Friday, November 27, 2009

╠ Apologies with meaning ╣

I got an interesting email earlier today which basically said that ebay was sorry for an inconvenience I may have experienced with my last transaction. Now I don't really know what inconvenience they were referring to...but they attached a 10% off voucher. Basically meaning I can now go and buy something big and shiny and save 10% after I just spent $7 on a trinket.

At first I was confused because I wondered how ebay could do it considering they don't own what they 'sell'. But it makes's a nice offer, encourages repeat purchase and actually means something because it literally is out of their back pocket.

Additionally what I like is it is conforming to a norm that people are used to from bricks and mortar retailers and using it to segway them into online auctions.

So Kudos off to buy a yacht!

Monday, November 16, 2009

╠ You're in the way! ╣

This picture to the left is what came up when I went to read an article that caught my eye in an RSS Feed. However instead of being able to read the article this video popped up over the start of it and began to play on its own accord. Furthermore there was no button I could press to remove it or drag it away.

So I figured I may as well let it end and hope it disappears. When it finished it just stayed there so my entire point of reading the article was ruined. I had to refresh and hope it wouldn't load again.

So basically this ad has said 'Instead of that thing you wanted, look at me!'. This is the worst kind of advertising. Yes advertising is normally an interruption but this is a step beyond that, this is a disruption and detour, and on top of this at the cost of downloads as it did seem to be quite a high quality video it was displaying.

Advertising like this is horrible because it hurts both brands. You don't agree with the messge of the ad because of your emotional state of annoyance and you dislike the site for allowing such poor advertising. It's a ridiculous lose-lose situation and I hope to never see it again.

Friday, November 6, 2009

╠ Allocating consumer costs correctly ╣

I recently discovered the haste with which stock can clear from an Aldi store. If you want that special item that they have every week then you better get in before 11am on the day of launch.

The thing about Aldi is it allocates the cost paid by the consumer accurately. Aldi consumers are not necessarily monetarily rich, but instead time rich. Therefore they can go to the extra effort.

I wondered why Aldi didn't simply raise prices to meet demand. However it goes back to the time rich nature of consumers. Yes, there are people who miss out a lot of the time, however most of their consumers are time rich meaning they can head in early. If they really want the product then they will be in at 9am. So whilst you may have people in throughout the week asking for the product, a lot of them only want to look at it. It's not unreasonable to assume that 90% of people who want the product may be in early on that Thursday.

What makes a good business is to set your costs to the consumer focussed around what they're most willing to pay. Are they time poor, travel distance poor or just money poor. Making sure you align your business with what your customers are rich in means your customers will be overall more satisfied. Another example of this is 7-11 which survives due to catering to time poor consumers.

Sunday, November 1, 2009

╠ What is Expensive? ╣

Throughout Uni I've always heard about how things add value to a product, make people willing to pay more for it. Basically working as if people have an exact dollar value they're willing to pay for an item that fits into a product category and then additional for extra components and branding.

However in practice it isn't like this. On my most recent large purchase I was negotiating a price down for an outdated display item and I realized I don't have an exact price that I won't pay a cent more. Instead what the situation is in most cases is as the price rises, your percentage chance of purchase goes down.

What this is known as in economics is price elasticity, how much demand changes with an increase in price. The greater the change,the more elastic a product is. The elements that reduce the elasticity of a product are elements such as brand and reduced alternatives. Basically it is shaped by the opportunity cost of not purchasing it. Is today your only opportunity? Do you need it right away? Someone saying yes to these will be more price inelastic and therefore will be a higher chance of purchasing the same product for a higher cost.

So pricing isn't about hitting a magic number that everyone will buy at, it's about picking a value that will create the highest percentage chance of purchase in the average situation without sacrificing too much profitability.

To finish I'd just like to share what was one of my favourite thoughts on this issue. The definition of expensive is wrong, instead of just being a high cost item it is instead an item that is priced above your expected expenditure. Or in relation to my explanation priced at an area with low purchase intention.