Low Prices Are Not Always Your Friend
Cutting prices might seem reasonable given the state of the economy, but doing so could backfire over the long run, argues our columnist
Summary
1. Price as an Indicator of Value
2. For Long-Term Success, Higher Prices
3. Face It, You're Not Wal-Mart
The author's idea
That thought reminded me of another shopping experience, this time revolving around jewelry. I recently inherited a ring from my grandmother that was somewhat dated, but featured a beautiful aquamarine, my wife's birthstone. I knew she would love the stone, so I set out to find a jeweler who could redesign the ring into a pendant in time for her birthday.
I visited three or four different jewelry stores, trying to find one that would offer design talent, a personal touch, and a willingness to work within my budget. And as I evaluated my own decision process, I observed something interesting and somewhat surprising—I gravitated toward the most expensive option.
My Opinion
Last semester I happened to research about Starbuck's story, and I realized that one of its successful strategies was 'High Pricing Stratagy'. Especially in Korea, it works really well!!
There are many women who want to become like Hollywood stars tend to like Starbuck's coffee. Most of them go to Starbuck only for a cup of coffee but for a take-out cup which can be a fashion item. Moreover there is a word for this situation. Have you heard of 'Veblen Good'?
I'd like to tell you about this term. According to the economic dictionary, Veblen goods are a theoretical group of commodities for which peoples' preference for buying them increases as a direct function of their price, instead of decreasing according to the theory of supply and demand. It is claimed that some types of high-status goods, such as diamonds or luxury cars, are Veblen goods, in that decreasing their prices decreases people's preference for buying them because they are no longer perceived as exclusive or high status products. Similarly, a price increase may increase that high status and perception of exclusivity, thereby making the good even more preferable. The Veblen effect is named after the economist Thorstein Veblen, who first pointed out the concepts of conspicuous consumption and status-seeking.
It is very interesting for me and I think I have experienced this effect before. When I worked as a waiter in an Italian restaurant, there were lots of expensive dishes. However, I saw there were always lots of customers who had willingness to pay. I could not understand at that time because It was too expensive, But now I understand that hige price can be good in some fields of business. Because people might think high price has higher value.
Reference: Businessweek Sales&Marketing by Steve McKee April 14 , 2008
Wikipedia.org
May 30, 2008
20501034 - Entry 12
Summary
Apple’s iPhone ‘s users are asking the function of GPS(Global Positioning System). The smartphone’s chief competitors like blackberry offer real satellite navigation systems. And Nokia is also considering GPS strategically important that last year it spent $8.1 billion to acquire Chicago’s Navteq; a digital mapmaker that supplies all the major navigation device companies.
As a matter of fact, iPhone provide GPS but it is often described as pseudo GPS to determine its location. Instead of getting a true location fix from the GPS satellites orbiting Earth, it determines its position in part by using the nearest cell towers, using technology from Google. The thing is that it isn’t quiet accurate. Sometimes it shows you a block or two away from where you actually are. Frequently it will put you within 100 feet.
My opinion
I am not using iPhone. I am using Samsung’s Anycall. It functions as camera, mp3 player, movie viewer, blue tooth, calculator, memo, dictionary and etc. It is obvious that cell phone is evolving in a way of combining numerous functions inside of it. Navigation function hasn’t embedded in mobile phone yet but I think in couple of years it will be very common to find navigation in the ordinary cell phone. Navigation will work in various ways and it will create numerous new business opportunities. Can you imagine that if one is hungry, cell phone automatically recommend you the nearest restaurant. Can you imagine that if one gets hurt, the cell phone find the nearest hospital and asking for an ambulance. Cell phone navigation will be the most popular advertising tool because it brings right information for the right people. In my perspective, if cell phone’s navigation system is combined with database system, it will have huge impact on the society because cell phone, itself can sort out highly desired information for the cell phone owner based on what he chosen in purchasing history.
As a matter of fact, iPhone provide GPS but it is often described as pseudo GPS to determine its location. Instead of getting a true location fix from the GPS satellites orbiting Earth, it determines its position in part by using the nearest cell towers, using technology from Google. The thing is that it isn’t quiet accurate. Sometimes it shows you a block or two away from where you actually are. Frequently it will put you within 100 feet.
My opinion
I am not using iPhone. I am using Samsung’s Anycall. It functions as camera, mp3 player, movie viewer, blue tooth, calculator, memo, dictionary and etc. It is obvious that cell phone is evolving in a way of combining numerous functions inside of it. Navigation function hasn’t embedded in mobile phone yet but I think in couple of years it will be very common to find navigation in the ordinary cell phone. Navigation will work in various ways and it will create numerous new business opportunities. Can you imagine that if one is hungry, cell phone automatically recommend you the nearest restaurant. Can you imagine that if one gets hurt, the cell phone find the nearest hospital and asking for an ambulance. Cell phone navigation will be the most popular advertising tool because it brings right information for the right people. In my perspective, if cell phone’s navigation system is combined with database system, it will have huge impact on the society because cell phone, itself can sort out highly desired information for the cell phone owner based on what he chosen in purchasing history.
20820014 Entry-12
Who Benefits From Higher Gas Prices? Auto Insurers.
Drive less, Pay less
The article is generally about how insurance companies make a profit due to steeply increased price of gasoline. As the increasing cost of gasoline forces U.S. drivers to keep their cars in the garage, as a result, there is less chance for an accident.
It makes sense to less driving means fewer accidents, which will help boost auto insurer earnings. U.S. Department of Transportation report indicates that auto mileage dropped by 4.3% in March compared to the year ago month. As a matter of fact, the report won’t be news to auto insurers, because they have already seen the reduced accidents
The third- largest auto insurer company “Progressive” offers “drive less, pay less” campaign which encourage drivers’ less risky- driving habits.
However insurers get benefit from increased price of gas, still there is negative effect to the repair companies. Due to higher material cost, the cost of repairing vehicles also increased.
My opinion
One barrel crude oil costs $126.62 in the U.S market by the report of May 30, 2008 on the wall street journal. As we all know that crude oil price has increased steeply in recent few months. Gasoline as a basic cost of all goods and services, almost in each country it causes high inflation. In Mongolia due to increased price of raw material ( gasoline, wheat etc) and unstable government situation, inflation up to almost 30% . Therefore I thought that increasing price of gasoline only benefits to huge oil exporter countries like Saudi an Arabia, Emirate or any other big exporters and never imagine that insurance company or third part companies could be benefited. From this article I saw that agile marketers can find out any expected advantage or value even situation is tough.
But I read that oil price tends to decrease in second quarter. Or probably because of some government actions like embargo, international agreement on trade, oil could cost less. At that time people will drive more, and accident rate could be increased again.
The article is generally about how insurance companies make a profit due to steeply increased price of gasoline. As the increasing cost of gasoline forces U.S. drivers to keep their cars in the garage, as a result, there is less chance for an accident.
It makes sense to less driving means fewer accidents, which will help boost auto insurer earnings. U.S. Department of Transportation report indicates that auto mileage dropped by 4.3% in March compared to the year ago month. As a matter of fact, the report won’t be news to auto insurers, because they have already seen the reduced accidents
The third- largest auto insurer company “Progressive” offers “drive less, pay less” campaign which encourage drivers’ less risky- driving habits.
However insurers get benefit from increased price of gas, still there is negative effect to the repair companies. Due to higher material cost, the cost of repairing vehicles also increased.
My opinion
One barrel crude oil costs $126.62 in the U.S market by the report of May 30, 2008 on the wall street journal. As we all know that crude oil price has increased steeply in recent few months. Gasoline as a basic cost of all goods and services, almost in each country it causes high inflation. In Mongolia due to increased price of raw material ( gasoline, wheat etc) and unstable government situation, inflation up to almost 30% . Therefore I thought that increasing price of gasoline only benefits to huge oil exporter countries like Saudi an Arabia, Emirate or any other big exporters and never imagine that insurance company or third part companies could be benefited. From this article I saw that agile marketers can find out any expected advantage or value even situation is tough.
But I read that oil price tends to decrease in second quarter. Or probably because of some government actions like embargo, international agreement on trade, oil could cost less. At that time people will drive more, and accident rate could be increased again.
reference:
TItle: Who Benefits From Higher Gas Prices? Auto Insurers, by MarketBeat Staff
May30, 2008
20820007 Entry - 12
Mobile Service Boom in India300 million cell phones vs. 30 million PCs
Indian mobile market is ranking in the second place on earth. Today about 300 million people are using cell phones and 8 million new subscribers sign up every month. Last year Indians spent about $250 million on extra services such as text messaging, games, wallpaper for mobile display, music and internet. Why demand for these services is huge? Because there are only 30 million PCs in the country and e-commerce is still not popular through Internet. Therefore average revenue in the country is $10 compare to China $12 and $30 in United States and the mobile cost per minute is as little as 1.2 cents vs. 8.4 cents in Pakistan and 3.5 cents in China. So while offering low price calls many services remain luxury for many Indians who use cheap cellular phones but want the same services available for premium handset. The demand for these extra services became a reason for many multinationals like Google, Yahoo and Microsoft’s MSN to be sharer in the market. They are cooperating with great number of top telecom providers such as Vodafone, Reliance Communication and Tata Teleservices in order to offer information like taxi services, stock quotes, news and hospital and business listings. The range of offerings is extensive. Airtel, Indian leading company offers weather forecasts and sells mobile services which allow users to make purchase in stores and book train and flight tickets using their mobile instead of credit cards. Hence by these services telecom providers want to increase the share of their income currently 10% of revenue and 13% of profits on average, to about 20%.
“India is leading the way for mobile solutions globally.” Manoranjan Mohapatra CEO at carrier Bharti Telesoft.
Opinion
I think Indian telecom providers can increase their revenue share if they find the ingenious ways to fulfill needs of mobile users considering big market and population of the country. Now days customers are mostly focusing on convenience and leisure so many users in India think that handsets are their extension of their self and a cool one stop shop for many personal needs. Especially young people have high aspirations but they can’t satisfy it from banking to entertain. So it is very important to make value preposition by understanding customer’s expectations because service is intangible, perishable, variable and inseparable. Indian cellular phone users expect to get more than from their mobiles then just talk. Let’s see how companies in the country will please their customers and increase their revenue.
Reference: http://www.businessweek.com/
May 29, 2008
20400442--ENTRY 12
LG Will Clean Up, With or Without GE This week's article is about our home-proud company LG. The LG Total Capacity Refrigerator which has 15" LCD TV with FM radio, temperature adjustment, room temperature display, water controls, a weather & info center, recipes, digital photo album, calendar, BioShield Anti-Bacterial Seal and other features.
LG is "clearly one of the leading candidates," GE Chief Executive Officer Jeffrey Immelt said during his short visit. One might thing, 'What on earth is he talking about?'. It is that LG is trying to move to the continent of money, America market, to achieve further success, like it is showing in India and other countries. LG is occuping merely 70% of Korean house appliances. However, it is not all that easy.
Success in the more mature U.S. market would, of course, be harder to achieve on its own. Still, in the U.S., LG has made remarkable progress in the past four years with its strategic focus on premium segments. The Korean maker has targeted consumers willing to pay a few hundred dollars extra for snazzy designs and high performance. LG's sleek washing machines, for instance, last year commanded a 22.8% share of the market for more expensive front-loading washers priced at up to $2,500. That's up from only 6% three years earlier.
That is why LG is considering a close business relation with GE.
Opinion
When I was in Thailand and America for my junior-high, I still remember how shocking it was to see a building-sized samsung logo on the broadway. And also, LG flat TV hung at the UN lobby. They are the promotion of Korea as a successful nation with high technology and high standard of living.
As we studied in the class, Korea has high technology to sell around the world, but marketing strategy is so bad. One example is Hyundai compared to Toyota. Toyota's tech is not so up high, but they use the tech in such a way to fulfill customers' delicate taste.
International market penetration require much research about the market's specific preferences. In this sence, merger with GE would bring positive effect to LG.
Reference. LG Will Clean Up, With or Without GE by Moon Ihlwan, Business Week
May 29, 2008
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