ajaz_eco_204_2012_2013_chapter_16_Market_Power

That has helped the company gain some 25 million

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Unformatted text preview: amera at various prices, the company settled on a price of $479—and the impact was significant. Although there was a drop-off in volume, overall sales increased threefold and profits went up fivefold. "Knowing the trade -off between price and quantity allows you to make these decisions," Drescher says. In the financial services market, where smart pricing is an imperative, credit card pioneer Capital One continues to show the way. It built the firm on technology that can identify the most profitable customers, and then tailor prices to reel them in. The Falls Church, Va.-based financial services firm attributes its 30 percent a year average earnings growth to its information-technology strategy, which exploits the Internet and data mining to respond to changing market conditions and demand. Capital One continually tests the market through mailings and Internetoffers to find the right mix of rates and features to appeal to various customer segments: The company is known to conduct more than 64,000 tests a year. On...
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