Month: August 2006

Everyone on this site will surely know the “4 P’s of marketing”:http://marketing.about.com/od/marketingplanandstrategy/a/marketingmix.htm. I must come clean, I have a favorite P. It’s Price. I’ve always been a secret admirer of the pricing strategies of companies, even before I got into marketing myself. I can’t understand anyone not admiring the genius of the “Buy One, Get the Second Half Price!” offer.
An accountant would say that this is just a marketing trick and that it would be more honest just to say “Get 25% off this item but only if you buy 2 of them”. That’s why there are no accountants in marketing. The strategy is to create extra demand for a product that you already have a qualified customer for at the till. For every customer who you get in the door interested in the sale item, you double the speed of your inventory movement. It’s genius. Then, of course, there is the Walmart approach of constantly rotating in-store price discounts. This strategy encourages frequency and loyalty in shopping behaviour and I would guess also increases the total amount of time spent in store.
Comparing these pricing innovations in the offline world with pricing online demonstrates the maturation process still needed in online marketing.
Let’s take one of the biggest and most successful online retail sales sites as an example, “iTunes”:http://www.apple.com/itunes/. Don’t get me wrong, I love iTunes for its simplicity of use and its vision of creating music “experiences” for customers. Further, at a billion paid downloads and growing, it’s tough to argue that they need a whole lot of coaching from me. That said, I would suggest that their current pricing practices reflect their existing dominance in the music download space (78%, I heard). I would predict that as new entrants increase their own market share, iTunes will naturally have to look at maturing its pricing practices to compete.
So what does iTunes do with pricing that so violates my sacred and favorite “P”?