ajaz_eco_204_2012_2013_chapter_16_Market_Power

This may be incorrect because online customers do not

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Unformatted text preview: ces by matching rivals 28% [of executives] have no Internet pricing strategy 22% [of executives] set all prices only to recover costs and tack on profit 18% [of executives] do customer research to determine value to buyer No wonder then that a McKinsey report (see article) found that: “price changes have the biggest, fastest impact on profits compared with other factors”: + 1% price= profits up 8.6% - 1% variable cost = profits up 5.9% + 1% volume = profits up 2.8% - 1% fixed cost = profits up 1.7% Let’s examine each “price strategy” one by one: 40 % [of executives] match online prices to those offline. Matching online and offline prices implies: This implies that and . This may be incorrect because online customers do not necessarily have the same price elasticity as offline customers and surely the of online transaction differs from 10 offline transactions . 10 Note: There may be a reason why online prices match offline prices: the possibility of arbitrage where consumers buy in the l ow priced market and sell in the high price market. For example, it...
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This document was uploaded on 01/19/2014.

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