distribution </li></ul><ul><li>Innovation adoption </li></ul><ul><li>Social Media Marketing </li></ul><ul><li>Pricing </li></ul><ul><li>Online objectives </li></ul><ul><li>Characteristics of the internet </li></ul>
  7. 7. Price Something of value exchange for something else
  8. 8. Total Price Concept (TPC) <ul><li>Price has two key components: </li></ul><ul><ul><li>Financial element </li></ul></ul><ul><ul><ul><li>money </li></ul></ul></ul><ul><ul><li>All other costs </li></ul></ul><ul><ul><ul><li>Intangible </li></ul></ul></ul><ul><ul><ul><li>Difficult to replicate </li></ul></ul></ul><ul><ul><ul><li>Form part of the total cost to the consumer </li></ul></ul></ul>
  9. 9. Total Price Concept: Consumer side <ul><li>Four intrinsic social prices </li></ul><ul><ul><li>Time </li></ul></ul><ul><ul><ul><li>Opportunity costs </li></ul></ul></ul><ul><ul><ul><li>Actual time cost </li></ul></ul></ul><ul><ul><ul><li>Waiting periods / Download times </li></ul></ul></ul><ul><ul><li>Effort </li></ul></ul><ul><ul><ul><li>Bartering of personal services for the final product </li></ul></ul></ul><ul><ul><ul><li>“ Some assembly required…” </li></ul></ul></ul><ul><ul><li>Lifestyle </li></ul></ul><ul><ul><ul><li>Change in some aspect of the person’s habits or behaviours </li></ul></ul></ul><ul><ul><ul><ul><li>Eg cutting back TV to play World of Warcraft </li></ul></ul></ul></ul><ul><ul><li>Psyche costs </li></ul></ul><ul><ul><ul><li>Perceived loss of self esteem, privacy or pride </li></ul></ul></ul>
  10. 10. Total Price Concept in self production <ul><li>Blogging </li></ul><ul><ul><li>Time </li></ul></ul><ul><ul><li>Effort </li></ul></ul><ul><ul><li>Lifestyle </li></ul></ul><ul><ul><li>Psyche </li></ul></ul><ul><ul><ul><li>Loss of privacy </li></ul></ul></ul><ul><ul><ul><li>Fear of being ridiculed </li></ul></ul></ul><ul><ul><li>Associated financial costs </li></ul></ul><ul><li>Second Life </li></ul><ul><ul><li>Time </li></ul></ul><ul><ul><li>Effort </li></ul></ul><ul><ul><li>Lifestyle </li></ul></ul><ul><ul><li>Psyche </li></ul></ul><ul><ul><ul><li>Loss of privacy </li></ul></ul></ul><ul><ul><ul><li>Fear of being ridiculed </li></ul></ul></ul><ul><ul><li>Subscription fees Money </li></ul></ul>
  11. 11. Pressures on internet pricing <ul><li>Perceived lower costs to the seller </li></ul><ul><li>Environmental turbulence </li></ul><ul><li>Taxation (or lack of it) </li></ul><ul><li>Cyberculture </li></ul><ul><li>Universal (or near universal) price knowledge </li></ul>
  12. 12. Comparing costs traditional and electronic markets Source: Strader, T. J. & Shaw, M. J. 1999, ‘Consumer cost differences for traditional and Internet markets’, Internet Research: Electronic Networking Applications and Policy , vol. 9, no. 2, p. 83.
  13. 13. How online companies save costs <ul><li>Online companies can save costs by: </li></ul><ul><ul><li>Reducing overhead costs </li></ul></ul><ul><ul><li>Increasing the role of the customer </li></ul></ul><ul><ul><li>Producing and distributing promotional material online </li></ul></ul>
  14. 14. Cyberculture <ul><li>Gift Economies </li></ul><ul><ul><li>Status and reputation comes from what you give away instead of what you hoard </li></ul></ul><ul><ul><li>Respect is earned through the distribution of effort to the community </li></ul></ul><ul><li>Gift cultures trade social price rewards </li></ul><ul><li>Pay-per-use cultures trade money </li></ul>
  15. 15. Setting pricing objectives <ul><li>Financial objects such as: </li></ul><ul><ul><li>Cost-based objectives </li></ul></ul><ul><ul><li>Profit-oriented objectives </li></ul></ul><ul><li>Market-based objectives include: </li></ul><ul><ul><li>Market share objectives </li></ul></ul><ul><ul><li>Consumer expectations and reference pricing </li></ul></ul><ul><li>Psychological objectives: </li></ul><ul><ul><li>Positioning and price-quality relationship </li></ul></ul><ul><ul><li>Minimisation of non-financial price components </li></ul></ul>
  16. 16. Pricing strategies <ul><li>Pricing strategies have two functions: </li></ul><ul><ul><li>To support the overall marketing mix and positioning strategy of the company </li></ul></ul><ul><ul><li>To assist in achieving the company’s objectives, both financial and non-financial </li></ul></ul>
  17. 17. Options in pricing strategy <ul><li>three main options in pricing strategies: </li></ul><ul><ul><li>Below the average price </li></ul></ul><ul><ul><li>Around the average price </li></ul></ul><ul><ul><li>Above the average price </li></ul></ul><ul><li>Is that price in terms of dollars or time? </li></ul><ul><ul><li>Below the average time </li></ul></ul><ul><ul><li>Around the average time </li></ul></ul><ul><ul><li>Above the average time </li></ul></ul>
  18. 18. Issues in pricing for online activities <ul><li>Four key issues that the online marketer must consider: </li></ul><ul><ul><li>Apparent ease of price comparison </li></ul></ul><ul><ul><li>The nature of the product being priced </li></ul></ul><ul><ul><li>The total cost of the product to the consumer </li></ul></ul><ul><ul><li>International currency transactions and different payment systems </li></ul></ul>
  19. 19. Discussion Questions for the Board <ul><li>Which costs are more likely to stop your involvement in online activities? Money or time costs? How would you suggest lowering this key price barrier? </li></ul><ul><li>What are some of the costs borne by the consumer engaged in online purchasing which are outside the control of the company? How do they impact on the consumer’s purchase intention and price perceptions? What can the organisation do to assist the consumer in reducing these costs? </li></ul>

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