Tag Archives: pricing

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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The Joy of Books (for kids)!

Remember when one of the joys of being a kid was getting a box delivered to you that was filled with surprises? Even when the box contained books?! I remember it and the pleasure that reading brought (and still brings) to my life. When kids read, new worlds open up to them. And, building a love of reading early can lead to a life-time love of reading and learning.

In a new service geared to young readers, Amazon is starting a new service to send a monthly box of books to kids based on their ages and interests. The Prime Book Box service uses the tag line “The Love of Reading, Delivered” and delivers a curated box of books every one, two, or three months. The service is priced at $22.99 per box, an estimated 35% discount from the cumulative list prices.

Books can be selected for various age groups: Baby to two year olds, three to five year olds, six to eight year olds, and nine to 12 year olds. Each box contains either two hardcover books or four board books. The selection may include classic books as well as new books selected by the editors, and customers have options to swap out books and substitute from a selected alternative list. The service also takes into account a customer’s purchase history in order to avoid sending a book that you had previously purchased on Amazon.

Reading and getting surprises in the mail – it makes kids happy!

Group Activities and Discussion Questions:

  1. Discuss the power of reading for kids.
  2. Poll students: What do they remember about getting books as a kid? What were some of their favorite books?
  3. Show Amazon’s Prime Book Box service to class: https://www.amazon.com/dp/B072J4QS9F
  4. Pricing is usually 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).
  5. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  6. Which strategy is Amazon using for the new service?
  7. Will this be effective?

Source: Brandchannel.com, other news sources

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Snapchat’s New Spectacles

Remember Snap’s Spectacles? Launched in fall, 2016, Spectacles were fashionable sunglasses that could record 30-second videos with a 115 degree lens. The specs were $130 and initially sold only through fun, bright yellow, SnapBot kiosks placed around the U.S. There was a lot of hype and fervor from teens to procure the sunglasses and post their videos. Roughly 220,000 Spectacles were sold, but only half of the owners used them after the first month, and Snap took a $40 million write-off after making too many. But, the company learned a lot from its first foray with Spectacles, and is now ready for the next iteration.

So, get ready for Spectacles Version 2. The new glasses are priced at $149.99 and have a number of new features and improvements over version 1. The case is smaller and handier to carry around, and it charges the glasses up to four times. The glasses are lighter and more comfortable and the field of vision has been reduced to 105 degrees. In addition to video, the glasses now take photos – which of course can be posted online.

Colors are new and more neutral with two lens versions, and the pairing process is much simpler than version 1. High quality photos and fast downloads improve the overall user experience. The glasses are now water resistant and can even take photos underwater. Spectacles are now on sale in the U.S., Canada, U.K., France, to be followed by 13 more European countries.

Fortunately, no more SnapBot vending machines to limit purchases – it’s easy to buy since all that’s needed is to go online to Snap to purchase. It really is a wearable camera.

Go ahead – smile, you’re on Spectacles!h

Group Activities and Discussion Questions:

  1. Discuss the strategy that Snap is using to position itself as a camera/hardware company rather than a social media company.
  2. Show the Web site: https://www.spectacles.com/
  3. Show a product review video: https://youtu.be/DRqZoINHCwM
  4. A short product video: https://youtu.be/Qpbyj-hz05s
  5. Pricing is usually 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).
  6. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  7. What price strategy is Snap using for Spectacles version 2?
  8. How does this compare with version 1? Will this be successful?

Source: Constine, J. (26 April 2018). Snapchat launches Spectacles V2, camera glasses you’ll actually wear. TechCrunch.

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