Pricing and Branding on Pricing and Branding on the Internetthe Internet

Rob RochesterRob Rochester

Traditional retailersTraditional retailers

Relied on brand Relied on brand recognition as recognition as there most there most powerful powerful competitive competitive advantage.advantage.• One of the largest One of the largest

areas of investment areas of investment in traditional in traditional companies.companies.

““Surprisingly, branding and Surprisingly, branding and marketing matter a lot more on the marketing matter a lot more on the web than technology does. More web than technology does. More over, customer loyalty has prevented over, customer loyalty has prevented rampant commoditization of rampant commoditization of products. Price matters, but not to products. Price matters, but not to the exclusion of consumer concerns the exclusion of consumer concerns like brand trust and service” – Clinton like brand trust and service” – Clinton Wilder, senior writer at Wilder, senior writer at InformationWeekInformationWeek

The online customerThe online customer

Shoppers expect to save between Shoppers expect to save between 20%-30% from standard retail prices 20%-30% from standard retail prices when shopping online.when shopping online.• Customers are willing to “shop around” Customers are willing to “shop around”

online to try to find a deal.online to try to find a deal. Customers expect an around-the-Customers expect an around-the-

clock fire saleclock fire sale

Online BrandingOnline Branding

The trust a strong brand inspires The trust a strong brand inspires increases in the online environment.increases in the online environment.• PrivacyPrivacy• TrustTrust

Many new emerging branding Many new emerging branding models.models.• Every company is trying to adapt to the Every company is trying to adapt to the

quickly changing markets.quickly changing markets.

AmazonAmazon

““customer, customer, customer. I customer, customer, customer. I think everything falls out of that. It’s think everything falls out of that. It’s especially true online, because the especially true online, because the balance of power shifts away from balance of power shifts away from the company and towards the the company and towards the customer.”customer.”

Amazon.comAmazon.com

Internets most powerful merchantInternets most powerful merchant• Positioned itself as a convenience brand Positioned itself as a convenience brand

with…with… BooksBooks VideosVideos MusicMusic AuctionsAuctions GiftsGifts Home improvementHome improvement

• Allows amazon.com to have multiple meanings to Allows amazon.com to have multiple meanings to multiple customers.multiple customers.

AmazonAmazon

PersonalizationPersonalization• The ultimate objective is to give each The ultimate objective is to give each

customer his or her own, unique customer his or her own, unique storefront.storefront.

Through extensive interaction.Through extensive interaction.• Creating additional value for its customers.Creating additional value for its customers.

Able to leverage it’s brand recognition Able to leverage it’s brand recognition and consumer trust to extract a and consumer trust to extract a premium over most of its competitors.premium over most of its competitors.

Amazon Amazon

Barnes & NobelBarnes & Nobel

Strong physical presence made them Strong physical presence made them hesitate to invest fully in the market.hesitate to invest fully in the market.• Fear that a failure in the online world Fear that a failure in the online world

would jeopardize there brick-and-mortar would jeopardize there brick-and-mortar company.company.

All ready had a strong brand.All ready had a strong brand.

Barnesandnobel.comBarnesandnobel.com Launched Barnesandnobel.comLaunched Barnesandnobel.com

• 19971997• 2 years after Amazon.com2 years after Amazon.com

SellingSelling• BooksBooks• MagazinesMagazines• CD’sCD’s• VideosVideos• SoftwareSoftware• Online music store (1999)Online music store (1999)

Did very little to tie Barnes & Nobel to Did very little to tie Barnes & Nobel to Barnesandnobel.comBarnesandnobel.com• Conflicting return policiesConflicting return policies• Differing pricesDiffering prices

Buy.comBuy.com Grabbed attention by guaranteeing the web’s Grabbed attention by guaranteeing the web’s

lowest price on everything its family of lowest price on everything its family of websites sold.websites sold.• SoftwareSoftware• GamesGames• MusicMusic• VideosVideos• BooksBooks• Computer hardwareComputer hardware

Broke a 15 year-old first year sales recordBroke a 15 year-old first year sales record• 120 million in revenue in 1998120 million in revenue in 1998

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Buy.comBuy.com

Guarantees to beat prices of its top three Guarantees to beat prices of its top three competitors in each product categories by competitors in each product categories by 10%10%• Selling below cost if necessarySelling below cost if necessary

Used products to acquire customersUsed products to acquire customers• ““The world’s lowest price”The world’s lowest price”

Used to traffic people to the site.Used to traffic people to the site.• Charge a premium for advertising.Charge a premium for advertising.

Fits well with the current “get a deal” Fits well with the current “get a deal” mentality adopted by many of the internet mentality adopted by many of the internet customers.customers.

MobshopMobshop An Internet-based network that leverages the power of An Internet-based network that leverages the power of

the internet to aggregate demand for products and the internet to aggregate demand for products and services to pool consumers purchasing power.services to pool consumers purchasing power.• Sells products for e-tailors.Sells products for e-tailors.

Chipshot.comChipshot.com GolfDiscount.comGolfDiscount.com Electronics.netElectronics.net RoxyRoxy Shades.comShades.com SuperbuildSuperbuild Reel.comReel.com Fogdog sportsFogdog sports

Participating suppliers can reach an exponential number Participating suppliers can reach an exponential number of customers without incurring additional incremental of customers without incurring additional incremental acquisition cost.acquisition cost.• Attracts traditionally hard and expensive consumers, Attracts traditionally hard and expensive consumers,

inexpensivelyinexpensively

MobShopMobShop

Matches buyers with buyersMatches buyers with buyers• Allows buyers to get the products they Allows buyers to get the products they

are looking for under wholesale.are looking for under wholesale. The more people on a buy cycle the greater The more people on a buy cycle the greater

the reduction in the price.the reduction in the price.• Helps clients do this by giving them a “tell a Helps clients do this by giving them a “tell a

friend” optionfriend” option

Helps suppliers by allowing them to Helps suppliers by allowing them to work with larger purchasing parties.work with larger purchasing parties.

Priceline.comPriceline.com

Patented “name your price” model.Patented “name your price” model.• TravelTravel• Home financeHome finance• Automotive servicesAutomotive services

First mover advantage.First mover advantage. ““priceline.com has chosen to sell a priceline.com has chosen to sell a

substantial number of tickets below its substantial number of tickets below its cost in order to increase airline and cost in order to increase airline and adaptive marketing revenues, build a adaptive marketing revenues, build a record of successful transactions and record of successful transactions and enhance the priceline.com brand”enhance the priceline.com brand”

Priceline.comPriceline.com

Priceline.com was willing to sell some of Priceline.com was willing to sell some of their tickets for a loss because…their tickets for a loss because…• Traffic to siteTraffic to site• Reinforced brandingReinforced branding

Much less investment then traditional brandingMuch less investment then traditional branding

Used an innovative model to capture the Used an innovative model to capture the market.market.• 30% of airline and hotel rooms tickets go 30% of airline and hotel rooms tickets go

unsoldunsold Capitalized on this allowing both priceline and the Capitalized on this allowing both priceline and the

airlines and hotels to benefit.airlines and hotels to benefit.

PriceLine.comPriceLine.com

mySimon.commySimon.com

Comparison shopping siteComparison shopping site• Empowers consumers to find the best prices Empowers consumers to find the best prices

for any product on the web.for any product on the web. 2000 CNET acquired mySimon2000 CNET acquired mySimon Choose to keep mySimon.com a Choose to keep mySimon.com a

segregated brand from CNETsegregated brand from CNET Acquisition gave CNET a fast way to Acquisition gave CNET a fast way to

integrate content.integrate content.• Product reviewsProduct reviews• Consumer feedbackConsumer feedback

mySimon.commySimon.com

“…“…we want to integrate rich media we want to integrate rich media with comparison shopping to create with comparison shopping to create more shareholder value.”more shareholder value.”

CNETCNET

ConclusionConclusion Companies will struggle to keep a steady Companies will struggle to keep a steady

revenue stream and ahead of their revenue stream and ahead of their competition until the online markets slow competition until the online markets slow down and people have time to adapt.down and people have time to adapt.• Changes dailyChanges daily

Many companies are selling products for under Many companies are selling products for under cost and validating this with branding.cost and validating this with branding.• Cheaper than traditional branding costCheaper than traditional branding cost

At this point its hard to tell which strategy will At this point its hard to tell which strategy will be the best for creating a powerful brand be the best for creating a powerful brand online.online.• New models are developed all the time.New models are developed all the time.