Effects of the 2Is on Product

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Effects of the 2Is on Product
Individualization
Interactivity

• Users can redevelop aspects of the product to
  meet individual needs and preferences
• Firms can provide more targeted, personalized
  products
• Increases stickiness as customers invest time
  and effort to personalize

• Enables responsive service interaction to provide
  augmented value to the product
• Allows companies to quickly gather valuable
  customer data such as preferences
• Customers can be directly involved in the product
  development process

Product
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What is Product

• Core Benefit
• most fundamental value offered by the product
• Examples core benefit for an SUV (Sports Utility
  Vehicle) is transportation
• For eDiets.com, its dieting information
• Basic Product
• minimum product offering needed to deliver the
  core benefit
• Examples for an SUV, its the baseline model
• For eDiets.com, its accurate information, advice
  and motivational support in order to lose weight
• Augmented Product
• features that go beyond a customers minimum
  expectations
• Examples for an SUV, it could be extended
  warranty, trade-ins and financing
• Look at eDiets.com
• What are some product augmentations?
• How does eDiets.com make money?

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Product Augmentation

• Pre-Sales Support
• Comparison shopping
• Product selection guides
• Product demonstrations
• Bestseller Lists
• eMail notifications of new products
• Look at Landsend.com try the Personal Shopper
  and Virtual Model
• Fulfillment Options
• Place orders through a number of channels mail,
  email, 1-800, on-line, dealership
• Download or receive on CD/DVD
• Post-Sales Support
• Send reminders for product maintenance
• Electronically schedule appointments
• On-line warranty filing and information
• Tips and trouble-shooting
• Community support
• Customer Care

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Product Assortment

• Bundling
• Personal computer with extra memory, scanner,
  printer
• Season tickets to sports events
• Series subscriptions for theatre
• Discounts for on-line subscription to Print
  subscribers of a newspaper or magasine
• Complementary Products
• Often add basic or advanced functionality, tools
  or enhancements to a product
• created by the same company or third-party
  companies from a modular design or open-source
  software
• Look at Quicken.com
• What complementary products are available to the
  basic software?
• Look at Apples webs site.
• What complementary products are available for the
  iPod?

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Product Levers
Four Key Stages of Customer Relationships
Awareness
Exploration/ Expansion
Commitment
Dissolution

• Core benefit
• Presentation and packaging

• Presentation and packaging
• Attributes and features
• Presales support
• Fulfillment
• Availability of complementary products
• Customer-specific attributes and features

• Upgrades
• Customer-specific attributes and features
• Post-sales support
• Tiered service
• Personalization
• Customer care

• Migration to different product in the portfolio
• Customer care

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Conclusion

• Products come in two basic types physical
  products and services. For all products there are
  three components to the overall value
  proposition the core benefit, the basic product
  and the augmented product.
• There are certain product development levers
  available to managers
• The levers may be applied to both physical and
  service products
• The product development levers can be organized
  by product type
• Basic product development levers
• Augmented product development levers
• The 2Is allow firms to learn about their
  customers, personalize a product to meet customer
  preferences and offer customer relationship
  management tools to provide more value for
  customers and cut costs for product sellers

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The Effects of the 2Is on Pricing
Individualization
Interactivity

• Easy to convey prices to individuals
• Allows more targeted price promotions
• Different websites cater to different segments

• Allows a larger buying and selling community
• Allows prices to be changed easily
• Allows consumers to easily check prices
• Easier to understand and measure consumers
  reactions to price promotions
• Easier to receive customer feedback on price,
  understand customers willingness to pay, and
  implement price-discrimination strategies

Pricing
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Pricing Strategies

• Hi-Lo
• Cyclical strategy
• Usually prices are high
• Regularly offer deep discount promotions (lower
  than EDLP below)
• Get shoppers attention and bring them to the
  store
• Attracts price-sensitive consumers and stimulates
  demand
• EDLP (Every Day Low Pricing)
• Relatively low product prices
• Fewer sales than Hi-Lo
• SafeWay, WalMart, Amazon and Saturn are examples
• Good to associate EDLP with Brand
• Brand Pricing
• Often a type of prestige pricing
• Product is priced high
• Value is associated with the perceived value of
  the brand
• Often attached to a logo

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Pricing Strategies

• Dynamic Pricing
• Prices are not set, but fluid
• Internet makes it much easier to change prices
  without the traditional menu (physical) costs
  of doing so
• Interactivity allows buyers and sellers to
  negotiate prices
• Auctions are a popular dynamic pricing model on
  the internet
• eBay is the most famous of these
• The seller sets the minimum bid (price)
  onproducts
• Bids are offered by potential buyers
• Eventually the highest bidder wins out
• Priceline has a different type of auction model
• Buyers submit a price for airline tickets
• Priceline checks with airlines to see if the bid
  is acceptable
• If it is, the buyers credit card is debited and
  an itinerary sent to them

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Pricing Strategies

• Volume Discounts
• Price decrease as more items are purchased
• Examples include buy two, get one free
• Two-Part Pricing
• Often includes a subscription fee and then highly
  discounted items
• Example might include a Music Club with a
  subscription and very cheap CD pricing
• Frenzy Pricing
• Consumers go into a frenzy to purchase the
  product
• Often price is set low
• May be a limited number of items available or a
  limited-time offer
• Often generates a lot of media buzz
• Often done prior to a busy buying time like
  Christmas
• Can you think of some examples of Frenzy Pricing?

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Four Key Stages of Customer Relationships
Awareness
Exploration/ Expansion
Commitment
Dissolution

• Click-through promotions
• Web-referral promotions
• Bricks-and-clicks promotions
• Web price discounts
• Bundle
• Frenzy pricing
• Prestige
• Price as a sign of quality
• Hi-Lo
• Dynamic pricing
• EDLP

• Targeted Promotions
• Loyalty programs

• Tiered loyalty programs
• Wide variety ofpricing plans
• Become affiliates
• Volume-discount promotions
• Targeted promotion
• Two-part pricing
• EDLP

• Discontinue pricing promotions
• Reconfigure loyalty programs
• Decrease profit programs

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