Facebook for Business – Social Media in Your Marketing Mix: Price
Other than the obvious change in cost structure in some web-based distribution models, pricing fundamentals too, have not changed. Price is set to maximize profitability in concert with corporate strategy regarding:
- Cost leadership
- Niche focus
Corporate strategy regarding its selection of differentiation, cost leadership or focus plays a key role in pricing of course, but what has changed is the influence of changes in distribution on pricing flexibility. Compared to brick and mortar, ecommerce sites are a low cost way of going to market. The e-commerce based company will have a cost advantage over the brick and mortar store. Today, those that want immediate gratification or enjoy the in-person shopping experience out-number those that enjoy the inherent free market advantage of searching, researching, comparing and ordering online.
Many, and a growing number enjoy both. Armed with mobile computing devices like iPhones and Androids they shop in conventional retail outlets and enjoy instant access to product reviews and comparison pricing. Using cell phone apps and surfing the internet on their smart phones, comparison shopping, product and retailer reviews and product research while standing in a brick and mortar store is now commonplace. More than 50% of consumers already report using their phone while in the retail store to check-in, compare prices, and search for discounts according to a report from Chadwick Martin Bailey and iModerate Research Technologies. “Web influenced” sales must be a major consideration of today’s retail and industrial marketer.
The implication for the marketer is two-fold. The need to highlight the value proposition of both a differentiated marketplace and a differentiated product will increase in parallel with the increase in the well informed customer with virtually instantaneous access to product and price comparison online. Today it is estimated that 46% of consumers have shopped online. Online sales, however, account for only 8% of total consumer retail revenues. This amount will obviously increase over time as the more “connected” youth replace their parents as shoppers with money to spend.
Perhaps even more importantly, the explosion of visual content on the web, particularly video will weaken the differentiation advantage of the conventional brick and mortar store over the online marketplace. The online shopping experience is becoming more interactive. You can not only see the product online, but often see how you would interact with the product, learn how to use the product, see case studies on how others have benefitted from the product or service online and rate the product.
YouTube is now the 2nd largest search engine. The amount of online video content is only increasing and companies are learning to use this medium to get their message out and provide a richer shopping experience to online buyers. Consumers are also learning to use video to express their both their enthusiasm and satisfaction with a product or to vent their frustration on a product that they are not happy with. Woe be it to any company with a bad product review that goes viral on YouTube.
This blog is the fourth in a series that will examine the fundamentals of marketing and how social media is being used effectively as a promotional tool in the marketing mix.