Home   Internet Marketing                                          Ward Hanson   Stanford GSB

Smart Pricing 

Learning Objectives

Why the Net Changes Pricing

Pricing and Value

Net Content and Price Sensitivity

XML and Pricing

Case:  Homegain.com

Special Guest:  Bruce Schroder, Homegain.com

 

 

 

 
 
Readings & Tasks
Hanson: Ch. 11
Hall
Ankarani & Shanker
Case:   Homegain.com

Example Sites:

Price and product comparison sites

Auction types online Your Way Around Auctions -   These tutorials take  you through some of the steps necessary to get an auction moving, avoid problems, and  providing feedback.  It is from AuctionWatch.com, a site monitoring and supporting the auction community.   Among the topics:

Buyers:

Sellers:

 

Newstand & Airwaves
_/ 02-05-01\__ Economics of Comparison Sites: NY Times,  Reuters
_/ 02-23-99\__
Pricing Errors on Web Costly, NY Times    

 

 

 

 

Drucker's 5 Sins of Business contain three pricing-related problems:

  • The worship of premium pricing,
  • Skim pricing of new products
  • Cost-driven pricing.

The Net is changing the pricing rules for many companies, and making these pricing sins even more punishing.  There are many examples.    Both Amazon.com and Barnes  & Noble online have 50% off of NY Times bestsellers.  Reel.com has prices so low for some new movies that they were sued by "brick and mortar" competitors. Skim pricing and traditional cost plus pricing are difficult in such a world.

Even markets not associated with the Internet or not commonly associated with price competition are being affected.  Consider performance harmonicas. 

With retailers few and far between, price competition and price shopping is nearly impossible.  But along comes a fan with some time and enthusiasm, and price comparisons are a simple link away. 

Pricing is the most "digital" of the traditional marketing four p's, and the chapter discusses how this is revolutionizing pricing.   Any manager, of almost any product and service, needs to think about the Internet when deciding on their product or service pricing.

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  • Pricing policies - When P=0: In a number of industries the pricing strategy is changing dramatically.  On one hand, it looks like the price is going from a normal level to free.  At the same time, advertisers are stepping in and paying to support the service.  So, instead of charging for a service or product the web site is charging for traffic. But then again, as advertising is challenged the prices might have to rise again.