Pricing & Promotion

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Bill It, Kill It, or Keep It Free?

  • Research Feature
  • Read Time: 14 min 

Many B2B companies seek to grow beyond traditional product lines by venturing into new services. Yet they often overlook the opportunity to capture sales from free services they provide. This article outlines the free-to-fee, or F2F, service transition. It shows how to inventory free services (categorizing them as profit drains, distributor delights, competitive weapons, or gold nuggets) and lays out a path for profitably generating revenues.

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Master the Challenges of Multichannel Pricing

Retail customers may accept different prices on different channels — but retailers need to manage new complexities to make it work. These include understanding what customers value in each channel and how that affects what they will pay, giving store employees the right language for talking about price differences, and working out operational challenges. Getting it right has a real payoff: Retailers that effectively price differently across all channels see bottom-line growth of 2 to 5%.

Pass the Word: Peer Influence Has Big Impact on Online Market Dynamics

  • Blog
  • Read Time: 4 min 

A study of cryptocurrency markets provides some new insight into why people make the choices they do online. Crypto-currency traders used bots that executed over 100,000 small trades in 217 cryptocurrencies over the course of six months. Analysis reveals that traders are very susceptible to peer influences. The design of the online exchanges also appears to contribute to activity if functionality, graphical user interfaces, or application programming interfaces promote collective excitement.

From Winning Games to Winning Customers: How Data Is Changing the Business Side of Sports

  • Blog
  • Read Time: 5 min 

Sports analytics first proved its case on the field and in the front office, but as the practice spreads into business operations, the industry is addressing adoption challenges found in many sectors. At the MIT Sloan Sports Analytics Conference, speakers from teams and leagues discussed how they are using analytics to boost revenue, and how they’re managing transitions in culture and strategy.

Manufacturers Can Also Win in the Sharing Economy

  • Interview
  • Read Time: 8 min 

The sharing economy isn’t all bad news for manufacturers of big-ticket items such as cars. Research from Carnegie Mellon and UC Berkeley says that manufacturers will sometimes be able to charge higher prices to customers who are planning to rent out those goods. In a Q&A, one researcher says that when there’s heterogeneity in the market, meaning both a high-usage population and a low-usage population, circumstances are ripe for “a win-win-win for the borrower, the owner, and the manufacturer.”

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The Power of Product Recommendation Networks

Much as relationships in social networks have been analyzed to understand and influence how ideas flow among people, researchers wondered whether it might be possible to use the structure of product recommendation networks online to understand or influence how demand flows among products. The short answer is yes, and the implications for marketers are important.

Are You Using the Return on Investment Metric Correctly?

  • Blog
  • Read Time: 3 min 

The biggest challenge with ROI isn’t a technical deficiency but confusion over how it is used. “To calculate ROI accurately, you need to be able to estimate the fraction of profits attributable to the investment,” write Neil T. Bendle and Charan K. Bagga. “In order to calculate ROI, there must be a return (a profit associated with the investment) and an investment. Unless you have both, you cannot calculate ROI.”

How Should You Calculate Customer Lifetime Value?

  • Blog
  • Read Time: 3 min 

Should marketers subtract the cost of acquiring a customer before assessing that customer’s lifetime value (CLV)? Most of the time, no. “CLV is easier to understand, and in our view more useful, if marketers don’t subtract the acquisition cost from their calculation of CLV before reporting it,” write Neil T. Bendle and Charan K. Bagga. “Imagine that a company is selling an old machine. In this scenario, the company’s managers would expect to receive the machine’s current value, not the current value less what the company paid to buy the machine when new.”

Should You Use the Value of a “Like” as a Metric?

  • Blog
  • Read Time: 3 min 

Social media strategy shouldn’t be seen as the driver of value difference between a company’s fans and nonfans. Fans are often more favorable toward a brand to start with than nonfans are — indeed, this is probably what motivated them to affiliate in the first place. As well, social media spending should not be justified by an observed difference in customer value that may not have been caused by social media spending. Instead, to understand social media marketing’s impact, companies should run randomized experiments.

Should You Use Net Promoter Score as a Metric?

  • Blog
  • Read Time: 5 min 

The net promoter score (NPS) has become one of the most widely used marketing metrics. Consumers answer a simple question (How likely is it that you would recommend X?) on a scale from 0 to 10. Customers who answer 9 or 10 are considered promoters; those who answer 6 or less are rated as detractors. The score is the percentage of promoters minus the percentage of detractors. One of the strongest selling points of NPS is its simplicity. But the value of NPS may depend upon whether a manager sees it as a metric or as a system.

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Should You Use Market Share as a Metric?

  • Blog
  • Read Time: 5 min 

Market share is a hugely popular metric. But is it really useful? Companies with superior products tend to have high market share and high profitability because product superiority causes both. This means that the two metrics are correlated — but it does not necessarily mean that increasing market share will increase profits. Using market share as a metric of success simply because other companies do can be counterproductive.

The Metrics That Marketers Muddle

Well-defined metrics are critical to effective marketing. However, despite their widely acknowledged importance, five of the best-known marketing metrics — market share, net promoter score, the value of a “like,” customer lifetime value, and ROI — are regularly misunderstood and misused. This confusion undermines the marketing discipline’s reputation for delivering results. The authors present Do’s and Don’ts for using these metrics and flow charts with detailed advice for developing each metric.

How Crowdfunding Influences Innovation

Crowdfunding is changing how entrepreneurs bring new products to market. It has allowed thousands of innovating entrepreneurs to raise money, build brand awareness, and join a broader conversation with large numbers of potential backers — all while still in the product development process. But crowdfunding’s potential goes beyond financing and marketing. The people who back projects can also be important sources for product feedback and ideas.

Adapting to the Sharing Economy

Instead of buying and owning products, consumers are increasingly interested in leasing and sharing them. New strategies can help companies embrace this “collaborative consumption.” For instance, Ikea and Patagonia have found that helping people resell or give away products both enhances the companies’ reputations and helps customers create space in their homes for new Ikea and Patagonia items. Companies have also found value in embracing opportunities to share existing assets and capacities.

Image courtesy of Flickr user Phil Roeder. https://www.flickr.com/photos/tabor-roeder/14584628629

Will Customers Be Fair When They Pay-As-They-Wish?

  • Blog
  • Read Time: 3 min 

The obvious risk of pay-as-you-wish pricing is that customers may be tempted to offer unreasonably low payment. But organizations as diverse as the Metropolitan Museum of Art, Wikipedia and Humble Bundle have figured out how to manage that risk and make pay-as-you-wish work.

Showing 1-20 of 56