One of the potential benefits to Amazon’s proposed purchase of Whole Foods is that the online giant might bring its expertise in data analytics and pricing: “Amazon’s wide-ranging data collection and sophisticated analysis helps it set prices and decide what offers to present to different customers” (from “ Amazon-Whole Foods tie-up could speed grocery transformatio n,” ABC News, June 19, 2017). Read this article and note the implications for Whole Foods pricing. What kind of pricing strategies could Amazon bring to the grocery market? In what other ways could Amazon leverage its online expertise at Whole Foods?
Chapter 17 introduces the concept of dynamic pricing – prices that change according to the level of demand, the type of customer, or the state of the weather. This article, “ Surge pricing comes to the supermarket ,” (The Guardian, June 4, 2017), describes how supermarkets may soon use dynamic pricing—even for everyday products like bread and milk. A version of this currently occurs with coupons and personal coupons (where different coupons are sent to different customers). Read this article to see where this is going. What do you think of dynamic pricing that is described in this article? It is fair? Is it [Continue Reading …]
ClassPass is a startup that offers a monthly subscription service to fitness classes in more than 30 cities around the world. The company has struggled to find the “right price” for its services. ClassPass was offering a $100 per month subscription for unlimited fitness classes. This pricing, ClassPass attracted workout warriors – who got the best deal from this pricing, but their usage rate hurt ClassPass’s margins. In April 2016, ClassPass raised the price for its unlimited product to $180 – and not surprisingly lost customers. Learn more about ClassPass’s pricing issues by first reading this article at TechCrunch “ ClassPass sacrifices 10% of customers in pursuit of healthier margins, ” (September 27, [Continue Reading …]
A research study at the Universität Bonn (Germany) found that consumers are willing to pay more for products that include the Fair Trade logo (see image of logo on left). The logo can be found on a range of products including bananas, coffee, chocolate, and wine. TheUniversität Bonn study found consumers were willing to pay 30% more when the product carried the Fair Trade logo. In addition, they thought Fair Trade branded products tasted better. Another part of the study asked consumers to sample two pieces of chocolate and determine which tasted better. While the chocolates were identical, one included [Continue Reading …]
In chapter 17 we discuss dynamic pricing — when prices change “according to the level of demand, the type of customer, or the state of the weather.” Uber is a company that connects people who need a ride with drivers who can give those rides (a competitor to the taxi cab). A key part of Uber’s business model is “surge pricing.” Surge pricing is a form of dynamic pricing and prices increase as cabs become more scarce (due to fewer drivers or a significant increase in demand). So for example, when the weather is particularly cold or wet, many pedestrians seek out cabs. [Continue Reading …]
Another of Seth Godin’s interesting observations in “ Worthless (priceless) ” (September 11, 2014). This idea might be interesting to discuss in class when you discuss value. What examples can you give of something priceless transformed into something worthless? What about something worthless becoming priceless?
American Public Media’s Marketplace radio show recently asked (and answered) “ Why does popcorn at the movies cost so much? ” (August 4, 2014, you can listen or read the transcript). While I thought I knew the whole answer, I only knew half. Check if you know the whole answer – and perhaps use this as a discussion topic when you cover pricing. Can you think of some other reasons why movie popcorn costs so much?
Today technology and big data make it easier and faster to effectively price discriminate — offer different prices to different customers. The practice is becoming more common, especially online. Companies like Staples and Rosetta Stone use a customers’ browsing history and where they live to serve up different prices. For example, a site can tell if you have visited their online competitor or a price comparison site. If that is the case, they assume you are price sensitive, and they might offer you the product at a lower price. Legal? Yes. Ethical? Up for debate. All together, these make dynamic [Continue Reading …]