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Pricing is obviously one of the critical components of marketing, but it's little discussed by communication agencies and seems to be the domain of number crunchers client side and consultants.

I think it's interesting how Starbucks just announced a new pricing play- basically splitting it's market in two by raising prices on the more sophisticated drinks and lowering them on the simpler ones.

It seems like a smart play for these times which seems to be predicted on the idea that there's a mass market opportunity for basic coffee that Starbucks wants to be part of and doesn't want McDonald's to steal it's share and it's got it's captive base who it wants to pay more.

Time will tell to see if this pays off.


Posted by Ed Cotton Hedging is usually something done by Wall Street to help protect companies against volatile commodity and currency pricing. This tool might now be finding it's way into marketing thanks to a company called Pricelock, who've just done a gas deal for automaker Hyundai. The possibilities are endless; being able to lock in your cup of coffee at Starbucks or even the price of your steak at a local steakhouse.

It will be interesting to see if this idea spreads, given how price sensitive people are at this moment in time.


Posted by Ed Cotton Pricing looks like it's the next frontier for marketing.

With the mobile web, brands are going to have considerable opportunity to take advantage.

There's a good paper on the topic available from the University of Exeter,Business School, published in 07, but seems right on point for this moment in time.

"Consequently, buyers can now purchase through a channel that is most
conducive for them, i.e. the channel that gives them the greatest value. Since the expense in purchasing a product is both the price of the product as well as the cost of acquiring it, different pareto losses exist for different channels. Converting such pareto losses would give rise to many permutations in terms of pricing. With markets now being divided into finer segments, leading to the term micro‐segmentation, it is now possible to price for each of these micro‐segments and therefore allow firms to refine their revenue management strategies. With 3rd generation mobile telephony, TV on the web, music on the move, convergence of mobile and internet as well as other technologies, pricing and revenue management strategies have to be clever, creative and innovative (Jonason, 2004). Firms that are any less dynamic run the risk of being left behind."

Posted by Ed Cotton A few days back, I wrote about the rise of the "Radiohead pricing model" that we've started to see crop up in other places like restaurants and hotels.

Digging a little deeper, it seems there are some environments where this has been going on for some time, Berlin's honesty bars being one example.


Posted by Ed Cotton Gateway is gingerly coming back, stating that it's going to place more emphasis on its consumer business, recognizing laptops are style statements for consumers and promising to work with the world’s best design houses to create new product.

However, Gateway’s stock currently stands at $1.75.

Once the darling of Wall St and for the business press Gateway was once a brand that could seemingly do no wrong

"A Brand is a promise, and you have to keep your promises. There's no difference between what we sell and who we are." At Gateway 2000, Jim Taylor practices what he and his partner Watts Wacker preach

Fast Company – December 2006

This Fast Company piece covered a couple of interesting topics in the conversation with Watts Wacker and Jim Taylor.

1. They saw a social networking future, way ahead of time

Q: You've come to Gateway to help position the company for the next round of competition. What will it take to win in the future?

The future of the personal computer is as a tool to connect what Watts and I call "communities of strangers." These are people linked together based on common ideas and values -- shared identity -- rather than social proximity. This is an absolutely revolutionary change. By using the computer to find people who share your views, you can live in whatever kind of world you want. Reality is no longer a defined constant. It is a choice.

2. Speed isn’t all you need to compete.

Q: What else will it take for computer companies to prosper in the future?

“Winning companies will help people maintain their personal rates of change. The speed at which computer technology changes -- the speed at which Gateway operates is unreal. We change parts to the line every three hours. We change product configurations every three days. We change prices every day. If memory chip prices drop, our prices drop. If we get unexpected production efficiency, our prices drop.

That's why I love the direct channel. We talk to 100,000 people a day -- people calling to order a computer, shopping around, looking for tech support. Our Web site gets 1.1 million hits per day. The time it takes for an idea to enter this organization, get processed, and then go to customers for feedback is down to minutes. We've designed the company around speed and feedback.”

Gateway’s revenues collapsed dramatically from $9.6 billion in 2006 to $4.6 billion in 2002. With a booming PC market in the late 90s, there was enough business for everyone, but when it contracted, pricing pressures meant Gateway wasn’t in a position to compete with Dell. Going head to head with Dell, trying to compete with Dell’s ad spending and breaking away from its own direct model to build retail stores was disastrous.

Today company revenues stand at $3.9 billion, brand awareness is 96%, it has the famous “cow” boxes, they are the no 3 US computer brand and have a 13% share of US laptop sales. It’s a long road back, but it’s not an impossibility. 

For all nostalgic ad industry folks out there, the same Fast Company’s December 1996 issue also contained a piece on St Luke’s, entitled The Ad Agency to End All Ad Agencies. Seems like December 1996's Fast Company wasn't the "lucky" issue.