1. R ETAILING I NSIGHTS AND P RICING O NLINE Getting Prices Right on the Web

2. W HAT M ATTERS M OST IN I NTERNET R ETAILING Although online retailers theoretically have unlimited trading areas, they need to know where to look for customers.

3. W HAT M ATTERS M OST IN I NTERNET R ETAILING While traditional retailers can identify and target customers with relative ease (most customers either work or live within a few miles of the store), Internet retailers without physical stores find this much more difficult to do.

4. W HERE TO LOOK FOR C USTOMERS ? Many Internet retailers have trouble getting noticed and acquiring customers.

5. W HERE TO LOOK FOR C USTOMERS ? Indeed, having an unlimited trading area can be a mixed blessing: There are no straightforwar d rules about where to look for customers.

6. W HERE TO LOOK FOR C USTOMERS ? As a result, some Internet retailers are making small forays into traditional retailing, using strategies that include pop-up stores, kiosks and partnerships with well- known retailers.

7. W HAT R ESEARCH T ELLS U S Individual consumer acceptance depends on off­ line shopping costs.

8. W HAT R ESEARCH T ELLS U S Sales evolution is structured and predictable.

9. W HAT R ESEARCH T ELLS U S Migrating from “good” to “great” requires expansion to niche locations.

10. W HAT R ESEARCH T ELLS U S “Isolated” prospects are worth pursuing.

11. W HAT R ESEARCH T ELLS U S Different locations require different customer acquisition strategies.

12. T AKE -A WAYS the physical environment  Although Internet retail success is influenced by many factors (incl. website design, social media strategy and marketing innovations) Internet retailers must pay particular attention to the physical environment. “low-hanging fruit”  A large amount of “low-hanging fruit” is available to those who understand how sales vary according to ZIP code or neighborhood. two critical properties  The physical environment has two critical properties that make research both doable and actionable: measured relatively easily  (1) variation in the characteristics of the physical environment can be measured relatively easily and cheaply, often by using data from government sources. don’t change quickly  (2) physical environments don’t change quickly, which means that actionable insights tend to have a long shelf life.

13. P RICING S TRATEGIES

14.  Price setting has become an art as much as a science.  How marketers apply pricing strategy is as important as how much they charge.  Marketers can employ all traditional pricing strategies to the online environment BUT…  …with a twist! P RICING S TRATEGIES

15. T HEORY : R EFERENCE P RICING AND P RICE A NCHORS  Every product has a price range, within which changes have little impact on consumer behavior. For example:  Prices for well-known brand-name consumer health and beauty products can be raised as much as 17 % without a change in consumer reaction. NOT SENSITIVE/LOW ELASTICTY  Range in which price variations acceptable for certain financial services is less than 1 %. SENSITIVE/HIGH ELASTICTY

16. K EY Q UESTIONS FOR S ETTING P RICE  Do you sell a commoditized product/service or not?  Price vs. quality differentiation?  Do you have a strong store brand?  Service leader?  Penetrate or skim?  Bundle strategy?  Do you have a new or exclusive product?

17. B AYE AND G UPTA  “online retail industry is an unpromising one for firms seeking competitive advantage” fluid  What innovations in pricing strategy are required for a firm to be successful in fluid e-retail markets?

18. G ROUP F ACE - OFF :  Why is pricing such a challenge in online markets?

19. P RODUCT L EVEL P RICING

20.  ease with which online consumers and rival retailers may access comparative information about seller characteristics and prices  customers often search at the product level rather than by store or category

21. P RODUCT L EVEL P RICING Consumers are more selective in online markets Frequent price changes feasible

22. G ROUP F ACE - OFF :  Why is pricing such a challenge in online markets?

23. G ROUP F ACE - OFF : Why is pricing such a challenge in online markets?

24. G ROUP F ACE - OFF : When should a product/ser vice be free?

25. G ROUP F ACE - OFF What are network effects?

26. G ROUP F ACE - OFF In what ways do network effects affect pricing strategy?

27. 5 P RICING I NNOVATIONS price experimentation  Use price experimentation to learn about your Customers’ Price Sensitivity/Price Elasticity stage of PLC  Quickly adjust price based on stage of PLC (price sensitivities) number of competitors  Quickly adjust price based on number of competitors Unpredictable  Stay Unpredictable Temporary Advantage  Use Hit-and-Run Pricing to Gain a Temporary Advantage without Triggering a Price War

28. Y OU TELL ME :  What is “strategic” about frequent price changes online?  Is it good enough to be second lowest offer?

29. C ONCLUSION ON P RICING  Product-specific pricing  Dynamic/erratic pricing can be strategic  Shortened PLC means higher price sensitivity requires quicker modulation  Free may have value – network effects in two- sided markets!  Online pricing often the domain of lower management levels but when doing business online that may be a problem.

30. C ONCLUSION  Managerial Challenges:  Best e-businesses set up small functional e- marketing groups charged with the task of constantly monitoring opportunities to adjust prices based on market changes and customer behavior.  Group members should hold an entrepreneurial view of pricing.  Group should be empowered to set short- to medium-term pricing strategy and implement it.