Price: The Online Value

Internet Pricing is (basically) in the Hands of Consumers

As has been mentioned in this blog several times already, the internet has created a power shift from seller to buyer, and the online consumer wants what they want, when they want it. Of the 4 P's (product, price, place, promotion), price is the easiest to adjust to consumer demand. And it's important that companies be willing to make this adjustment, if necessary, especially in light of the concept of price transparency. Price transparency is the idea that both buyers and sellers can view competitive prices for items sold online. It's as simple as going on to Google, typing in the product you want, and clicking the link on the left called 'shopping'.

Check it out: http://www.google.com/search?q=ipod&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a#q=ipod&hl=en&client=firefox-a&hs=PBn&rls=org.mozilla:en-US:official&prmd=imvnsr&source=lnms&tbm=shop&ei=R2OjTrZd6uvSAdyG4YsF&sa=X&oi=mode_link&ct=mode&cd=6&ved=0CEwQ_AUoBQ&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=2f7b5fcc5835b72d&biw=1440&bih=695

Google then brings up the product you searched for, and tells you what stores or websites have it for what price, so the consumer can easily pick the cheapest price (or nearest location). With online shopping, consumers also need to keep in mind - and understand - the "real costs" of the product, which might or might not include shipping, tax, time, and energy. A product might be list priced at $10. But then tax could make it $12, and shipping could add anywhere from $0-$20 dollars, depending on how patient (or impatient) the consumer is, or how desperate the need for the product is.

Online buyers are more sophisticated. They do their research, they seek lower prices, and they won't settle for less than what they want. Some will even seek out auctions (Ebay) to find fair prices, or submit to reverse auctions, in which the buyer sets the price, and sellers decide whether to accept these prices (Priceline and Hotwire).

Companies can chose one of three pricing strategies:

1. Fixed pricing - A strategy in which sellers set the price, and buyers must take it or leave it. In this strategy, everyone pays the same price for the product. Fixed pricing can either be for price leadership, in which the company focuses on having the lowest-priced product in a particular category; or, promotional pricing, which is meant to encourage a first purchase, repeat business, or close a sale.

2. Dynamic Pricing - Here, companies offer different prices to different customers, with either segmented pricing, which is based on market segments; or price negotiation, which is done with individual customers.

3.Negotiated Pricing and Auctions - In which price is set more than once in a back and forth discussion (again, Ebay).


Companies have to decide what strategy works best for them. And if a particular strategy isn't working, it needs to be re-thought or replaced. And as the most flexible of the 4 P's, doing so is pretty easy.

Well, not THAT easy. But still easier than changing other aspects, such as the product, place, or promotion.