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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
. 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
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.
- Fall '14
- The Land