Monday, May 16, 2005

The Change of Price

How quickly can you see the impact of a change in your prices?

If you’re a publisher of travel guide books, say a publisher like Fodor or Frommer, it may not be until the book hits the discount bins in a bookshop prior to the launch of a new edition. It can be up to six years between launches of new editions of travel guides.

Industries like the Yellow Pages directories around the world are all on annual sales cycles, and few if any companies in this industry, change prices during a sales canvass. Yellow Pages Pricing Analysts may be waiting a year to assess the impact of their price changes.

There’s a slightly different situation in the US airport-based car rental business. There, some companies can see the impact of price changes, especially when a competitor is involved, within 24 hours.

But perhaps the fastest impact of a price change is seen by Dell Computers. When they change prices on their website, they can see a change in customer behaviour literally within minutes.

The world, and the world of pricing, moves faster all the time.

Sunday, May 15, 2005

Price Benchmarking

Every now and then, one reads about price benchmarking. Not necessarily of apples and apple products, but rather obscure and irrelevant apple and oranges pricing.

Perhaps the most commonly cited example is the price of a litre of milk, compared to say the price of a litre of bottled water. Or the price of a litre of milk or bottle water, versus the price of a litre of petrol.

Some of these comparisons are fairly simple calculations. It was quickly pointed out when it commenced operations, that the Heathrow Express train, that carried passengers from Paddington Station to London’s Heathrow Airport was, on a pence per kilometre basis, more expensive than a flight to New York on the Concorde on a pence per kilometre basis. A fairly simple calculation.

However, this one would not have been so simple: by volume, the ink for a HP colour printer is more expensive than Vintage 1985 Dom Perignon. A very intriguing calculation, even though the two are hardly substitutes for each other.