49 Timing Flash sales 50 Why timing can work Two sets of consumers shoppers

49 timing flash sales 50 why timing can work two sets

This preview shows page 49 - 65 out of 117 pages.

49
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Timing Flash sales 50
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Why timing can work Two sets of consumers, “shoppers” (price comparers) and “loyals” (show up and buy) if firm knows rivals’ price, wants to undercut it slightly at low prices, would rather have high price sold only to loyal customers leads to randomization and price cycles Price sensitive customers will wait, die-hards want it now Hardbacks vs. paperbacks Video on demand prices start at high “purchase only” price and drop to low rental price over time The distribution of customers into “shoppers” vs. “loyals” or patient vs. impatient can vary by product or over time For laptops/tv’s vs. headphones, we should see less price variation for the higher priced goods Supermarkets run sales on goods valued by price sensitive shoppers (milk, paper towels, cola, diapers) or when people are likely to be “looking around” (Thanksgiving turkeys, Super Bowl chips, etc.) Price competition is highest during peak holiday shopping period 51
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Payment models Pay-as-you-go Can overcome budget constraints. Ex. “go phone” Can also help with the “sticker shock” of a big upfront price and expand market 52
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Product based price discrimination The demand curve reminds of us of our missed pricing and segmentation opportunities Product-based segmentation success rests on identifying key differentiation value to distort and persuading customers of the fairness of the segmentation. 53
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Product based price discrimination Different versions in a product class Includes product attributes, included add-ons and bundling 54
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Necessary conditions for product- based customer segmentation 55
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Ex. Capacity (note: 16GB flash memory cost about $15 at the time, 3G chips cost much less than $130) 56
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Damaged goods: intentional reduction in the value of the product in order to price discriminate Note: this reduction in value comes at a positive cost to the firm. Producing a piece of hardware with fewer features is a different, but related, concept. Amazon “super saver” free shipping (7-10 days) Hold the item in the warehouse for a few days Copied by many online retailers, price sensitive consumers willing to wait, some people pay for “standard” IBM LaserPrinter E Added chips to slow processing Sony 74, 60 minute mini-discs differ by instructions on disc Throttling of internet speeds when there is no congestion 58
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Sharp DV740U Missing Button 59
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Sharp DV740U Missing Button 60
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Tracking shows that FedEx holds 2-day delivery packages at distribution centers to reduce chance they arrive in 1 day (intentional delays) 61
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Due to increased routing complexity, it actually costs FedEx to reduce the quality of the service… why is this profitable? 62
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Pushes high value of speed customers into one day who would otherwise risk two-day Differentiation to justify price differences Note the arrow 63
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Question: would this make sense if there were only the following two types of customers?
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