Smart Pricing: How Google, Priceline, and Leading Businesses Use Pricing Innovation for Profitability
October 24, 2011 by admin
Filed under GOOGLE PRODUCT
Smart Pricing: How Google, Priceline, and Leading Businesses Use Pricing Innovation for Profitability
“If you ever wondered how prices are determined, you will find it in Smart Pricing. This is the most comprehensive coverage on the topic for today’s new economy. The insights in this book are priceless.” David J. Reibstein, The William S. Woodside Professor and Professor of Marketing, The Wharton School, University of Pennsylvania, and coauthor of Marketing Metrics “Global competition and digital technology have made pricing decisions more challenging than ever before. In this smar
List Price: $ 34.99
Price: $ 19.38
Flatter to Deceive…,
This has to be a perfect example of an effective tagline “How Google…” Unfortunately, that’s where the goodness of the book ends. Overall, the book does not live up to the expectations helped set by the sub-title or the glowing quotes from professional reviewers/authors.
First of all, it is not clear who the target audience is. While the authors words “….gain more confidence in pulling the price lever and perhaps sparks an idea about innovative way to price….we will have achieved our main objective”, suggests they aimed the book at pricing professionals/executives. They are likely to be the most disappointed with the book – it lacks specificity of tactics or strong theoretical models to help that audience (except a basic IBEA analysis section and abstracting key principles of pay-as-you-wish model). The general business audience will be baffled by the directionless nature of the examples and the neither-academic/neither-general audience style of narration and haphazard idea development. Undergraduate students in business disciplines will find this book difficult to use as a resource for case studies.
In fact, the general audience is better served by an earlier, more focussed book – Free: The Future of a Radical Price which employ some similar examples. Moreover, the chapter on “China price” is mostly superficial and readers can get a more entertaining and informative look in Dragons at Your Door: How Chinese Cost Innovation Is Disrupting Global Competition.
Overall, given the affiliation of the authors and the sassy sub-title of the book, this turned out to be a rather misguided experiment in non-academic writing. It turned out to be a hodge-podge of familiar stories woven together a supposed common theme (you may need FBI’s help in identifying that theme, because it seems to be well-encrypted). A casual business reader is likely to be familiar with most of the models in the book and a curious reader hoping to get a detailed analysis or a roadmap will be sorely disappointed.
I really wanted to like this book. I didn’t. Skim at best.
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|Don’t Pay the Price! Poor effort riddled with errors,
Having recently read Free: How Today’s Smartest Businesses Profit by Giving Something for Nothing, I was looking for something a bit more in-depth. I didn’t find it here. For a book written by two professors, and endorsed by four more on the back cover, I expected at least a couple of charts or graphs, plus some scholarly analysis. Unfortunately, what was delivered was a long magazine article with no analysis and few “facts,” some of which are erroneous.
Some examples:
P. 132: “Tesco’s (a leading British grocery store chain) Clubcard operation also used this data to send personalized coupons and other offers to every Clubcard household every quarter, a huge operation that accounts for more than 6% of the UK’s annual postal volume.” Using the 13 million household number found on page 131, this means that annual UK postal volume would be about 867 Million pieces. Unfortunately, according to Royal Mail Holdings, Royal Mail delivers more than 84 million pieces of mail PER DAY, meaning the quoted statistic is off by a factor of more than 35X. For the statistic to be true, Tesco would have to mail more than 5 Million pieces per day, or two pieces per member household per week, more than 100 pieces per member household per year. Other “facts” similarly lack the most rudimentary checks.
P. 102: “As good as the traditional pricing system works…” Back in 5th grade, they taught us that should be “As well as…” A nit, but expectations are high for a $34.99 book of under 210 pages. Actually, this chapter “The Automatic Markdown” is one of the better chapters in the book, discussing the history and application of the Filene’s and Sym’s system of lowering prices for women’s fashions according to a fixed schedule announced in advance. But this chapter fails as the book fails: despite the interesting discussion, not one chart compares the pricing or profits of Filene’s Basement with the rest of the Filene’s chain, or with that of other retailers. Indeed, on page 109 the author states, “Even the Filene’s Basement branches that opened outside Boston in the late 1970′s untimately stopped using the store’s unique pricing structure.” Wow-a pricing system that became world famous at a single store location didn’t work at other branches of the same chain? Why? The authors offer no analysis, not even suggesting possible reasons. Even an undergraduate paper on this topic would offer guesses.
According to the index, Apple Computer is mentioned on pages 90, 169 and 172. Apple’s iTunes, iPod and iPhone offer multiple different case study opportunities for a book on pricing, and indeed a quick web search uncovers a number of useful and detailed analyses of Apple’s pricing strategy. Unfortunately, the professors chose not to offer any analysis in this book, instead devoting just four lightweight paragraphs to the world’s most highly valued technology company, and providing only a handful of well worn facts. When you can find better analysis on the web than in an allegedly scholarly book, you can be pretty sure the book has missed its mark.
Because the title mentions Google, you might expect some level of insight and analysis into Google’s famous pricing models. Unfortunately not. According to the index, Google is covered on pages 41-44. Here are some telling excerpts from those pages: “…why does Google stick with this model? It’s not because Sergey Brinn, one of the young co-founders, was born in the old Soviet Union and is nostalgic for communism. Nor because the company shares the utopian idea of some of the early Internet developers that information somehow deserves to be free.” What follows is several hundred words about what Google headquarters building looks like, how Fortune rated Google the best company to work for in the United States in 2008, how employees receive free laundry service and haircuts, and Google’s market valuation. There is even a quote, from a FICTIONAL CHARACTER (Gordon Gecko from the movie Wall Street). But not one word of actual analysis on Google’s pricing models. This is just one example of the non-content that fills this book.
The closing words of this scarce information on Google are found on page 44: “…advertising displayed alongside a search for keywords ‘marketing consultant’ currently runs at $4.00 per click-through, while ‘price consultant’ is available at the bargain rate of $2.89.” As usual, the authors got it wrong. The market determines the price of Google ads. This price difference is not indicative of a “bargain,” but instead the voice of the market describing with great precision the relative value of ads targeting those search terms, on the day the comparison was made. Neither the authors (nor their editors at Wharton School Publishing!) seem to…
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|Cost plus margin pricing is not enough!,
Raju & Jang blow the lid off cost plus margin pricing. They begin with an oft forgotten profitability principle … profits are driven by only 4 components … sales volume, fixed and variable cost and price. Their data driven argument is that of the four levers available to the entrepreneur … price is the most significant profit multiplier. Excellent current examples of creative approaches to pricing follow through each chapter in a case study format.
As Wharton alumni, I appreciated the quantitative approach. The author’s data driven conclusions bolster the pricing weight in profitability component synergy. The deep Wharton data base of financials is mined for tidbits and details that anyone responsible for setting prices will appreciate.
The study of incremental breakeven analysis that fuels the Chinese price wars is very interesting. The approach is daring and a `one up’ on Japan. This chapter alone is worth the price of the book. You can be assured that the tactic will be employed in the US as China enters the US automotive market.
As pricing primers go, this one is a sure bet. I highly recommend it.
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