Class Discussion Notes MKT 390 - 401

1
Class Discussion Notes MKT 390 - 401

• September 19, 2001

2
Product and Pricing

• Creating customer value online
• What is value?
• The entire product experience
• Defined by the customer
• Involves customer expectations
• Applied at all price levels
• Components of the value proposition Online
  benefits
• Product attributes
• Include overall quality and specific features
• Higher and consistent quality mean higher prices
• Features are things like style, color, size etc.
• Benefits are features from the users perspective
• The Internet increases customer benefits
• Marketing mix customization
• User personalization

3
Product and Pricing

• Components of the value proposition - contd
• Branding
• Trusted brands translate to customer perceived
  benefits which translate to higher prices
• Branding decisions
• Use existing brands on the Net
• Pros
• Well known with strong brand equity
• Cons
• New product or channel is risky
• Repositioning of offline brand
• Channel differentiation

4
Product and Pricing

• Branding decisions contd
• Create new brands
• Suggest something about the product
• Differentiate product from competitors
• Capable of legal protection
• Internet brands should be short, memorable, easy
  to spell and easily translatable
• Cobranding
• Maximize synergy and brand recognition
• Partnership should make sense

5
Product and Pricing

• Branding decisions contd
• Internet domain names
• Use company name or trademark in web address
• Names may not be available
• Buy name from registered owner
• Create a modified name
• Cybersquatting
• Pick the right name
• First level domain names
• .com
• .org
• .net
• .mil
• .gov
• .co.countryabbreviation

6
Product and Pricing

• Support services
• Labeling
• Identify brand names
• Sponsorship
• Ingredients
• Instructions for use
• Safety information and certification
• Promotions
• Create product recognition and influence purchase
  decisions

7
Product and Pricing

• Components of the value proposition Online
  costs
• Non-monetary cost reductions based on Internet
  technology
• The Net is convenient
• The Net is fast
• Self-service saves time
• One stop shopping saves time
• Integration saves time
• Automation saves energy

8
Product and Pricing

• Additional considerations for product development
• Market deconstruction
• Increasing velocity
• Short product life cycles
• Unusual business partnerships
• Knowledge management
• Complexity of products

9
Product and Pricing

• Product mix strategies
• Discontinuous innovations
• New product lines
• Additions/extensions of existing product lines
• Improvements or revisions of existing products
• Repositioned products
• Knock off low cost products

10
Product and Pricing

• New product trends B2B market
• Value chain automation
• Improves efficiency in the entire process of
  producing and delivering product/service to the
  customer
• Affiliate programs
• Drive traffic to the site
• Targeted advertising
• Personalized promotions
• Customized web site content
• Sales
• Catalog aggregators
• Product configuration
• Brokerages

11
Product and Pricing

• Value chain automation contd
• Payment/Financing
• Customer Service
• Distribution
• Relationship Marketing
• Outsourcing
• ASP Application Service Provider
• Perform value chain functions for their clients
  offsite
• Pros
• Lower startup costs
• Minimal I/S staff
• Lower switching costs
• Cons
• Lack of control

12
Product and Pricing

• Information sharing
• EDI
• OBI Open buying on the Internet
• Businesses must translate their data to a common
  format for exchange
• XML Extensible Markup Language
• The language can be extended to accommodate new
  types of data
• Built into IE, Netscape, MS Office
• Centralizing Information Access
• Corporate portals
• Sites designed for company employees
• Extranets
• Corporate portals accessible to value chain
  partners
• Groupware
• Lotus Domino and others

13
Product and Pricing

• New product trends B2C market
• Multimedia
• Conferencing software
• Webcams
• Streaming audio
• CD-quality audio
• Streaming video
• Internet telephony VoIP

14
Product and Pricing

• Assistive technologies
• Voice-activated computers
• Large type screen displays
• Type-to-speech or braille
• Speech to text telephony
• Eye gaze-to-type
• Media convergence
• Voice, video and data on corporate networks
• Wireless devices and the Web
• Cell phones
• PDAs
• Broadcast media and the Internet

15
Product and Pricing

• Efficient markets
• 5 characteristics of an efficient market
• Lower prices
• High price elasticity
• Frequent price changes
• Smaller price changes
• Narrow price dispersion

16
Product and Pricing

• The Internet is an efficient market
• Lower prices
• Factors that put downward pressure on prices
• Shopping agents
• Reverse auctions
• Tax-free zones
• Venture capital
• Competition
• Lower costs
• Order processing self-service
• JIT inventory
• Overhead
• Customer service
• Printing and mailing
• Digital product distribution costs

17
Product and Pricing

• The Internet is an efficient market contd
• High price elasticity
• Frequent price changes
• Competition
• Shopping agents
• Easy to change prices
• Volume discounts easier to offer
• Experimentation is easier
• Smaller price change increments
• Response of price sensitive consumers
• Shopping agents
• Offline price changes more difficult

18
Product and Pricing

• The Internet is not an efficient market
• Price dispersion is not narrow
• Why not?
• Online market is immature
• Goods are price in a variety of ways online
• Variety of delivery options and charges
• Time sensitive shoppers
• Branding
• Switching costs
• Second-generation shopping agents
• Metamediaries

19
Product and Pricing

• Factors putting upward pressure on Internet
  pricing
• Distribution
• Affiliate programs
• Site development and maintenance
• Marketing and advertising

20
Product and Pricing

• Pricing strategies
• Penetration pricing
• Market skimming pricing
• Price leadership
• Promotional pricing
• 3 advantages of promotional pricing on the
  Internet
• Highly targeted
• High customer satisfaction with purchases
• Online customers are more loyal
• Segmented pricing
• Negotiation
• Dynamic pricing