In 2011, it was Netflix. In 2012, it was
JC Penney. And in 2013, could it be Celiac Supplies? What does Brisbane’s only
gluten-free and wheat-free retailer have in common with these two US companies?
All three companies have executed
pricing strategies that have divided the pricing community, the media and their
customers.
Netflix decided to replace one bundled
(DVD and online streaming) subscription, with two separate subscriptions for
each service, resulting in, amongst other results, 84,000 hostile comments on
its Facebook page within a week.
JC Penney decided to do away with its frequent
sales and its couponing strategy, replacing it with everyday “fair and square”
pricing…and turning customers off in the process. As I write this, the
instigator of this strategy, CEO Ron Johnson, has just been replaced by former
chief, Mike Ullman.
And as has been widely reported around
the world (a quick search of Google News finds stories appearing in Alaska,
Indonesia, Greece, Hungary, France and China, to name a few), Celiac Supplies recently
decided to charge customers $5 to browse its store. This initiative was in
response to the practice of “showrooming”, where customers browse in-store but
then go and buy online, often at cheaper prices.
People from many walks of life think
this is a really bad move that will hurt Celiac’s business. How can a retailer
possibly charge a customer for something that has previously been provided for
free? But I believe this initiative might be “one step backwards for Celiac,
and two steps forward for retailers”.
Any student of marketing knows that
products have a lifecycle. Pricing models, strategies and tactics have life
cycles too. They evolve over time, as they move through a series of iterations
before being perfected. Pay-to-Browse is one early iteration and component on
the road to a new retail model. A similar process is currently underway with
online pay walls, but it has already happened in other industries.
Remember Bryan Grey and Compass Mark I? The
airline charged every single passenger on a flight the same price, a lesson
that was learned by subsequent low cost airlines. Similarly, airline frequent
flyer programs have been refined over the years, overcoming previous
shortcoming (no recognition of contingent liabilities) to the point where some
airlines’ frequent flyer programs are more valuable than the airlines
themselves.
Pay-as-You-Drive (PAYD) car insurance is
a pricing strategy that is also getting its kinks ironed out. Norwich Union in
the UK removed their offering in 2008, but the AA launched a policy in 2012 that
over came its limitations.