1. Internet Marketing & e-Commerce Ward Hanson Kirthi Kalyanam Requests for permission to copy any part of the material should be addressed to: PERMISSIONS DEPARTMENT THOMSON BUSINESS and ECONOMICS 5109 Natorp Boulevard Mason, OH Phone: (800)

2. Part Two: Chapter 12 Pricing in an Online World
“It is only an auctioneer who can equally and impartially 公平地 admire all schools 學派 or art.”
Oscar Wilde, The Critic as Artist

3. Power of Pricing
The most active and dynamic of marketing’s fundamental tools
The most digital of marketing actions
Pricing = information
Informational aspect means that all pricing actions are affected by the Net

4. Power of Pricing The close link of pricing to profitability
SOURCE: Marn and Rosiello, (1992), “Managing price, gaining profit,” The McKinsey Quarterly, No. 4, pp

5. Power of Pricing
**For Internet marketers, evaluating price sensitivity online
How does the presence of the Internet change price sensitivity of products?
How can online content influence price sensitivity of customers?
What new pricing tools work better online than through traditional methods?

6. ☆ The Standard Pricing Answer
Based on costs成本法, customer demand, competition市場法
Using research data, pricing intuition, and experience
Even not to set price (auction拍賣法)

7. ☆ Power of Pricing
The Internet tends to increase price sensitivity, but prices online are not automatically lower or less dispersed分岐
Value uncertainty contributes in predictable ways to price sensitivity
Purchase importance contributes in predictable ways to price sensitivity

8. Value Uncertainty Price Sensitivity Factors
Reference price effect: Competitive alternatives and how they are presented online

9. Value Uncertainty Price Sensitivity Factors
Reference price effect: Competitive alternatives and how they are presented online
Difficult comparison effect: Not every consumer is motivated to comparison shop or trusts alternate sites

10. Value Uncertainty Price Sensitivity Factors
Reference price effect: Competitive alternatives and how they are presented online
Difficult comparison effect: Not every consumer is motivated to comparison shop or trusts alternate sites
Switching cost effect: Battle for customers coming and going

11. Value Uncertainty Price Sensitivity Factors
Reference price effect: Competitive alternatives and how they are presented online
Difficult comparison effect: Not every consumer is motivated to comparison shop or trusts alternate sites
Switching cost effect: Battle for customers coming and going
Price-quality effect: Advantage goes to well-established brands

12. Price sensitivity factor: value uncertainty Power of Pricing
Information about product alternatives influences price sensitivity
SOURCE: PRNewsFoto/Nokia, PRNewsFoto/Handspring Inc, Market Wire Global Locate

13. Purchase Importance Price Sensitivity Factors
Total expenditure effect: Consumers are most price sensitive to items that consume largest part of their budget

14. Purchase Importance Price Sensitivity Factors
Total expenditure effect: Consumers are most price sensitive to items that consume largest part of their budget
End benefit effect: Supply chain inputs are more sensitive for companies with price-sensitive customers

15. Purchase Importance Price Sensitivity Factors
Total expenditure effect: Consumers are most price sensitive to items that consume largest part of their budget
End (指 final product) benefit effect: Supply chain inputs are more sensitive for companies with price-sensitive customers
Shared cost effect: Different approaches for cost deciders and cost payers

16. Purchase Importance Price Sensitivity Factors
Consumers who spend major portion of budget on pharmaceuticals are more likely to look for savings online

17. ☆ Advanced Pricing Online
Time-based pricing
Auction
Yield Management
Renting rather than selling
Running a limited time sale
Personalized pricing (page 419 bottom)
Bundle pricing
Bundling to reduce costs
Bundling to expand market
Bundling to improve performance s

18. Time-based Pricing
Borrowing a lesson from financial markets: “The only valid price is the one quoted right now.”

19. Time-based Pricing
Borrowing a lesson from financial markets: “The only valid price is the one quoted right now.”
Auctions, a primary time-based price strategy, let marketplace determine pricing

20. Time-based Pricing
Borrowing a lesson from financial markets: “The only valid price is the one quoted right now.”
Auctions, a primary time-based price strategy, let marketplace determine pricing
Internet resolves problem of assembling enough bidders and enough information
Lessons from EBay

21. Time-based Pricing

22. Time-based Pricing
Yield management, used regularly in travel industry, links price to availability
Importance of fixed, perishable capacity
Low incremental cost vs. average cost
Cost-sensitive vs. most loyal customers
Analyzing and predicting demand uncertainty

23. Time-based Pricing
Yield management, used regularly in travel industry, links price to availability
Importance of fixed, perishable capacity
Low incremental cost vs. average cost
Cost-sensitive vs. most loyal customers
Analyzing and predicting demand uncertainty
Other approaches: rentals, trials and sales

24. Personalized Pricing
Price differences based on willingness to pay, servicing costs or other individual-level distinctions
Higher profits, but potential obstacles
Could be illegal or unethical 不道德
Difficult to identify high-value buyers
Consumer resale risks

25. Personalized Pricing Emerging approaches Coupons and loyalty discounts
Price pegged釘住 to credit scores
Personal-level pricing contracts
Personalized bundling

26. Bundle Pricing Bundling to reduce costs
Production efficiency bundling promotes combined products when production or shipping has steep set-up costs高設置費用之商品
Margin spread bundling combines items with high contribution margins高利潤商品

27. Bundle Pricing Bundling to expand markets
Aggregation bundling stimulates volume, offers higher priced individual items to unusual customer segments
Trade-up bundling encourages customers to increase purchases in price-sensitive markets
Loyalty bundling used to cement loyalty, discourage switching

28. Aggregation Bundle Pricing (Explain: 下面各圖Price per song 去除per song, ; 右圖 20 songs price 分別是 20, 15,10, 5,0 pennies)
Most effective when bundle viewed more similarly than single items
SOURCE: Bakos and Brynjolfsson, (1998), “Bundling Information Goods: Pricing, Profits and Efficiency,” Working paper, MIT

29. Bundle Pricing Bundling to improve performance
Joint performance bundling recognizes that certain components perform better together than separately
Product definition bundling helps consumers understand full range of product and service benefits