©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPartTwo:Chapter12PricinginanOnlineWorld“Itisonlyanauctioneerwhocanequallyandimpartiallyadmireallschoolsorart.”OscarWilde,TheCriticasArtist卫浴网©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPowerofPricing•Themostactiveanddynamicofmarketing’sfundamentaltools•Themostdigitalofmarketingactions•Pricing=information•InformationalaspectmeansthatallpricingactionsareaffectedbytheNet©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationThePowerofPricing1.TheWorshipofPremiumPricing–companiestrytoohardtoholdontohighprofitmarginswithsmallsales2.SkimPricingofNewProducts–companiesservethemostdesirablesegmentfirstandforgettoadapttothemainstream3.Cost-DrivenPricing–Costisinternaltothefirm,butvalueistheonlythingthecustomercaresaboutDrucker’sPricingSins©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationThePowerofPricingPricingisTightlyLinkedtoProfitabilityProperpricingmustreflectchangesbroughtaboutbytheInternetTheHighLeverageofProperPricing©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPowerofPricing•ForInternetmarketers,evaluatingpricesensitivityonline–HowdoesthepresenceoftheInternetchangepricesensitivityofproducts?–Howcanonlinecontentinfluencepricesensitivityofcustomers?–Whatnewpricingtoolsworkbetteronlinethanthroughtraditionalmethods?©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPowerofPricing•TheInternettendstoincreasepricesensitivity,butpricesonlinearenotautomaticallylowerorlessdispersed•Valueuncertaintycontributesinpredictablewaystopricesensitivity©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPriceSensitivity&theNet•CommonperceptionisthattheNetwillalwaysraiseconsumerpricesensitivity–Thiswillbetrueformanycompanies•But,somecompanieswillbeabletogethigherprices•So,weneedtounderstandwhytheInternetbringsaboutchangesinpricesensitivityPriceSensitivityandOnlineInformation©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPriceSensitivity&theNet•Themostimportantdeterminantofpricesensitivity•Uniquefeaturesandbenefitslowerpricesensitivityandraisewillingnesstopay•Toproveuniqueness–Providehardfacts,solidtestimonials,andhands-ontrialuse•TheInternetiseffectiveatdoingthisTheUniqueValueEffect©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPowerofPricing•Referencepriceeffect:Competitivealternativesandhowtheyarepresentedonline©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPriceSensitivity&theNet•Connectspricesensitivitywiththepresenceandawarenessofalternatives–Priceelasticitydependsonwhethertherearealternativesavailableinthemarketplace•TheNetenablesinstantaneousside-by-sidepricecomparisonsofavailablealternatives–Increasinginformationmayleadtolesswillingnesstopay•ThismaybetheNet’sbiggestimpactTheSubstituteAwarenessEffect©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPowerofPricing•Referencepriceeffect:Competitivealternativesandhowtheyarepresentedonline•Difficultcomparisoneffect:Noteveryconsumerismotivatedtocomparisonshoportrustsalternatesites©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPriceSensitivity&theNet•Priceelasticityismuchhigheronitemsthatarenonperishableandcanbestoredeasily–Example:Adiscountonbooksmaypromptpurchaseeventhoughtheconsumermaynotreadthebookforseveralmonths•It’shardertostimulatedemandbyloweringthepricesofperishableitems–TherehastobeaclosermatchbetweentimeofpurchaseandconsumptionInventoryEffect©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPowerofPricing•Referencepriceeffect:Competitivealternativesandhowtheyarepresentedonline•Difficultcomparisoneffect:Noteveryconsumerismotivatedtocomparisonshoportrustsalternatesites•Switchingcosteffect:Battleforcustomerscomingandgoing©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationCreatingcustomerswitchingbarriers•Collectdetailsoncustomerstoraiseswitchingcosts•Knowingpreferencesisnecessaryforbetterservice•TheWebsiteshouldlearnaboutthecustomer’spreferences©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPowerofPricing•Referencepriceeffect:Competitivealternativesandhowtheyarepresentedonline•Difficultcomparisoneffect:Noteveryconsumerismotivatedtocomparisonshoportrustsalternatesites•Switchingcosteffect:Battleforcustomerscomingandgoing•Price-qualityeffect:Advantagegoestowell-establishedbrands©Copyright2006,ThomsonSouth-Western,adivisionoftheThomsonCorporationPriceSensitivity&theNet•Well-knownbrandswithahighqualityreputationcanchargehigherpricesbecausepricesensitivityislessened–Example–CharlesSchwabvs.Ameritrade•Unknownonlinelow-priceoutletsneedtobuildconfidenceandtrustiftheywantcustomerstorespondtolowprice–Onesolutionistopartnerwithtrustedandwell-knownfirms•Whilewell-knownfirmsmayeventuallyhavetolowertheirpricestomatchthecompetition,theprice-qualityeffectdelaystheneedforthisresponsePrice-QualityEffect©Copyright2006,ThomsonSouth-Western