ELC 310 Day 23

Agenda 1 st round case grades 1 A, 2 B’s and 1 C+ More research and analysis! Fifth Student Case OSRAM Sylvania by Owen presentations at least 15 min before class so I may upload to web server Case studies are tied to proceeding chapters, make sure you discuss the connection Discussion/lecture Pricing and Distribution

Case study Grading rubric (corrected) Grade Generation for analysis Demonstrated Mastery of Case Study35% Understanding of How Case Study Fits35% Presentation effectiveness 10% Quality of PowerPoint 10% Ability to Engage the Class in Discussion 10% Grades will be posted Nov 25 & Dec 12

® Tony Gauvin, UMFK, 2007 Rest of Schedule Today OSRAM Sylvania (Owen) Pricing and Distribution Dec 5 Student evualations Logistics.com A & B (Steve) Build a Trusting Relationship with Customers Dec 9 Travelocity (Randy) The Future of Digital Marketing Dec 12 Citibank Online (Emlyn) Take Home Quiz #4 Assigned Dec 1 PM Take Home Quiz #4 Due Written Case Study & Presentations Due

Overview Introduction Pricing Strategies Standard price models Incentives B2B exchanges Auctions Distribution Chanel conflicts End to end system integration

Introduction Value = benefits – cost Price for consumer is part of cost Increased price means lower value Price for producer is part of benefits Increased price means higher value Price part of total product package of benefits Becomes a consumer decision variable Digital technologies affect pricing in a few ways

Price Price must be between cost of production and value of product to consumer Price too low means manufacture loses profit Price too high means less consumer buy less product (which can also lead to lower profits) Ideally, Price should extract maximum profitability from the product Price based in supply and demand

Equilibrium pricing Assumes perfect elasticity of supply and demand and perfect competition

Pricing Models Cost plus Cost of manufacturing plus profit Break even analysis Break Even = Fixed Cost / (Unit Price - Variable Unit Cost) Unit Price = (Fixed Cost/Break Even) – Variable Unit Cost; assuming a conservative estimate for Break Even units Volume as a function of price point Competitive Pricing Penetration Pricing Market building

Incentive Sites Add benefits to the consumer value proposition as a offset to price Add customers MyPoints Thank You network Cool Savings

B2B exchanges Biggest promise from early ecommerce Biggest bust Insufficient incentives for potential participants to participate Most B2B exchanges have failed Tele Flower Auction (TFA) is an exception Added reach (non domestic growers) to an existing process (Dutch flower auction)

Auctions Reverse Auctions Auctions off demand Suppliers bid against demand Forward Auctions Auctions off supply Buyers bid against supply

Distribution Methods of transportation and storage usually by intermediaries bringing products to consumers Internet promise of disintermediation failed since intermediaries add value by Matching buyers to sellers Requisitioning (aggregation and disaggregation) Problem solving Big problem is channel conflict

End to end system integration Creating and capturing value in the supply chain (SCM or VCM) Tighter integration between intermediaries Better information flow Wal-Mart Inventory Management System POS Perpetual Inventory system Backroom receiving system systems Information available to distribution centers and partner vendors daily Right products are on the right selves at the right time for the right price