Amazon Raises Price for Prime Membership

Pricing is a very strategic part of marketing. And, yes, we know that price is one of the four P’s and is usually referred to as a tactic. However, when an organization is setting strategic objectives, price is a critical factor to meeting the objectives. However, it is relatively rare for companies to increase prices. Consumers tend to balk at paying more for a product or service that they have had for years. Except it appears, when the company is Amazon, then customers go along with the increase.

Beginning in May, new subscribers to Amazon Prime will pay $119 per year for shipping and entertainment membership programs; existing subscribers will pay the new fee when renewing after mid-June. This is an increase of $20 per year (20%), but it is only the second time that the company has raised the price for Prime. In 2014, Prime cost subscribers $99 per year, and in 2005 when it launched, the price was $79 per year. (What may be more surprising about the move though is that the company announced that is has more than 100 million Prime members worldwide. Amazon had never previously reported the level of members.)

Why the price increase? Prime is expensive for Amazon to fund. Since 2014, the number of products available for free two-day shipping has increased from 20 million to more than 100 million. The company has a significant investment in its logistics network and costs of shipping continue to rise. In addition, Amazon has spent lavishly to acquire, and create, an extensive library of movies and TV shows that are included in the benefits of Prime memberships. Prime delivers value to subscribers beyond the two-day free shipping option.

Is Prime still worth the price?

Group Activities and Discussion Questions:

  1. Pricing is a complex topic. Discuss the six steps for pricing (determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments).
  2. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  3. For Amazon Prime, divide students into groups and have each group work on any/all of the six steps.
  4. When setting the price level, assign each team a different model to use (demand-oriented, cost- oriented, etc.).
  5. Debrief the exercise. Compare the various pricing models and discuss advantages/disadvantages of each.

Source: CNN Money, Recode, Washington Post, other news sources

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Billie Body Brand – No More Pink Tax!

Why is it that many products that are quite similar in scope and use cost more when sold to women compared to men? It’s sometimes referred to as the “pink tax” when women are charged more than men for feminine products and general services. According to a study done by New York City in 2015, girl’s clothes cost 4% more than boy’s clothes, women pay 7% more than men for accessories such as bags and watches, 8% more than men for clothing, and 13% more than men for personal care products.

Enter Billie – a company that offers a direct-to-consumer product line of female-focused razors, shaving creams, and lotions developed – and priced – for women. One might think of it as the female equivalent of male-focused Dollar Shave Club, but according to Billie’s founders, it really wants to be a friend to its customers and be considered a body brand. It offers a subscription service of razors delivered every one, two, or three months at a price point of $9.00, including free shipping.

Billie makes a point of listening to its customers and forging relationships. They try to treat customers as friends and be helpful and in tune. Billie doesn’t want to tell women how they should look, but do want women to have a choice and provide an affordable solution designed specifically for women.

No more pink tax!

Group Activities and Discussion Questions:

  1. Discuss the stages in
  2. The New York City study report: http://www1.nyc.gov/assets/dca/downloads/pdf/partners/Study-of-Gender-Pricing-in-NYC.pdf
  3. View
  4. View Billie’s story: https://youtu.be/810UnL8ZTNk
  5. View Billie Web site: https://mybillie.com/
  6. Discuss competition: what are the direct competitors for this product? Indirect competitors?
  7. Divide students into teams. Have each team compare one of Billie’s product with a competitive product. What are the points of difference?
  8. Draw a positioning map for Billie.

Source: Brady, S. (8 May, 2018). Making mundane magic: 5 questions with Billie co-founder Georgina Gooley. Brandchannel.com

 

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Product Lines Don’t Last Forever

Nothing lasts forever. It’s a tired phrase, but a true one, that is often applied to consumer goods. In the past year or so, two of the most ubiquitous consumer products that have been deleted include the VCR and the iPod. It happens in all industries.

In the automotive industry, some of the famous car brands that have been deleted in the past decade include Pontiac, Saturn, Maybach, Mercury, Hummer, Saab, Isuzu, Oldsmobile, and Plymouth. The most recent company to delete a car line (but not the entire company) is Ford. Ford plans to kill off its entire sedan lineup (except Mustang!). The company plans to delete Taurus, Fusion, Focus, and Fiesta – some of which have had high rankings and sales. Why cut the lines?

Strategically, Ford needs to cut costs and improve its overall financial performance. The company’s decision also seems to reflect changing consumer preferences for SUVs and crossovers, instead of traditional family sedans. Generation Y and Millennials are now starting families, but they still want to maintain an active lifestyle. This makes SUVs a popular choice. By 2020, Ford plans to have nearly 90% of its vehicles in the categories of truck, SUV, and commercial vehicles. And, let’s not forget about emerging demands for electric and autonomous vehicles.

Out with the old – in with the new.

Group Activities and Discussion Questions:

  1. Discuss the stages in the product life cycle. What are the marketing objectives in each stage?
  2. Divide students into teams. Have each team draw a product life cycle and place various products and services into each stage.
  3. Show Ford’s Web site: https://www.ford.com/
  4. Where do the various vehicles fit in the product life cycle?
  5. Discuss Ford’s cuts to its product lines.
  6. Have students brainstorm on how to reposition or revise products/services to that they can move into an earlier stage of the life cycle.

Source: Detroit Free Press, Brandchannel.com, New York Times, other news sources

 

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