All marketing students should read one of Seth Godin’s many short books. He presents his insights in a very simple, easy to understand manner — something we try to do (but don’t always succeed at) in our text books. Seth Godin recently had a nice post “ On pricing power ” (February 17, 2011) at his blog. I have little to add — I just suggest you read it because I think you will like it.
While this article describes the psychology of holiday (so last month) discounts, “ Many Discounts, Few Deals ” (Wall Street Journal, December 15 – click here for a backdoor to the article if you don’t subscribe ), the concepts apply at all times of year. “Do we promote our $29.50 jeans as “50% off” or as “$15.” Marketers are still trying to figure out how consumers process prices. What do you think? Does framing discounts differently influence your buying behavior? If the Gap describes a discount in a way that boosts sales 1% — that could be big money!
Amazon.com comes up with some very creative marketing strategy ideas. One of its very successful programs is Amazon Prime. For $79 a year (free first year for students), Prime members have all Amazon orders shipped with free two-day delivery (full disclosure, Joe is a very satisfied Prime customer). This Bloomberg Businessweek article, “ What’s in Amazon’s Box? Instant Gratification ” (November 23, 2010), describes how this brilliant “Place” decision has built loyalty and sent major competitors scrambling. This provides a great example of a firm leveraging its strengths (wide selection and low prices) — making it hard for other online retailers to copy the strategy. Combine [Continue Reading …]
As we get closer to the end of the semester we get closer to covering pricing. This is always a challenging topic. It is nice to see a couple of recent Wall Street Journal articles that address timely pricing challenges. In “ Dilemma Over Pricing ,” (WSJ, October 21, 2010) rising commodity prices are pressuring profit margins at companies ranging from General Mills to Domino’s and Harley Davidson. Of course the economy has many cautious, price sensitive customers — so firms are treading carefully. In “ Raising Prices Pays Off for Some ,” (WSJ, October 27, 2010), you can read how a few small companies have raised prices in [Continue Reading …]
The Bloomberg BusinessWeek cover story this week (“ What Amazon Fears Most: Diapers, ” October 7, 2010) is a long article on Diapers.com. The story is interesting and relays the low-cost start-up strategy. The founders spent their seed money on building a customer friendly website . When they launched they were buying diapers from the local club stores and storing them in a friend’s garage. They have since moved into three state-of-the-art warehouses. The article describes Diapers.com’s retail and pricing strategy — let’s not make money on the diapers but on the other products shoppers add to the cart with the diapers. The article also has some excellent [Continue Reading …]
If you are not familiar with Ryanair’s low-cost business model, this article “ Ryanair’s O’Leary: The Duke of Discomfort ” (Bloomberg BusinessWeek, September 2, 2010) will bring you up to speed. What do you think of Ryanair’s approach to air travel? Does the low service, low price model work for you? What if the plane’s only had one pilot?
In our text books we have a boxed example on “freemium” in one of our pricing chapters. Freemium refers to “giving away service to users and making money when some opt to pay for additional features.” As consumers we love this strategy — who doesn’t want something for free (especially when living on a student budget). It certainly encourages people to try your product. But how can you make money giving something away? Evernote, a suite of software and services used for taking and storing notes, has used the freemium business model with great success. This Fast Company article, “ Evernote CEO Phil Libin’s 3 Steps to ‘Freemium’ Success [Continue Reading …]