Archive for the ‘Mktg – Pricing’ Category

Gotcha: Using your own genes against you …

May 2, 2018

 NPR says …

“Getting the results of a genetic test can be a bit like opening Pandora’s box … you might learn that you’re likely to develop an incurable disease later on in life.”

There’s a federal law that’s supposed to protect people from having their own genes used against them, the Genetic Information Nondiscrimination Act, or GINA.

Under GINA, it’s illegal for health insurers to raise rates or to deny coverage because of someone’s genetic code.

image

But the law has a loophole: It only applies to health insurance.

Some insurance can be denied or priced high because of a person’s DNA.

Here’s an example … and a prediction.

(more…)

Gotcha: “I paid more, so it must be better …”

April 26, 2016

One of my favorite sports’ movie scenes is from “Major League”

Newly hired manager Lou Brown is chatting with the Indians’ general manager.

One of the team’s players –Roger Dorn – pulls up in a fancy ride, hops out and unloads his golf clubs.

Brown says to the GM: “I thought you didn’t have any high-priced talent.”

The GM shoots back: “Forget about Dorn, he’s just high priced.”

image

Lou Brown almost fell for a common trap …

Sometimes people do perceive that higher priced products are better – even when they’re not.

They’re subconsciously using price as a “quality cue”.

Here’s some research that supports the dynamic …

(more…)

Air fares: Public weighs in …

May 28, 2015

According to a YouGov.com survey reported by  NBC News  …

Survey says: 4 in 10 Americans  wouldn’t mind being publicly weighed at the airport.

image
Source

The results suggest that a once-unthinkable concept of differential fares based on size could become a fact of life for fliers.

Here are some verbatims:

(more…)

Norwegian economics professor jumps on the scale … endorses “pay what you weigh”

May 27, 2015

Over the weekend, a  friend got squeezed on a flight from BWI to LAX.

Not “bumped” … “squeezed” … by a plump plus-sizer overflowing the adjacent seat.

My trim, yoga-inclined friend suggested that I reprise my posts about airlines’ pricing … hoping that the airlines would get the message this time around.

=====

It started awhile back when I posted  Why don’t airlines charge more for these bags?

Specifically, I suggested that airlines charge passengers by weight: a base ticket price for the first 175 pounds and then $75 for each 50 pounds (or portion thereof) over the limit.

I  thought I was on safe ground since a  survey done for the travel website Skyscanner reported that 76% of travelers said airlines should charge overweight passengers more if they didn’t fit in a seat.

But, the idea went over like a lead-butted balloon.

Turns out that, as usual,  we were just a bit ahead of the times.

Later, we reported that Samoa Air became the first airline to start charging by the pound.

For details, see Samoa Air: Pricing by weight is the ‘concept of the future’

image

Now, even politically correcct academicians are hopping on the scale.  A Norwegian economist has suggested — in a prestigious academic journal —  a “pay what you weigh” pricing plan that “would bring health, financial and environmental dividends.”

Here’s the skinny on his program …

(more…)

Gotcha: Using your own genes against you …

April 24, 2015

 NPR says …

“Getting the results of a genetic test can be a bit like opening Pandora’s box … you might learn that you’re likely to develop an incurable disease later on in life.”

There’s a federal law that’s supposed to protect people from having their own genes used against them, the Genetic Information Nondiscrimination Act, or GINA.

Under GINA, it’s illegal for health insurers to raise rates or to deny coverage because of someone’s genetic code.

image

But the law has a loophole: It only applies to health insurance.

Some insurance can be denied or priced high because of a person’s DNA.

Here’s an example … and a prediction.

(more…)

Gotcha: Your willingness-to-pay is showing …

December 18, 2014

Punch line: Major retailers are customizing online prices for each user, using users’ information (such as location) to determine different prices for identical items. The goal: higher price realization and higher profits. 

BLOG

Here's the scoop ...
 (more...)

Gotcha: Using your own genes against you …

September 23, 2014

 NPR says …

“Getting the results of a genetic test can be a bit like opening Pandora’s box … you might learn that you’re likely to develop an incurable disease later on in life.”

There’s a federal law that’s supposed to protect people from having their own genes used against them, the Genetic Information Nondiscrimination Act, or GINA.

Under GINA, it’s illegal for health insurers to raise rates or to deny coverage because of someone’s genetic code.

image

But the law has a loophole: It only applies to health insurance.

Some insurance can be denied or priced high because of a person’s DNA.

Here’s an example … and a prediction.

(more…)

Gotcha: “I paid more, so it must be better …”

March 19, 2014

One of my favorite sports’ movie scenes is from “Major League”

Newly hired manager Lou Brown is chatting with the Indians’ general manager.

One of the team’s players –Roger Dorn – pulls up in a fancy ride, hops out and unloads his golf clubs.

Brown says to the GM: “I thought you didn’t have any high-priced talent.”

The GM shoots back: “Forget about Dorn, he’s just high priced.”

image

Lou Brown almost fell for a common trap …

Sometimes people do perceive that higher priced products are better – even when they’re not.

They’re subconsciously using price as a “quality cue”.

Here’s some research that supports the dynamic …

(more…)

Air fares: Public weighs in …

February 24, 2014

According to a YouGov.com survey reported by  NBC News  …

Survey says: 4 in 10 Americans  wouldn’t mind being publicly weighed at the airport.

image
Source

The results suggest that a once-unthinkable concept of differential fares based on size could become a fact of life for fliers.

Here are some verbatims:

(more…)

Gotcha: Using your own genes against you …

February 12, 2014

 NPR says …

“Getting the results of a genetic test can be a bit like opening Pandora’s box … you might learn that you’re likely to develop an incurable disease later on in life.”

There’s a federal law that’s supposed to protect people from having their own genes used against them, the Genetic Information Nondiscrimination Act, or GINA.

Under GINA, it’s illegal for health insurers to raise rates or to deny coverage because of someone’s genetic code.

image

But the law has a loophole: It only applies to health insurance.

Some insurance can be denied or priced high because of a person’s DNA.

Here’s an example … and a prediction.

(more…)

Gotcha: Your willingness-to-pay is showing …

December 18, 2013

Punch line: Major retailers are customizing online prices for each user, using users’ information (such as location) to determine different prices for identical items. The goal”higher price realization and higher profits.

* * * * *
Excerpted from WSJ’s, “Websites Vary Prices, Deals Based On Users’ Information”

BLOG

It was the same Swingline stapler, on the same Staples.com website.

But for Kim Wamble, the price was $15.79, while the price on Trude Frizzell’s screen, just a few miles away, was $14.29. 

(more…)

Air fares: Public weighs in …

April 30, 2013

According to a YouGov.com survey reported by  NBC News  …

Survey says: 4 in 10 Americans  wouldn’t mind being publicly weighed at the airport.

image
Source

The results suggest that a once-unthinkable concept of differential fares based on size could become a fact of life for fliers.

Here are some verbatims:

(more…)

Norwegian economics professor jumps on the scale … endorses “pay what you weigh”

April 5, 2013

OK, I think this case is now officially done.

It started a couple of weeks ago when Iposted  Why don’t airlines charge more for these bags?

Specifically, I suggested that airlines charge passengers by weight: a base ticket price for the first 175 pounds and then $75 for each 50 pounds (or portion thereof) over the limit.

I  thought I was on safe ground since a  survey done for the travel website Skyscanner reported that 76% of travelers said airlines should charge overweight passengers more if they didn’t fit in a seat.

But, the idea went over like a lead-butted balloon.

Turns out that, as usual,  we were just a bit ahead of the times.

Yesterday, we reported that Samoa Air became the first airline to start charging by the pound.

For details, see Samoa Air: Pricing by weight is the ‘concept of the future’

image

Now, even politically correcct academicians are hopping on the scale.  A Norwegian economist has suggested — in a prestigious academic journal —  a “pay what you weigh” pricing plan that “would bring health, financial and environmental dividends.”

Here’s the skinny on his program …

(more…)

Gotcha: Schools copying airlines’ nickel & diming …

April 3, 2013

In recent years, airlines nave become masters at “unbundled pricing” … offering a low base fare and then charging more for bags, heavy bags, priority boarding,window seats, bad sandwiches, soft drinks, blankets and, of course, reservation changes.

According to CNN: Baggage fees alone generate more than $3.3 billion each year, and fees for reservation changes add almost $2.5 billion.

Annoying, for sure … but also a good source of revenue.

According to watchdog group ProPublica, colleges are starting to adopt the airlines’ pricing playbook.

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Specifically, ProPublica says that student fees have become a kind of “stealth, second tuition imposed on unsuspecting families.”

And though their names can border on the comical — i.e., the “student success fee” — there’s nothing funny about how they can add up.

Such fees are on the rise on many campuses.

Here are some specifics:

(more…)

Samoa Air: Pricing by weight is the ‘concept of the future’

April 3, 2013

A couple of weeks ago – reacting to SWA charging for an overweight bag – I asked the question:

If airlines charge for overweight bags, why don’t they charge fore for overweight passengers?  After all, a pound is a pound is a pound.

See: Why don’t airlines charge more for these bags?

Specifically, I opined:

There’s a societal cost to somebody’s ample butt hanging over onto somebody else’s seat.

Here’s a novel plan: how about a base ticket price for the first 175 pounds and then $75 for each 50 pounds (or portion thereof) over the limit.

Price the human  heavyweights,well, just like the overweight bags.

Then, rent the seat belt extenders for say $20.

Profit improvement for the airlines and major step forward in the war on obesity.

As President Obama likes to say: “It’s common sense.”

I took some heat for the idea but at least one airline thinks we’re onto something.

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According to The Guardian, Samoa Airlines the first-mover to tilt the scales in favor of fit & trim passengers.

Here’s the skinny on the Samoa Air plan …

(more…)

For Sale: Best-seller books … Price: $8 per kilo, hardcovers extra.

April 2, 2013

In one of my classes we study how books are priced.

One team suggested that page count was a relevant criteria … that books with more pages should be priced higher than shorter books.

I summarily rejected the idea and joked at the team’s expense.

Well, the page has turned.

The team went to China and sent me me this picture.

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Lo and behold, in China, they encountered book stores that sold books based on their weight.

A counterfeit version of the Steve Jobs biography (above) weighed in at 360 grams, and was priced by weight at 18 RMB ($2.85). Roughly 50 RMB ($8) per kilo.

The team tells me that all paperback books in that particular shop (located on Nanjing road, main street Shanghai) are sold at this rate; hardcovers are also priced by the kilo but at a higher rate.

OK guys, you get the last laugh.

Thanks to Ash Kaluarachchi & Greg Berguig for feeding the lead

>> Latest Posts

Prices: Why don’t airlines charge more for these bags?

March 11, 2013

On the road this week …  savoring the joys of air travel.

Stop #1: Southwest’s curbside check-in.

Guy in front of us had one of those “c’mon man” moments.

His bag weighed in at a couple of pounds over the 50# limit.

The skycap – a very nice guy – explained that he’d have to take a few things out of his bag to sneak under the weight limit or shell out 75 bucks – roughly $25 per pound – for the excess.

The guy started rifling through his bag and made weight.

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Of course, the incident got me thinking …

(more…)

Super-sized: World Cup to offer double-wide seats to double-wide fans … say, what?

March 5, 2013

According to several sources

The 2014 World Cup in Brazil is set to be the first to offer special seats for obese fans.

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It will be the “first time tickets for obese people are offered at a FIFA event.”

FIFA said that to qualify for a ticket, people are required to submit a medical certificate that proves they have a body mass index of 30 or more.

Here’s the kicker …

(more…)

Symptoms & causes: Why diabetes strips are $18 on a hospital bill and less than a buck on Amazon.

February 25, 2013

On Sunday, Business Insider ran a piece called The Most Infuriating Paragraph You Might Ever Read About The Healthcare System

It referenced rants on “Steven Brill’s epic cover story for Time on why healthcare costs so much.”

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The paragraph that set them off from the Brill article should – according to Business Insider — “legitimately get anyone’s blood boiling.”

By the time Steven D. died at his home in Northern California the following November, he had lived for an additional 11 months. And Alice had collected bills totaling $902,452. The family’s first bill — for $348,000 — which arrived when Steven got home from the Seton Medical Center in Daly City, Calif., was full of all the usual chargemaster profit grabs: $18 each for 88 diabetes-test strips that Amazon sells in boxes of 50 for $27.85; $24 each for 19 niacin pills that are sold in drugstores for about a nickel apiece.

There were also four boxes of sterile gauze pads for $77 each. None of that was considered part of what was provided in return for Seton’s facility charge for the intensive-care unit for two days at $13,225 a day, 12 days in the critical unit at $7,315 a day and one day in a standard room (all of which totaled $120,116 over 15 days). There was also $20,886 for CT scans and $24,251 for lab work.

As for why we can have a system where diabetes-test strips are sold for $18/each in one place, while Amazon sells a box of 50 for $27.85, see this, great piece by Sarah Kliff on the lack of price controls in the US.

My opinion: Apparently these guys have never heard of “absorption costing” or bothered to really ask “why is healthcare so costly?”

(more…)

Gotcha: “I paid more, so it must be better …”

February 13, 2013

One of my favorite sports’ movie scenes is from “Major League”

Newly hired manager Lou Brown is chatting with the Indians’ general manager.

One of the team’s players –Roger Dorn – pulls up in a fancy ride, hops out and unloads his golf clubs.

Brown says to the GM: “I thought you didn’t have any high-priced talent.”

The GM shoots back: “Forget about Dorn, he’s just high priced.”

image

Lou Brown almost fell for a common trap …

Sometimes people do perceive that higher priced products are better – even when they’re not.

They’re subconsciously using price as a “quality cue”.

Here’s some research that supports the dynamic …

(more…)

Gotcha: Shrouding prices in mystery …

February 12, 2013
A couple of years ago, behavioral economists Xavier Gabaix and David Laibson wrote a seminal paper on the concept of “price shrouding,” and “information suppression”.

In other words, techniques that make it practically impossible fo a buyer to ascertain the real economic cost of a product.

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Here are some of the ways that sellers shroud their prices to flatten your wallet … 

(more…)

Prices: Get a Big Mac cheap …

February 9, 2013

OK, so you have to go to India …  it’s technically a Maharaja Mac, not a Big Mac … and, the cheap price is driven by relative currency values.

Still, one of my favorite price indices is the Big Mac Index … it compares the currency adjusted price of the burger across the globe.

According to Ryan Avent, chief economist at The Economist

The Big Mac index is based on an economic theory called purchasing-power parity (PPP), which indicates that over a long enough time exchange rates should adjust so similar goods cost the same across countries.

The index reveals that, at market exchange rates, the price of the same McDonald’s  burger can vary vastly from country to country.

image

I’m lovin’ it ….

Source

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Follow on Twitter @KenHoma         >> Latest Posts

Gotcha: You probably paid too much … especially if you’re bad at math.

February 6, 2013

Awhile ago, we reported a study that consumers almost invariably pick 33% more stuff than a 33% price discount.

Ouch.

Consumers are notoriously bad at spotting real values. Why?

 image

According to the Atlantic ….

  • First: Consumers don’t know what the heck anything should cost, so we rely on parts of our brains that aren’t strictly quantitative.
  • Second: Although humans spend in numbered dollars, we make decisions based on clues and half-thinking that amount to innumeracy.

More specifically, here are some more ways consumers end up paying too much …

(more…)

Gotcha: The menu is playing with your mind … it’s a profit scheme.

February 4, 2013

In his book, Priceless: The Myth of Fair Value (and How to Take Advantage of It), author William Poundstone dissects the marketing tricks built into menus—for example, how something as simple as typography can drive you toward or away from that $39 steak.

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Here are some on the profit-enhancing menu tricks to watch for …

(more…)

JCP: deals or no deals?

January 31, 2013

Answer: deals.

Earlier this week we posted that JCP CEO Ron Johnson insisted at an investor conference that Penney’s “marketing is really starting to connect” with customers … and that in 2013, Penney will become “a happening place.”

That was 2 days ago.  Then yesterday …

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According to USA Today: CEO Ron Johnson announced a strategic evolution to its plan to offer everyday low prices that customers could count on rather than the nearly 600 fleeting discounts, coupons and sales events each year.

What sort of “strategic evolution”?

(more…)

Prices: How much for a bottle of Two-Buck Chuck?

January 25, 2013

In California, Two-Buck Chuck has been upchucked … from $1.99 to $2.49.

Is nothing sacred?

image

* * * * *
Here’s what’s behind the end-of-an-era pricing move …

(more…)

Gotcha: Using your own genes against you …

January 23, 2013

 NPR says …

“Getting the results of a genetic test can be a bit like opening Pandora’s box … you might learn that you’re likely to develop an incurable disease later on in life.”

There’s a federal law that’s supposed to protect people from having their own genes used against them, the Genetic Information Nondiscrimination Act, or GINA.

Under GINA, it’s illegal for health insurers to raise rates or to deny coverage because of someone’s genetic code.

image

But the law has a loophole: It only applies to health insurance.

Some insurance can be denied or priced high because of a person’s DNA.

Here’s an example … and a prediction.

(more…)

Gotcha: Your willingness-to-pay is showing …

January 17, 2013

Punch line: Major retailers are customizing online prices for each user, using users’ information (such as location) to determine different prices for identical items. The goal”higher price realization and higher profits.

* * * * *
Excerpted from WSJ’s, “Websites Vary Prices, Deals Based On Users’ Information”

BLOG

It was the same Swingline stapler, on the same Staples.com website.

But for Kim Wamble, the price was $15.79, while the price on Trude Frizzell’s screen, just a few miles away, was $14.29. 

(more…)

Price War: Targeting online retailers

January 11, 2013

Target is sick & tiered of being “showroomed”.

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According to USA Today

(more…)

Gotcha: Now, even Southwest is charging for “luv”

January 4, 2013

I used to be a big Southwest fan.

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I used to perversely enjoy watching the clock tick so I could get in the “A” boarding group by hitting the enter button exactly 24 hours before flight time.

Then the jabrones at SWA  took the fun out of the process by letting online slackers buy their way into the A group for 10 bucks … an “early bird” check-in.

Worse still, when my friends would flaunt their AMEX black cards, I’d charge everything to my SWA-Visa … earning a free flight for only a gazillion “flight legs”.

Then, the SWA  jabrones changed their credit card program … making it less lucrative and way more confusing.

(more…)

Gotcha: Hosed by “dynamic pricing”

December 26, 2012

In a prior post My computer’s algorithms tell me that you’re willing to pay higher prices we reported that online retailers were using software that helps them detect shoppers who can afford to pay more or are in a hurry to buy … and, present pricier options to them or simply charge more for the same stuff.

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For example:

Cookies stored in shoppers’ web browsers may reveal where else they have been looking, giving some clues as to their income bracket and price-sensitivity.

A shopper’s internet address may be linked to his physical address, letting sellers offer, say, one price for well-to-do zips, another for low income zones.

“Price customization” software can collate such clues with profiles of individual shoppers that internet sellers buy from online-data-aggregation firms … All fairly cheaply.

For example, Orbitz detects whether people browsing its site are using an Apple Mac or a Windows PC and recommends pricier hotels to Mac users.

Some online firms charge people different rates for the same products … for instance, by charging full price for those assumed to be willing and able to pay it, while offering promotional prices to the rest.

Allocating discounts with price-customization software typically brings in two to four times as much money as offering the same discounts at random,

One way to do this is to monitor how quickly shoppers click through towards the online seller’s payment page: those who already seem set on buying need not be tempted with a special offer.

Similarly, companies are beginning to scan Twitter for info on the shoppers since their tweets give useful hints about whether a discount is needed to clinch the sale.

Well, a WSJ investigation revealed that the online pricing tricksters are getting even trickier …

(more…)

Price points: A McDouble for a buck … shoulda asked me.

December 11, 2012

In October, McDonald’s posted its first monthly drop in nine years.

The company immediately replaced the president of its U.S. business.

The new president “ramped up McDonald’s value messaging, focusing heavily on the Dollar Menu to help drive traffic”.

The company again renewed emphasis on low-priced menu options, such as $1 Sausage McMuffins and coffee.

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The result?

McDonald’s sales sales bounced back in November.

Surprise, surprise, surprise…

Source

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Follow on Twitter @KenHoma                         >> Latest Posts

Why do fancy hotels charge so much for Wi-Fi?

November 27, 2012

Answer: Because they can …

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= = = = =
Excerpted from Business Week

Think about it: You can get free Wi-Fi at a McDonald’s or at a city park, but check into some 4 & 5 star hotels and they’ll charge you as much as $15 peer day to check your email or update Twitter.

Q: Why isn’t Wi-Fi free at fancier places? Aren’t you supposed to get better service for paying more?

(more…)

HITS: Earn higher profits by pushing the “The Latitude of Price Acceptance”

November 26, 2012

HITS: HomaFiles Ideas To Share

Punch line: Relatively small increases in price can generate large increases in profitability … that’s called price-profit leverage.  And, relatively small increases in prices are low hanging fruit for practically all products and companies since consumers have “zones of price indifference” or, in other words, a “latitude of price acceptance”.

* * * * *
Price-profit Leverage

According to McKinsey Increases in price typically have 2 to 4 times the effect on profitability as proportionate increases in volume.

More specifically, given the cost structure typical of large corporations, a 1% boost in price realization yields a 5% to 15% net income gain.

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* * * * *
Latitude of Price Acceptance

Customers have a latitude of price acceptance —  a range of possible prices within which price changes have little or no impact on their purchase decisions.

Customers frame their LPAs from the price range that they observe, say, in-store vs. online, or regular vs. sale prices.

LPAs vary for different categories of products that customers buy.

A McKinsey & Co. study shows that LPAs can range widely: from 17% for branded consumer health and beauty products to 10% for engineered industrial components and apparel to only 2% for some financial products.

The 2% for financial products may seem paltry, but the McKinsey study indicates that a financial services company moving from the middle to the top of a 2% LPA band for personal loan products would generate an 11% increase in operating profits for those products.

Source

* * * * *
Buyer behavior & LPAs

Scanner panel data analyses for sweetened and unsweetened drink      categories support the presence of a region of price insensitivity      around a reference price.

  • Consumers with higher average reference price have a wider latitude of price acceptance.
  • Consumers with a higher frequency of purchase (i.e., shorter average interpurchase time interval) have a narrower latitude of price acceptance, because they are more aware of the range of price distributions.
  • Consumers with a higher average brand loyalty have a wider latitude of price acceptance, demonstrating greater tolerance of price fluctuations.

* * * * *
Takeaway: Know the LPA … then go for it … don’t leave easy $$$ on the table.

Source

>> Latest Posts

Filling movie theater seats … at a discount, of course.

November 21, 2012

DealFlicks.com offers movie goers lower prices for to fill seats that would otherwise go unused.

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Similar to the old Priceline hotel model, users select their neighborhood, movie and showing time, and once they’ve paid, the location of the theater is revealed.

Discounts range between an average of 40 and 60 percent off typical ticket prices.

Users can also take advantage of Super Deals – offering the greatest discounts – when they enter two possible screening times and allow DealFlicks to choose which one they see.

Fexible consumers benefit with large discounts.

Theaters benefit by selling more seats (and popcorn).

Source

Thanks to MC for feed the lead.
* * * * *
Follow on Twitter @KenHoma

PVP: Cable company pricing strategies (yes, there’s method to the madness)

November 20, 2012

Punch line: Cable pricing strategies appear to be a mystery to most, but Comcast confirms the company, does in fact, have a strategy for those wacky prices.

* * * * *
Excerpted from WSJ’s, “Cord-Cutting: Cable’s Offer You Can’t Refuse”

1114_trump_630x420

When Georgia-based medical student Cathy Vu called Comcast last month to cancel her TV service and keep just Internet, she got a shock.

Taking the Internet alone would cost her more, not less, a month.

Cable providers are making their Internet-only plans less attractive than their cable and Internet packages.

Unbundling often doesn’t pay*

  • Comcast: TV + Internet for about $50/month for the first 6 months vs. standalone samespeed Internet for about $70/month.
  • Verizon FiOS: TV + Internet for about $85/month (two-year contract) vs. standalone Internet for about $80/month.
  • Time Warner Cable: TV + Internet for about $50/month for 12 months vs. standalone Internet for about $45/month for 12 months.

People are pretty much forced into buying both services.  Comcast confirms the pricing strategy, saying it is more valuable for the cable operator to pursue customers who will take multiple services than “single play” customers.

Several pay-TV executives say that cord-cutting is still a small trend that has largely stemmed from weak economic conditions.

But one little-discussed factor is cable operators’ pricing policies, which can prompt people to keep TV even if they don’t particularly want it.

In addition, Comcast, Time Warner Cable and Verizon said that a customer who takes multiple services is more likely to stick with the cable company and add more products later on.

“The deeper the discount, the higher the churn” at the end of the promotional period, one cable executive said.

Edit by BJP

* * * * *
Follow on Twitter @KenHoma

McDonald’s reverts to dollar menu to build loyalty … say, what?

October 23, 2012

According to the WSJ

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McDonald’s  reported a 3.5% decline in third-quarter earnings as sales slowed more dramatically than expected because of a sluggish economy and a disappointing marketing campaign.

McDonald’s … conceded that it needs to be more aggressive in advertising low prices.

In a weaker economy, customers may not go out to eat as frequently and tend to stop getting extras like drinks and desserts and premium items like Angus burgers, which all offer higher profits.

McDonald’s move earlier this year to shift its marketing focus in the U.S. to the higher-priced and more profitable “Extra Value Menu” from the successful “Dollar Menu” didn’t “resonate as strongly” with consumers.

“We’re going back to talk of the Dollar Menu.”

The company hopes that focusing attention to its lower prices will attract more customers and gain their loyalty.

This way, when the economy starts to improve, McDonald’s will have a larger consumer base and more ability to raise prices.

OK, I understand that low prices move burgers.

In fact, I think the McDouble for a buck is the best food value on the planet.

But, face it Mickey, low prices appeal to price-sensitive customers … not loyalists.

Trust me, when you try to jack the prices up, their (and my) “loyalty” will shift quickly to the new “value” burger joint.

Just ask Subway.

I’m sure they’ve been wondering “where’s Ken?” since they shifted from $5 Foot Longs to … a couple at $5, some at $5.50, some at $6.50, etc.

Let me repeat: you don’t build loyalty with bargain basement pricing … you just move a ton of burgers at low prices.

>> Latest Posts

Sucka Alert: It’s after 5 p.m., so the price is higher…

October 18, 2012

Excerpted from the book Pricing Segmentation and Analytics by Bodea and Ferguson

One example of using price segmentation in the price analytics process has been applied at a grocery store chain.

Previous studies have shown that consumers who shop at a grocery store after 5 p.m. on weekdays are generally less price sensitive than consumers who shop on weekdays before 5 p.m.

This finding is intuitive as the consumers who are shopping after 5 p.m. are generally working professionals who are on their way home from work and do not bother to comparison shop, while consumers who shop before 5 p.m. consist of homemakers and retired individuals who, conceivably, are more price conscious and have more time to comparison shop.

To take advantage of this knowledge, there is a grocery store chain in Texas that raises the prices of almost all items after 5 p.m. on weekdays and lowers them again before opening the next morning.

I’m a strong advocate of “dynamic pricing” but this one gives me the creeps … I’d like to be a fly on the wall when customers catch on to the pricing scheme.

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Give me a large pepperoni pizza … with a touch of ObamaCare

September 18, 2012

Punch line: Papa Johns CEO has taken a stand against Obamacare, and announced that the popular pizza delivery chain will pass the increased cost of doing business on to its customers, in order to protect its shareholders.

* * * * *

Excerpted from latimes.com’s, “Papa John’s to raise pizza prices if ‘Obamacare’ survives”

la-fi-mo-papa-johns-pizza-obamacare-20120808-001

Get ready to pay more for your Papa John’s pizza if “Obamacare” goes into full effect …  15 to 20 cents more.

John Schnatter, chief executive of the pizza chain, is bashing President Obama’s healthcare reform law as a policy that will force the company to choose between its customers and its investors.  And if the Patient Protection and Affordable Care Act rolls out as planned in 2014, Schnatter’s strategy is “of course … to pass that cost on the consumer in order to protect our shareholders’ best interest,” he said in a recent conference call.

Schnatter estimates that the legislation will cost Papa John’s about 11 cents to 14 cents per pizza, which equates to 15 cents to 20 cents per order.

“We’re not supportive of Obamacare like most businesses in our industry but our business model and unit economics are about as ideal as you can get for a food company to absorb Obamacare,” Schnatter said. “Ergo, we have a high ticket average with extremely high frequency of order counts, millions of pizzas per year.”

On Twitter, reactions were mostly negative.  “*switches to Pizza Hut*,” wrote one user. “*calls Dominoes*,” wrote another.  “I really wish businesses would stay out of politics,” tweeted user mikedavis824.

The National Restaurant Assn. has criticized the healthcare legislation for having a chilling effect on expansion and hiring in the industry, which tends to be labor-intensive and burdened with thin margins.  Chains such as White Castle and Burger King have predicted surging costs due to the new regulations, which require businesses with 50 or more full-time employees to offer healthcare to such workers and their dependents.

Unsurprisingly, Papa John’s chief is a big fan of Mitt Romney. Schnatter recently even hosted a private fundraiser for the Republican presidential candidate at his mansion in Anchorage, Ky.  Romney was dazzled by the grounds, declaring to guests: “Who would’ve imagined pizza could build this. This is really something. Don’t you love this country? What a home this is, what grounds these are, the pool, the golf course…. This is a real tribute to America, to entrepreneurship.”

Edit by BJP

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Trick question: To patients, what’s the price of free healthcare?

August 22, 2012

OK, everybody knows that ObamaCare largely wipes out co-pays and deductibles for preventive medicine.

In other words, patients don’t have to shell out any money … the definition of “free’”, right?

Not so fast.

I always assert to my students that people always, always, always under value their time

See archive post “Time is Money”

Think of the bargain entertainment center you can buy at IKEA for $299.

The purchase price is a steal compared to the fully assembled entertainment center at a furniture store.

But, it takes you two days to assemble it.

At, say $20 per hour, the implicit economic cost of your time is over $200.

Suddenly, it’s no bargain at all.

If you value your time higher than $20 per hour then then economics get even worse.

The principle: “price” is more than the money expended to acquire a product … it also includes the economic cost or searching, acquiring and putting a product into use …  and any on-going costs to keep the product maintained and operating.

What does that have to do with preventive medicine?

Simple connection.

According to an article last week in the WSJ: “To meet the promise of free preventive care nationwide, every family doctor in America would have to work full-time delivering it”.

In other words, demand is twice the capacity to supply.

“When demand exceeds supply in a normal market, the price rises until it reaches a market-clearing level.”

That’s Econ 101.

When a price is fixed below the natural “clearing price” then either the product has to be rationed or other economic costs kick in … like the implicit cost of of the time required to acquire the service.

Think about the time involved to get to see a doctor.

First is the scheduling call.

Ever been put on hold or forced to call back?

I have.

Ever been disappointed when told that the first available appointment slot is weeks off?

I have.

Note: For patients in need of services covered by Medicare, the typical wait to see a doctor was two or three weeks

Ever waited for an hour or two or more waiting to see the doctor?

I have.

Note: Studies report that 20% of the patients who come to an emergency room leave without ever seeing a doctor, because they get tired of waiting.

When demand exceeds supply, doctors have a great deal of flexibility about who they see and when they see them.

In marketing economics, it’s called “demand management”.

Demand management has a couple of underlying principles.

One is “Whenever demand exceeds supply take care of loyal customers first, then take care of the other customers willing to pay the most”.

So, if you’re a doctor facing demand that far exceeds your capacity, what do you do?

First, take care of longstanding patients … then service the patients that pay the most – those who pay out-of-pocket or have private insurance.

Who’s last on the list?  Government insured patients: MediCare and Medicaid.

How can they possibly do that?

Simple. They can simply act like airlines, restaurants, credit card companies  and banks.

For example, once a Medicaid patient’s phone number is in the system, their phone calls can be queued behind any calls from higher paying patients.

Financial service companies have been doing that for years.  Whales’ calls get priority routing and faster answers.

Similarly, appointment slots can be capacity constrained by payment type … with relatively few slots per day allocated to low price patients.

Airlines have capacity controlled low priced “leisure” seats for decades.

Once at the office, doctors can keep advancing high pay patients in the waiting queue.

What’s the worse that can happen? A patient that you’re going to lose money serving ups and leaves.  Oh well.

The bottom line: free isn’t really free … when you factor in your time … and the possibility of not being served at all.

It’s basic demand management economics.

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You probably paid too much … especially if you’re bad at math.

August 14, 2012

Ac couple of weeks ago we reported a study that consumers almost invariably pick 33% more stuff than a 33% price discount.

Ouch.

Consumers are notoriously bad at spotting real values. Why?

According to the Atlantic ….

  • First: Consumers don’t know what the heck anything should cost, so we rely on parts of our brains that aren’t strictly quantitative.
  • Second: Although humans spend in numbered dollars, we make decisions based on clues and half-thinking that amount to innumeracy.

More specifically, here are some more ways consumers end up paying too much …

  1. Anchoring Effect: People are heavily influenced by the first price we see … it’s called “anchoring” …  that’s why the appliance salesman shows you the most-featured, highest-priced appliance first … it makes every other appliance seem like deal.
  2. Aversion to Extremes: People are  terrified of extremes … they don’t like buying the cheapest item … or the most costly …  they shy away from prices that appear too high or too low.For example, in one famous study, people were offered 2 kinds of beer: premium beer for $2.50 and bargain beer for $1.80.

    Around 80% chose the more expensive beer.

    When a third beer was introduced, a super bargain beer for $1.60, 80% bought the $1.80 beer and the rest $2.50 beer. Nobody bought the cheapest option.

    Then researchers removed the $1.60 beer and replaced with a super premium $3.40 beer.

    Most people chose the $2.50 beer, a small number $1.80 beer and around 10% opted for the most expensive $3.40 beer.

  3. Shining Light Effect: Savvy restaurants, for example, design their menus to draw our eyes to the most profitable items by things as simple as pictures and boxes.Good rule of thumb: If you see a course on the menu that’s highlighted, boxed, illustrated, or paired with a really expensive item, it’s probably a high-margin product that the restaurant hopes you’ll see and consider.
  4. Dulled senses: Alcohol narrows the range of complicating factors people can hold in their heads at once.  People are easily made dumber by alcohol, time, decisions.When we’re drunk, stressed, tired, and otherwise inattentive, we’re more likely to ask and answer simple questions about buying things.

    Cheap candy bars and gum are situated near the check-out at grocery stores because that’s where exhausted shoppers are most likely to indulge cravings without paying attention to price.

  5. Concealed habits: To save some $$$, cancel recurring payments like gym memberships and subscriptions to papers and services you don’t use.Cancelling is a hassle, right?

    So what?

    Cancel that subscription.

  6. Peace of mind… allows some companies to make more money on extended warranties and service contracts than they do on their productsExcept for PCs (high prices, risk of crashes), extended warranties don’t pay-off … otherwise, why would retailers push them so aggressively?

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Profitable pricing is literally “shrouded” in mystery…

July 20, 2012

A couple of years ago, behavioral economists Xavier Gabaix and  David Laibson wrote a seminal paper on the concept of “price shrouding,” and “information suppression”.

Here’s a summary excepted from The Red Tape Chronicles

The principle is simple, and shows why cheating is rampant in our markets and why honesty is rarely the best policy.

First, a definition of shrouding:

In days gone by, price tags were simple.

An apple cost 10 cents.  A cup of coffee cost $1.

But today, the consumer marketplace is far more complicated, giving sellers the opportunity to create confusion.

Many items have follow-up costs that make the original price tag meaningless.

Computer printers are the classic example.

You might get a great deal on a printer, but if the ink is expensive, you lose in the end.

In fact, Gabaix argues that it’s impossible for consumers to intelligently shop for printers.

No consumer knows how much ink costs — the cartridges don’t come in standard sizes, the amount of ink used to print varies and ink costs are unpredictable.

That makes the true price  “shrouded” — not quite hidden, but not quite clear, either

So, it’s easy for printer companies to lowball printer price tags and overcharge for ink, enabling them to print money.

Shrouded price tags are everywhere.

The hotel website might say “$99 a night” but you know the bill will be more like $120 or $130.

Pay TV companies promise $30-a-month service, which ends up costing more like $50.

At its best, the maddening mixture of coupons, rebates, sales and fine print fees can feel like a game.

At worst, it’s being cheated.

You’d think shoppers would love a chance to buy from a store that doesn’t play these games, the way car buyers (allegedly) like shopping at no-haggle auto dealerships.

They don’t.

Shoppers hunt for the tricks that let them save money.

Stores hide booby traps that let them take money.

If a firm tries to educate consumers on tricks and traps, and tries to offer an honest product, a funny thing happens: Consumers say, “Thank you for the tips,” and go back to the tricky companies, where they exploit the new knowledge to get cheaper prices, leaving the “honest” firm in the dust.

Once you educate consumers on the right way to shop, they will seek out the lowest cost store, and that will be the one with the shrouded prices.”

“Shrouding is the more profitable strategy.”

Like it or not, hidden fees – and secret discounts – are here to stay.

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My computer’s algorithms tell me that you’re willing to pay higher prices …

July 18, 2012

I was interviewed by a reporter from the Economist a couple of week’s ago.

Though I served up some prime material (and some red meat), my quotes didn’t make the cut

Dear Ken:
Unfortunately I was not able to use the information you provided, as what we needed was specific confirmation of actual examples of dynamic/custom pricing. Thank you once again for your willingness to share your expertise

OK, enough whining … here’s the gist of The Economist’s article Personalizing online prices

(more…)

Quick, pick one: a 33% discount or 33% more for free …

July 17, 2012

According to a study at the University of Minnesota’s Carlson School of Management, report in The Economist

When offered two deals on loose coffee beans: 33% extra free or 33% off the price, most shoppers considered them equivalent though he discount is by far the better proposition … it would take a 50% increase in quantity to be equivalent.

More generally, the researchers found, that shoppers prefer getting something extra for free to getting something cheaper.

For example, the researchers sold 73% more hand lotion when it was offered in a bonus pack than when it carried an equivalent discount (even after all other effects, such as a desire to stockpile, were controlled for).

The main reason is  “consumer innumeracy” … e.g. people can’t do fractions or simple math in their head.

* * * * *
How can retailers compensate for (or exploit) consumers’ math blind spots?

One way is to befuddle them with double discounting.

People are more likely to think that a product that has been reduced by 20%, and then by an additional 25%, is a better deal than one which has been subject to an equivalent, one-off, 40% reduction.

Similarly, when evaluating a car’s fuel efficiency, consumers understand the number of extra miles per gallon it gets, more so than the equivalent percentage fall in fuel consumption.

We’re not talking calculus, we’re talking fractions … ouch.

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GM offers no-haggle prices … and a money-back guarantee.

July 11, 2012

According to Bloomberg

Losing ground to Toyota and needing to clear out end-of-model-year vehicles, GM will offer no-haggle pricing on 2012 Chevrolet cars and trucks plus a money-back guarantee on all new Chevys .

The new promotions, which GM calls its Chevy Confidence program, address two things car shoppers dread: haggling and commitment.

Americans aren’t great at haggling and we are expected to do so on the two biggest purchases we face: real estate and autos.”

“This Chevrolet Confidence program alleviates the issue of haggling and eliminates ‘buyer’s remorse.’”

The no-haggle program pledges to offer 2012 vehicles at the “best possible prices” in addition to current incentives.

The no-haggle sales price, called Total Confidence Pricing … harkens back to previous sales programs offered by GM.

The company’s Saturn included no-haggle buying before the brand ended as part of GM’s bankruptcy reorganization in 2009.

Such programs are “marginally effective,” according to Dennis Virag, president of Automotive Consulting Group. “There will be some buyers, but I don’t think it’s going to attract a large number of new customers for Chevy.”

* * * * *
GM is trying to boost Chevy as the brand faces greater pressure from Toyota.

U.S. sales of Chevrolet, GM’s largest brand, rose 6.3 percent to 961,662 cars and light trucks in the first half, a slower pace than the industrywide increase of 15 percent; Toyota’s namesake brand gained 29 percent to 937,964.

Ken’s Note: Toyota faced what President Obama would call “headwinds” the past couple of years with a tsunami knocking out production for a few months, and Obama’s Secretary of Transportation calling Toyotas unsafe to drive … a hysterical charge that was never proven.

GM CEO Dan Akerson  is pushing the company to boost operating margins and strengthen Cadillac and Chevrolet as global brands.

Anybody see a trend?

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For Sale: Best-seller books … Price: $8 per kilo, hardcovers extra.

April 9, 2012

In one of my classes we study how books are priced.

Last fall, a team suggested that page count was a relevant criteria … that books with more pages should be priced higher than shorter books.

I summarily rejected the idea and joked at the team’s expense.

Well, the page has turned.

The team just returned from China and sent me me this picture.

image

 Lo and behold, in China, they encountered book stores that sold books based on their weight.

A counterfeit version of the Steve Jobs biography (above) weighed in at 360 grams, and was priced by weight at 18 RMB ($2.85). Roughly 50 RMB ($8) per kilo.

The team tells me that all paperback books in that particular shop (located on Nanjing road, main street Shanghai) are sold at this rate; hardcovers are also priced  by the kilo but at a higher rate.

OK guys, you get the last laugh.

Thanks to Ash Kaluarachchi & Greg Berguig for feeding the lead

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Wasn’t it cheaper to park here yesterday?

March 21, 2012

Punch line: Airlines have priced dynamically for years — raising or lowering prices depending on how fast a flight’s seats are selling.

Some sports teams have started charging different prices depending on the  day-of-week and and drawing power of the opposing team.

Coke was busted in some locales for electronically jacking up prices when dispensing machines were running low on inventory.

Now, some cities are using high tech meters to dynamically change parking prices.

* * * * *
Excerpted from NYT: A Meter So Expensive, It Creates Parking Spots

As much as a third of the traffic in some areas has been attributed to drivers circling as they hunt for spaces … causing  lost time, polluted air and illegal parking.

In his 2005 book, “The High Cost of Free Parking”, Donald Shoup, a professor of urban planning at UCLA advocated dynamic pricing of metered parking spots — finding the lowest price a city can charge and still have one or two vacant spaces available on every block.

San Francisco is putting the theory to test.

San Fran is using new technology and the law of supply and demand, raising the price of parking on the city’s most crowded blocks and lowering it on its emptiest blocks.

San Francisco installed high tech parking sensors and new meters at roughly a quarter of its 26,800 metered spots to track when and where cars are parked.

And beginning last summer, the city began tweaking its prices up and down and shortening (or lengthening) time limits — trying to to leave each block with at least one available spot all the time.

Eventually, the metes may charge different prices at different times of the day.

“We only need a few people to see there is a price difference and choose to park in a different location to open up just a few spaces here and there.”

But raising prices is rarely popular … and the program was “complicated on the social equity level” since high parking prices can shut out poorer parkers. 

Thanks to JF for feeding the lead.

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McBaguette, s’il vous plait …

March 5, 2012

Punch line: Is Mickey D. is going haute cuisine? No, not really.  The Mickster is just sticking a burger on baguette and charging the French a premium price.  Mon dieu.

* * * * *
Excerpted from the WSJ “To Tailor Burgers for France, McDonald’s Enlists Baguett”

In France the fast-food giant is gearing up to offer a burger served on baguette, part of a wider effort to add more locally inspired fare to its menu and attract more upscale diners.

McDonald’s restaurants across France will test the McBaguette — a burger topped with French-made Emmental cheese and mustard.

The promotion is in line with the  company’s successful global strategy of updating its restaurants to appeal to a broader clientele, while offering a more varied menu, up and down the price scale.

In France that involves tapping into a national obsession: bread.

  • 98% of French people eat bread every day.
  • The French each consume about 55 kilograms (a21 pounds)of bread a year.
  • 65% of the two billion sandwiches sold each year in France are baguette-based.

The McBaguette will be sold for €4.50, more than a euro above the average price of a sandwich in France.

* * * * *
Ken’s Take: “Obsession with bread”?  I thought the French were obsessed with something else.  Live and learn …

Thanks to AGC

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Obama’s favorite book … guaranteed.

February 13, 2012

Gotta admit, I like the tussle between Team O and the Catholic Church.  It’s like watching a Wrestlemania main event.

But, theological and and health issues aside, I’m shocked by Administration’s naiveté re: business and economics.

And, I think I broke the code. 

I’m betting that the only business book Obama and his advisers carry around is Chris Anderson’s 2009 best-seller: Free – The Future of a Radical Price.

Note that I said “carry around” … not “read” … because the book does a nice job of explaining the uses and mis-uses of “free”,

Why do I think so?

Easy, because the cover blurb was written by Google’s Eric Schmidt — the recently canned Google CEO and close buddy of Obama’s … and because of Obama’s penchant for declaring stuff to be “free” whether it is or isn’t.

image

Obviously, Team O doesn’t really get the concept.

Let’s start with the basics: nothing is free

When something (like pills) is produced, delivered and consumed, there are associated  costs.

Yes, pills may be given to the consumer without charge, but somebody has to pick-up the tab.

Since the government has no money of its own, if it nobly declares that it’ll pay for it, it’s really saying that all taxpayers will pay for it — whether they want to or not.

Note that, for obvious reasons,  I said taxpayer, and not citizens. 

Let’s take another variation: consumers don’t have to pay for pills — their insurance companies will be mandated to give them away for free.

Oh really.

One member of the administration said that the money will come straight from the insurance companies reserves — the money set aside to pay claims.

Well, then either other types of claims become unfunded (i.e. can’t be paid), or the insurance  company just rolls over and sacrifices some profits, or premiums go up.

There aren’t any other options, and I’m betting on the last one — raising premiums.

That’s ok — in the mind of the Feds — because employers, not employees have to eat the premium increase.

Well, economists would say that the higher premiums come indirectly out of employees pockets since they will just constrain other parts of workers’ compensation packages.

You can buy into that argument or not … your choice.

Let’s pretend that the insurance company just has to eat the added costs.

Oops.

Team O walked into a logic trap.

Many large organizations self-insure.  That means that insurance companies are just processing agents — the companies pay claims out of their own coffers. 

It was like that at GE and Black & Decker.

And guess what, many large Catholic organizations are self-insured.

So, saying that the Catholic organizations won’t have to pay for pills, etc., — that their insurance companies will have to pay — is complete nonsense.

You see, self-insured organizations are their own insurance companies.

That’s what self-insured means!

So, even the Catholic bishops figured out that Team O’s grand accommodation is not really an accommodation at all.

It’s either the reflection of business ignorance or an intentional ruse.

Hmmm.  Hard to pick.

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Ditched by NPR … for the record, here’s what I said.

December 23, 2011

A couple of weeks ago I was invited to do a radio interview with NPR for its MarketPlace business segment.

The topic was retailer’s pricing practices.

Right down my power alley, so I was amped.

I took the interview seriously – even did some research.

Went to the studios for the interview … which was recorded.

After the allotted 30 minutes, the reporter asked me if I could continue for another 3o minutes.

Sure.

I expected she’d pull a couple of 15 second sound bites out of the 60 minutes.

To my dismay, all 60 minutes of my “filet”  hit the edit room floor.  Ouch.

Below, I’ll give my hypothesis for what happened … here (based on my notes) is what I said … some pretty good stuff – if I must say so myself.

Studies consistently show that consumers’ have very imprecise knowledge of prices.

Very few consumers are even able to recall — within 5 or 10% the price they paid … even for recently bought or frequently bought items.

The exceptions are so-called “signpost items” — such as a gallon of milk or a 12-pack of Coke. Consumers often use those items as “sample precincts” used to implicitly judge other prices in a store.

“If they’re priced right on milk, they must be priced right on other products”

* * * * *

People look for “cues” when evaluating a product’s price.

The words “free”. “new” and “sale” are probably the most impactful in a marketer’s vocabulary.

“Sale” takes on a particularly strong meaning when it’s supported by a comparative price claim  … versus competitors’ prices  … or versus a self-proclaimed “regular price”.

Since people tend to have imprecise knowledge of prices, they often  anchor their price perceptions on stated regular prices and react — or over-react – to the implied discounts.

Shoppers conclude – sometimes erroneously: The bigger the discount, the better the deal.

* * * * *

Legally speaking, a “regular price” is defined as a price that was offered for a meaningful length of time and at which a substantial amount of sales were made.

Of course, the terms “meaningful length of time” and “substantial sales” are subject to interpretation and often tough to pin down in practice.

It boils down to whether a good faith effort was made to sell the product at its “regular price”.

* * * * *

While the FTC has legal jurisdiction over unfair marketing practices – including “fictitious price claims” –  it hasn’t brought any cases in the past 30 years.

The FTC has largely delegated enforcement to the states and localities … which have a crazy-quilt of statutes that are selectively enforced, typically when there is a veritable groundswell of consumer complaints.

Even then, cases are hard to prove and any penalties are relatively light slaps-on-hands.

* * * * *

Some retailers make heavy use of what’s called “high-low” or “was/is” pricing tactics.

That is, they run frequent sales that emphasize the discount from so-called regular prices.

Kohl’s is famous for using the “was/is” tactic; so is the men’s clothing chain Jos A Banks – which routinely run sales touting “buy 1 suit at regular price and get 2 for free”.

If anybody buys anything at those stores at “regular” prices, they should look over their shoulders to make sure that Darwin isn’t chasing them”

* * * * * *

These high-low tactics are a relatively benign form of marketing hype.

Savvy buyers ignore everything but the bottom line price that they’ll be paying.

They ask themselves do I want to buy this product at this price?

Sure, they might want to shop around to see if they can find a lower price someplace else, but …

What somebody else may or may not have paid for the product at another point in time is largely irrelevant … except for bargain hunter’s bragging rights.

The real question is whether you want to buy that shirt for $19,99 or not.

* * * * *

Further, strict enforcement of the statutes may actually have a harmful effect on consumers.

Think about it … why force a retailer to sell more stuff at a high price to satisfy a statute?

That would result in consumers – on average – to pay more for products

* * * * *

I get more concerned with hidden charges that aren’t reflected in the prices that customers think they’re paying.

For example, shipping & handling charges that far exceed the cost to ship or handle …

Or, stripped down products that don’t include all the necessary components … like computer peripherals that don’t include the connecting cables … or printers that come with toner cartridges that print a minimal number of copies.

Often times, buyers don’t know what hit them until after-the-fact

Basically, the piece that aired was dumbed down to “lots of stuff is on sale … really, LOTS of stuff”   A surprisingly light piece.

My hypothesis: the reporter went into the story expecting to nail retailers (like Kohl’s) for deceptive practices.  My view was that the “was-is” pricing tactic is pretty benign and that shoppers should just focus on the current price.  That didn’t support the story line.

And, I doubt the reporter could find anybody who got very excited about whether retailers’ “regular” prices really were regular prices.

So the storyline fell apart and “lots of stuff on sale” became the emphasis.

Woulda thought the Darwin line would make the cut. 

Oh well … it made the Homa Files !

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