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E-commerce and the Reference Price

A recent post discussed one of the foundations for pricing, which is how to establish the true economic value of your product. Part of the process was getting an accurate “reference” price, or what the next best competitive alternative was.

Today1, the NY Times had an interesting article on how out of whack the e-commerce pricing was. The premise was that while originally, the draw to e-commerce (Amazon et. al.) was to get a lower price, that has evolved to be a more convenience as a value proposition. Yet a powerful message conveyed in the shopping process was the “discount” over list price. And marketers are happy to take advantage of this psychological phenomenon.

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Focus, Strategy, and Distractors

One of the lessons you learn in marketing is that entering a market, particularly a market that has a well defined set of competitors, it is a good idea to find a niche that you can address better than the existing players. It is like “bowling” you find your head pin, and knock it down. Then once you have demonstrated success, you move to the next pin or niche, gradually expanding your toehold into the market.

Classic “Crossing the Chasm” market penetration tactics. Of course, when the strategy is boiled down this clearly, the entire organization understands what success looks like, and the reasons why such a narrow focus is important, there is a cohesion across all boundaries. The “we are all in it together” attitude.