Summer+2009+Section+08-PS+Week+5

=**__Price $$__**= Week 5 Wiki - Team Gestalt (Tori, Randi, Chris)

Pricing and the Psychology of Consumption

 * [|Lump-sum Payments] vs. Monthly Payments
 * Observe consumer use of cash and debit card. More people use their debit cards due to convenience.

**Price Framing**

 * Present a price to the consumer that includes 'extras' that will draw the consumer to the benefits of the main product or service that was bought. An example in class was an all-inclusive deal, like the PMBA program! Other examples?
 * Another example that seems to be popular is the all inclusive resort for vacations. These places typically include all food, drinks, some entertainment, and your room. For larger families this could be a big selling point because they would not have to budget for all the extras like excursions and eating out which can make you feel like you are saving a lot of money, hence the idea of price framing that includes "extras." My question is are they really "extras" that are saving you money or does it just appear that way? Thoughts?
 * [|Value Pricing]**
 * Find what price people are willing to pay and then price the product or service just below what the comsumer "values" it at.
 * I use value pricing in reverse when negotiating supply contracts with vendors. One of the first questions vendors will ask is, “How much are you looking to spend? or What is your budget?” Obviously, you can’t answer those questions or they will know your “value price” and price their product accordingly. As work around to those questions, I say, “Tell me about your product and I’ll decide what it is worth.” This way I get to set the price anchor, not the vendor.

**Coke's Vending Machine Idea**
Price discrimination is not unethical. It is simply the law of supply and demand coupled with the value added of a product to the consumer. If a product provides more utility to a consumer the price should be set accordingly. I do think that we would feel differently about this if it were framed as a discount price on cooler days. The CEO of Coke stuck his foot when he made the comment about the smart vending machines increasing the price on hotter days because there would be more demand but what he was saying is essentially true - Coke can charge whatever the general population in willing to pay and on hot days that would probably be a few cents more.
 * Is price discrimination unethical?
 * Would we feel differently about it if they said they were discounting the price on cooler days?

Coke had a brilliant idea with their "smart" vending machine. The thought of losing half a billion dollars due to poor communication by Coke's CEO is amazing. How could someone in that position be so out of touch? The smart vending machine is not unethcial. It just needs to be "sold" to the public in a different way. With customers tastes shifting away from soft drinks, Coke will need to find another way to make up the revenue they are bound to lose in the future. I would like to see them take another look at their veding machine idea, especially now that their old CEO is out of the picture.

My friend just got back from traveling and the first thing they told me about regarding their trip was this "crazy" Best Buy vending machine they came across located in the airport. This got me thinking of what a great example this is of several of the concepts we have been discussing in class.This is a prime example of focusing on selecting the best opportunity by looking at customer satisfaction and taking into account consumer needs that relate to “place”. It is also an example of upsetting the established order. This could be a peak into the future; where in when you take this type of machine and the red box machines – you have to wonder what type of impact can vending machines have on society and how far can the vending machine envelope be pushed? - Apple has I-Pod vending machines at airports as well. It's crazy to think that you can swipe your credit card and get a $300 I-Pod out of a vending machine.
 * The power of the Vending Machine:**

**Freeconomics**
Video link: []

**Regression Analysis**

 * A [|regression analysis] allows us to capture data on the benefits that products offer and thier prices to determine which benefit explains most of the variance in the product's prices.
 * Advanced Functionality...Does someone have an easy way and helpful way to explain this idea?

**Virgin Mobile Case**
There was some discussion about whether we would allow advertisers to purchase ad space on the phones directed at our specific market segment. While mobile phone ads haven't quite caught on, we think it's only a matter of time. Case and point - a couple days ago I read an article in business week titled "[|Pandora: Unleashing Mobile-Phone Ads]." Companies such as Best Buy, Dockers, Target and Nike are experimenting with mobile-phone ads through the mobile Pandora music application. Customers are responding to these targeted mobile-phone ads, "Target says 27% more people clicked on its ad for the release of Christina Aguilera's greatest hits CD last fall than on any other mobile Web campaign." Mobile-phone ads is going to take off, and Virgin's targeted customer segment is a perfect place for companies aimed at the youth demographic to start!
 * Team Gestalt**
 * No Handset Subsidies
 * No Contracts
 * Prepaid or Monthly Plan
 * Close partnership with MTV and other youth media
 * Charge less for fewer minutes bought at a time - to encourage ongoing consumption, rather than customers sloughing away




 * Team Wiki:** We thought that Virgin Mobile employed the best strategy available to them in order to enter an established industry. Virgin decided to go a completley different route disrupting the current framework of the mobile industry. In addition to entering the industry with a unique approach they decided to niche themselves and go after what they felt was a underdeveloped market in teenagers and young adults.



Our team wanted to price a plan that considers the younger crowd, with prices that parents could afford for their teenagers. We wanted to include people with no credit history or bad credit history.
 * Team Love's Ladies**
 * Service plans are monthly pre-paid plans.
 * International service plans.
 * Distribution sites at Target and Best Buy stores and online at the Virgin Mobile website.
 * Promotion through marketing efforts with a focus on the younger crowds at concerts, universities.



Our team was looking at options that would appeal to the younger demographic, ideally teenagers who would become loyal to the Virgin Mobile brand and who would continue on as customers into their adulthood. We wanted to include some perks that teenagers would value in their plan.
 * Team HACK:**
 * Virgin mobile would install alerts on their phones that let you know when your minutes were getting low or your phone bill was due. We thought that the fewer details people had to remember on their own the better.
 * Discounted service plan rate for good grades.
 * Four year plan for college students. We've got them covered from freshman to seniors!
 * One free replacement phone per year without the purchase of additional insurance each month.