7. Pricing strategies in E-Commerce Flashcards
Fixed Pricing
= price of a good/service that is not subject to bargaining
→ a merchant that has set a price level which may not be changed for individuals
Dynamic Pricing
= pricing strategy in which businesses set flexible prices for products or service based on current market demands and supply situations of the seller
→ merchants change their prices based on how much value the customer attaches to the product and their own desire to make a sale
⇔ Customers change their offers to buy based on both their perceptions of the sellers desire to sell and their own need for the product
Examples of fixed price strategies
Freemium
= pricing strategy by which a base product is provided free of charge but money charged for additional features and services
→ this model allows to attract an user base without expending rexources on costly advertismément or a traditional sales force
- If you are not succeeding with that goal, it probably menas that your free offerings are not attractive enough
- ⇔ If you generate a lot of traffic but few people are paying to upgrade your free offerings are too rich
Bundling
= pricing strategy that joins products or services together in order to sell them as one single combined unit
→ companies sell the bundle forr lower price than it would be charged for items individually
→ low-demand products or products with low marginal costs in a bundle to increase total revenue
Versioning
= creating multiple versions of the same good and selling them to different market segments at different prices
→ price depends on the individual value to the consumer
→ consumers will segment themselves into groups that are willing to pay diferent amounts for various versions
Yield management
= managers set prices in different markets, appealing different segments, in order to sell excess capacity
Conditions:
- generally the product is not permanently available
- seasonal variations in demand
- Market segments are cleary defined for price discrimination
- markets are competitive
- markets conditions change rapidly
Sarge pricing
= dynamic pricing algorithm in order to optimize revenues depending on the current conditions
→ the higher the demand the higher the prices
Flash Marketing
= using notifications to notify customers offer goods or services for a limited time
Online auctions
benefits
- Liquidity
- Price discovery
- Price transparency
- Market. efficiency
- Lower transaction costs
- Consumer aggregation
- Network affects
Risks and costs of auctions
- delayed consumption costs
- Monitoring costs
- Possible solutions include:
- Fixed Pricing
- Watch list
- Proxy Bidding
- Possible solutions include:
- Equipmen costs
- Trust risk
- Possible solution: rating systemm
- Fulfillment costs
Internet Auctions Basics
- Different from traditional auctions
- Market power and bias in dynamically priced markets
- Neutral: Number of buyers and sellers is few or equal
- Seller bias Few sellers and many buyers
- Buyer bias: Many sellers and few buyers
- fair market Value: average of prices for that product or service in a variety of dynamic and fixed-price markets
- Price Allocation rules
- Uniform pricing rule: multiple winners whi all pay the same price
- Discriminatory pricing rule: winners pay different amoun depending on what they bid
Seller and consumer behavior at auctions
- Seller profit: arrival rate, auction length and number of units in auction
- Auction prices not necessarily the lowest
- Unintended results of participating in auctions
- Winners regret
- Sellers lament (behagen)
- Losers lament
