Tag Archives: pricing

SiriusXM Buys Pandora

SiriusXM satellite radio provider is buying music streaming service Pandora for a $3.5 billion stock deal. The deal will create the world’s largest audio entertainment company. Why should SiriusXM buy Pandora? Because SiriusXM wants to gain people who listen to music but don’t want to pay for the premium SiriusXM service.

SiriusXM offers streaming without advertisements for $10.99 to $20.99 per month per car with up to 140+ channels, or streaming on any device for the same amount of $10.99 to $20.99 per month, or combine both options for all-access streaming. SiriusXM has 36 million subscribers in North America.

On the other hand, Pandora, which has 70 million active listeners (5.6 million who are paying members) can be used at no-cost as long as listeners don’t mind listening to advertisements. Or, listeners can buy monthly subscriptions at $4.99 or $9.99 per month for services that eliminate advertisements and offer personalized stations and create playlists, plus other options.

SiriusXM isn’t new to Pandora; it provided $480 million of funding to Pandora last year. Pandora faces stiff competition from other music services such as Apple Music, Amazon, Tidal, and Spotify.

The war to gain new listeners is heating up!

Group Activities and Discussion Questions:

  1. Poll students:How much music do they listen to each day? Where is their music coming from? How much do they pay each month?
  2. View SiriusXM: https://www.siriusxm.com/
  3. View Pandora: https://www.pandora.com/
  4. Discuss the four primary marketing strategies: market penetration, market development, product development, and diversification.
  5. Which strategy is SiriusXM using? Why?
  6. Divide students into teams. Have each team research the different prices and packages offered by each music streaming company.
  7. Compare price structures. Which offers listeners the better deal?

Source:  Wall Street Journal, New York Times, other sources

Leave a comment

Filed under Classroom Activities

Is this a good deal?

Everyone loves a deal. Just showing a sign with “50% off!” can get shoppers racing to the store to rack up credit card points. But is that perceived ‘deal’ really a deal? Or is it a ploy? And, do shoppers always make the right choices when comparing pricing options? Oftentimes, shoppers do not make the lowest-cost choice, but instead fall prey to their own mathematical errors.

Answer this: Which is a better deal for a $6, 6-ounce product:

  • Option (a): 33% off the regular price, or
  • Option (b) 33% more product for the regular price?

At a quick glance, it appears the two deals are equivalent. But are they? No.

  • Option (a) $6 – 33% discount ($1.98) = $4.02, divided by 6 ounces = $0.67/ounce.
  • Option (b) 6 ounces plus 33% more volume (1.98 ounce) = 7.98 ounces, divided by $6 = $1.33/ounce.

In order for the two options to be truly equivalent, the price discount of 33% must be countered by a quantity increase of 50%.

This is a common scene for product discounts in stores. Generally, consumers prefer product bonuses instead of price discounts, even though these do not offer the same benefit.

Go ahead and try to make these calculations in your head! Then, carefully examine the promotions offered by retailers before making your final decision.

Which promotion would you use?

Group Activities and Discussion Questions:

  1. This activity is a good time to set students loose in stores on a field trip.
  2. Divide students into teams. Have each team walk through a local store to determine how prices are advertised and shown in stores. They can compare the shelf price with prices found in sales flyers (usually at store entrances).
  3. As they wander the store, have students find examples of products that are offering a discount, or offering an extra portion in the package. (They can use smart phones to take photos of the examples.)
  4. What pricing strategies are being use?
  5. Do they always make the lower-cost choice?
  6. Debrief the exercise.

Source:  McGinty, J. (3 August 2018). 50% off: Why that deal isn’t as good as you think. Wall Street Journal.

 

Leave a comment

Filed under Classroom Activities

A Lesson on the ‘Pink Tax’ from Burger King

Price discrimination is illegal, but nonetheless it exists. Previous articles on this blog have discussed the ‘Pink Tax’ that women encounter when buying products that are the same (or nearly identical) to those bought by their male counterparts. Oftentimes, the only difference in the products is simply the color – using pink to attract female buyers.

Research confirms this pricing discrepancy. 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. In total, price differences cost women $1,351 per year more than men. (And yet, women on average are paid only 79% of the wage paid to men.)

To highlight the topic, Burger King took a creative approach and released a 60-second video that shows just how crazy it is to ask women to pay more for a product that is packaged in pink. In the spot, pink-boxed Chicken Fries are sold for $3.09, while regular packaged Chicken Fries are only $1.69. Unsuspecting female customers have some great reactions!

What other examples of the ‘Pink Tax” can you uncover?

Group Activities and Discussion Questions:

  1. Poll students: What is their experience with price discrimination between males and females? Why do they think there is a difference in prices?
  2. Show the Burger King video: https://youtu.be/7rtHmSfYDbs
  3. Vox also has a brief overview of the pink tax: https://www.vox.com/2018/3/30/17179350/pink-tax-beauty-products-gender-inequality-women
  4. Divide students into team. Have each team research products that are similar for men and women (such as clothes, health and beauty products, sports, etc.).
  5. List the products and prices on the white board.
  6. What could be done to correct the price discrimination?
  7. Note: The New York City study report is available at: http://www1.nyc.gov/assets/dca/downloads/pdf/partners/Study-of-Gender-Pricing-in-NYC.pdf

Source: Ad Week; New York City Consumer Affairs

Leave a comment

Filed under Classroom Activities