Pricing and Branding on the Internet Rob Rochester
Traditional retailers • Relied on brand recognition as there most powerful competitive advantage. • One of the largest areas of investment in traditional companies.
“Surprisingly, branding and marketing matter a lot more on the web than technology does. More over, customer loyalty has prevented rampant commoditization of products. Price matters, but not to the exclusion of consumer concerns like brand trust and service” – Clinton Wilder, senior writer at InformationWeek
The online customer • Shoppers expect to save between 20%-30% from standard retail prices when shopping online. • Customers are willing to “shop around” online to try to find a deal. • Customers expect an around-the-clock fire sale
Online Branding • The trust a strong brand inspires increases in the online environment. • Privacy • Trust • Many new emerging branding models. • Every company is trying to adapt to the quickly changing markets.
Amazon • “customer, customer, customer. I think everything falls out of that. It’s especially true online, because the balance of power shifts away from the company and towards the customer.”
Amazon.com • Internets most powerful merchant • Positioned itself as a convenience brand with… • Books • Videos • Music • Auctions • Gifts • Home improvement • Allows amazon.com to have multiple meanings to multiple customers.
Amazon • Personalization • The ultimate objective is to give each customer his or her own, unique storefront. • Through extensive interaction. • Creating additional value for its customers. • Able to leverage it’s brand recognition and consumer trust to extract a premium over most of its competitors.
Barnes & Nobel • Strong physical presence made them hesitate to invest fully in the market. • Fear that a failure in the online world would jeopardize there brick-and-mortar company. • All ready had a strong brand.
Barnesandnobel.com • Launched Barnesandnobel.com • 1997 • 2 years after Amazon.com • Selling • Books • Magazines • CD’s • Videos • Software • Online music store (1999) • Did very little to tie Barnes & Nobel to Barnesandnobel.com • Conflicting return policies • Differing prices
Buy.com • Grabbed attention by guaranteeing the web’s lowest price on everything its family of websites sold. • Software • Games • Music • Videos • Books • Computer hardware • Broke a 15 year-old first year sales record • 120 million in revenue in 1998 • a
Buy.com • Guarantees to beat prices of its top three competitors in each product categories by 10% • Selling below cost if necessary • Used products to acquire customers • “The world’s lowest price” • Used to traffic people to the site. • Charge a premium for advertising. • Fits well with the current “get a deal” mentality adopted by many of the internet customers.
Mobshop • An Internet-based network that leverages the power of the internet to aggregate demand for products and services to pool consumers purchasing power. • Sells products for e-tailors. • Chipshot.com • GolfDiscount.com • Electronics.net • Roxy • Shades.com • Superbuild • Reel.com • Fogdog sports • Participating suppliers can reach an exponential number of customers without incurring additional incremental acquisition cost. • Attracts traditionally hard and expensive consumers, inexpensively
MobShop • Matches buyers with buyers • Allows buyers to get the products they are looking for under wholesale. • The more people on a buy cycle the greater the reduction in the price. • Helps clients do this by giving them a “tell a friend” option • Helps suppliers by allowing them to work with larger purchasing parties.
Priceline.com • Patented “name your price” model. • Travel • Home finance • Automotive services • First mover advantage. • “priceline.com has chosen to sell a substantial number of tickets below its cost in order to increase airline and adaptive marketing revenues, build a record of successful transactions and enhance the priceline.com brand”
Priceline.com • Priceline.com was willing to sell some of their tickets for a loss because… • Traffic to site • Reinforced branding • Much less investment then traditional branding • Used an innovative model to capture the market. • 30% of airline and hotel rooms tickets go unsold • Capitalized on this allowing both priceline and the airlines and hotels to benefit.
mySimon.com • Comparison shopping site • Empowers consumers to find the best prices for any product on the web. • 2000 CNET acquired mySimon • Choose to keep mySimon.com a segregated brand from CNET • Acquisition gave CNET a fast way to integrate content. • Product reviews • Consumer feedback
mySimon.com • “…we want to integrate rich media with comparison shopping to create more shareholder value.”
Conclusion • Companies will struggle to keep a steady revenue stream and ahead of their competition until the online markets slow down and people have time to adapt. • Changes daily • Many companies are selling products for under cost and validating this with branding. • Cheaper than traditional branding cost • At this point its hard to tell which strategy will be the best for creating a powerful brand online. • New models are developed all the time.