The Price Isn’t Right

By Detlef Schoder and Alex Talalayevsky

Thanks to the Internet, companies have lost control of their pricing power. Here’s how they can get it back.

Everyone knows that companies have rock-bottom prices they’re willing to offer in emergencies. Think goods and services whose value is about to expire: hotel dates, plane tickets, last season’s fashions, packaged food.

But until recently, not many people knew what those prices were. Keeping them under wraps is a key part of how companies maintain pricing power.

Well, the secret is out. Now, thanks to the Internet, consumers are able to figure out those prices. And that is creating huge headaches for the companies.

Online shoppers today aren’t just buyers; they’re also product reviewers, technical consultants and scouts for legions of fellow shoppers hunting for bargains. Many use Web sites where links are posted for online coupons and cash-back offers—deals that some companies didn’t intend to circulate so widely. Others go to sites where people discuss how to find the lowest bids acceptable on travel-service auction sites. Even shoppers for big-ticket items like cars get an edge from sites that reveal prices paid for new and used cars.

Questions to Ask Yourself

1. Does your company deal in products or services whose value is highly perishable or time-sensitive?
2. Do you offer online coupons or have multiple discount strategies that can be used by unlimited numbers of consumers?
3. Are your resellers sometimes discounting your goods without your authorization or knowledge?
4. Is your company unaware of what’s being said on bargain-hunting and other shopping-related Web sites about its prices and products?
5. Do you make last-minute offers at cut-rate prices without full appreciation as to how that might undermine your established pricing schemes or your brand image?

If you answered yes to any of these questions, your company may need to reassert control over its pricing power by pushing back against the increasing ability of online shoppers to obtain your lowest acceptable prices. Selling unlabeled, marked-down merchandise through an intermediary is one strategy, as is bundling the goods with additional offerings so that the base value you’ve assigned to the products is less clear.

Further assisted by search engines and so-called shopping bots that find the lowest prices for any number of products, shoppers today have unprecedented power to buy products at the sellers’ rock bottom. But if they come to expect such prices all the time, companies could see their long-term pricing power erode and profits slashed.
Here are eight tactics companies can use to limit the ability of bargain hunters to find their deepest discounts and lowest acceptable prices.


Marketing

By Detlef Schoder and Alex Talalayevsky
http://sloanreview.mit.edu

Thanks to the Internet, companies have lost control of their pricing power. Here’s how they can get it back.

Everyone knows that companies have rock-bottom prices they’re willing to offer in emergencies. Think goods and services whose value is about to expire: hotel dates, plane tickets, last season’s fashions, packaged food.

But until recently, not many people knew what those prices were. Keeping them under wraps is a key part of how companies maintain pricing power.

Well, the secret is out. Now, thanks to the Internet, consumers are able to figure out those prices. And that is creating huge headaches for the companies.

Online shoppers today aren’t just buyers; they’re also product reviewers, technical consultants and scouts for legions of fellow shoppers hunting for bargains. Many use Web sites where links are posted for online coupons and cash-back offers—deals that some companies didn’t intend to circulate so widely. Others go to sites where people discuss how to find the lowest bids acceptable on travel-service auction sites. Even shoppers for big-ticket items like cars get an edge from sites that reveal prices paid for new and used cars.

Questions to Ask Yourself

  1. Does your company deal in products or services whose value is highly perishable or time-sensitive?
  2. Do you offer online coupons or have multiple discount strategies that can be used by unlimited numbers of consumers?
  3. Are your resellers sometimes discounting your goods without your authorization or knowledge?
  4. Is your company unaware of what’s being said on bargain-hunting and other shopping-related Web sites about its prices and products?
  5. Do you make last-minute offers at cut-rate prices without full appreciation as to how that might undermine your established pricing schemes or your brand image?

If you answered yes to any of these questions, your company may need to reassert control over its pricing power by pushing back against the increasing ability of online shoppers to obtain your lowest acceptable prices. Selling unlabeled, marked-down merchandise through an intermediary is one strategy, as is bundling the goods with additional offerings so that the base value you’ve assigned to the products is less clear.

Further assisted by search engines and so-called shopping bots that find the lowest prices for any number of products, shoppers today have unprecedented power to buy products at the sellers’ rock bottom. But if they come to expect such prices all the time, companies could see their long-term pricing power erode and profits slashed.
Here are eight tactics companies can use to limit the ability of bargain hunters to find their deepest discounts and lowest acceptable prices. Continuar leyendo «The Price Isn’t Right»

Repeat Business: There’s More of You to Love

Are you familiar with the following concept? It is much easier and more cost effective to sell to existing customers than it is to acquirer a new one. Which one would you rather have? Sell 50 items to 5 people or 50 items to 50 people. When you are designing and tweaking your marketing campaigns, be sure to include your current customer base and maximum their profit potential. Here are several ways to do just that, give your customers a reason to come back for more.

Special Discount Offers

I recently purchased something from an online retailer. When I received my package, I noticed there was a discount coupon inside that I could use on my next purchase. I’m a sucker for coupons and many consumers are. It is a great way to encourage and entice your customers to order again. For best results, the coupon should have a higher discount value than what is normally offered to the general public on sites like Retailmenot.com. The discount should also be a one-time use coupon. This will prevent others from sharing it online and reduce the perceived value.


Post image for Repeat Business: There’s More of You to Love

Curtis Stevens

By Curtis Stevens

Are you familiar with the following concept?  It is much easier and more cost effective to sell to existing customers than it is to acquirer a new one.  Which one would you rather have?  Sell 50 items to 5 people or 50 items to 50 people.  When you are designing and tweaking your marketing campaigns, be sure to include your current customer base and maximum their profit potential.  Here are several ways to do just that, give your customers a reason to come back for more.

Special Discount Offers

I recently purchased something from an online retailer.  When I received my package, I noticed there was a discount coupon inside that I could use on my next purchase.  I’m a sucker for coupons and many consumers are.  It is a great way to encourage and entice your customers to order again.  For best results, the coupon should have a higher discount value than what is normally offered to the general public on sites like Retailmenot.com.  The discount should also be a one-time use coupon.  This will prevent others from sharing it online and reduce the perceived value. Continuar leyendo «Repeat Business: There’s More of You to Love»

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