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Education
Education
StreetSmartsreetSmarts S
St
SMM
Let's talk
Let's talk priceprice
price level but to how fair they think it is," Ailawadi and rice level but to how fair they think it is," Ailawadi and
By Dale S. Laszi p
By Dale S. Laszigg
Farris wrote. "If they think that a price increase is tied to arris wrote. "If they think that a price increase is tied to
Castles Technology Co. Ltd.astles Technology Co. Ltd.
C F
profit-taking or to other hidden motives, they'll consider rofit-taking or to other hidden motives, they'll consider
p
A sometimes tied to higher costs, such as a fuel-price surcharge."higher costs, such as a fuel-price surcharge."
it unfair. They are more likely to accept the increase if it's . They are more likely to accept the increase if it's
it unfair
s t
s the cost of doing business goes up, we he cost of doing business goes up, we
tied to
sometimes have to pass price increases on to have to pass price increases on to
o
our merchants. How do we deliver that mes-ur merchants. How do we deliver that mes-
GS Online MLS Forum member CCGuy concurred, stat-line MLS Forum member CCGuy concurred, stat-y
A sage without hurting our credibility or losing sage without hurting our credibility or losing
ing, "Today, most of our clients are on cost-plus, so if oday, most of our clients are on cost-plus, so if
ing, "T
customers? customers? GS On
inter
interchange goes up or down, it is all on the merchant." change goes up or down, it is all on the merchant."
For Kusum L. Ailawadi, a marketing professor at For Kusum L. Ailawadi, a marketing professor at
He noted the increasing trend toward transparency e noted the increasing trend toward transparency
Dartmouth College, and Paul W. Farris, a communications Dartmouth College, and Paul W. Farris, a communications H
among merchant acquirers: "Margin compression is why chant acquirers: "Margin compression is why
professor at the University of Virginia, there are no easy professor at the University of Virginia, there are no easy among mer
many companies have hybrid interchange tables and a y companies have hybrid interchange tables and a
answers. Their Wall Street Journal article, "How Companies answers. Their Wall Street Journal article, "How Companies man
Can Get Smart About Raising Prices," takes aim at common Can Get Smart About Raising Prices," takes aim at common f few points added in here and there – along with [Durbin] ew points added in here and there – along with [Durbin]
not being passed through – I have seen everything from hrough – I have seen everything from
missteps – such as sacrificing quality and having clear-missteps – such as sacrificing quality and having clear- not being passed t
.07
ance sales – made by companies in an effort to downplay ance sales – made by companies in an effort to downplay .07 basis points to .50 to .55 and even .75."basis points to .50 to .55 and even .75."
rising prices. rising prices. 2. Be in s
2. Be in sync with your marketync with your market
"Passing along costs while keeping customers happy is
"Passing along costs while keeping customers happy is T
Timing is critical to pricing strategies. Ailawadi and Farris iming is critical to pricing strategies. Ailawadi and Farris
a tough balancing act – but it can be done," they wrote.
a tough balancing act – but it can be done," they wrote. r recommend aligning price increases with new product ecommend aligning price increases with new product
"Companies should resist the urge to cut promotions or
"Companies should resist the urge to cut promotions or announcements since most customers expect to pay more ince most customers expect to pay more
announcements s
camouflage price increases, which often backfire.
camouflage price increases, which often backfire. for new, improved products and services. They also sug-or new, improved products and services. They also sug-
f
gest keeping a close eye on your competition. keeping a close eye on your competition.
gest
"Instead, they should focus on minimizing the pain for
"Instead, they should focus on minimizing the pain for
shoppers who are most sensitive to price increase, by tar- "The market leader should lead at the appropriate time The market leader should lead at the appropriate time
shoppers who are most sensitive to price increase, by tar-
"
geting discounts at them and offering different versions of and
geting discounts at them and offering different versions of
and give rivals a chance to raise their own prices and give rivals a chance to raise their own prices and
their product at different price levels." f follow along," the authors wrote. "Following in the wake ollow along," the authors wrote. "Following in the wake
their product at different price levels."
of an industry trend toward price increases represents f an industry trend toward price increases represents
o
Ailawadi and Farris recommend proactively manag-
Ailawadi and Farris recommend proactively manag- the best chance for smaller companies to follow suit and he best chance for smaller companies to follow suit and
t
ing prices instead of waiting for something to blow up.
ing prices instead of waiting for something to blow up. recover margins by raising prices." ecover margins by raising prices."
r
Following are six guidelines for creating smooth transi-
Following are six guidelines for creating smooth transi-
tions within evolving pricing structures in order to main-
tions within evolving pricing structures in order to main- T
This view was supported by AdamVetter, who wrote, his view was supported by AdamVetter, who wrote,
tain consistent, steady portfolio growth. "Usually, a price increase must be accompanied by some "Usually, a price increase must be accompanied by some
tain consistent, steady portfolio growth.
1. Maintain trans additional service that at least partly offsets the anger additional service that at least partly offsets the anger
1. Maintain transparencyparency
regarding the increase. regarding the increase.
Full price disclosure can boost consumer confidence. ull price disclosure can boost consumer confidence.
F
"Research shows that consumers respond not just to
"Research shows that consumers respond not just to
4
488
Education
StreetSmartsreetSmarts S
St
SMM
Let's talk
Let's talk priceprice
price level but to how fair they think it is," Ailawadi and rice level but to how fair they think it is," Ailawadi and
By Dale S. Laszi p
By Dale S. Laszigg
Farris wrote. "If they think that a price increase is tied to arris wrote. "If they think that a price increase is tied to
Castles Technology Co. Ltd.astles Technology Co. Ltd.
C F
profit-taking or to other hidden motives, they'll consider rofit-taking or to other hidden motives, they'll consider
p
A sometimes tied to higher costs, such as a fuel-price surcharge."higher costs, such as a fuel-price surcharge."
it unfair. They are more likely to accept the increase if it's . They are more likely to accept the increase if it's
it unfair
s t
s the cost of doing business goes up, we he cost of doing business goes up, we
tied to
sometimes have to pass price increases on to have to pass price increases on to
o
our merchants. How do we deliver that mes-ur merchants. How do we deliver that mes-
GS Online MLS Forum member CCGuy concurred, stat-line MLS Forum member CCGuy concurred, stat-y
A sage without hurting our credibility or losing sage without hurting our credibility or losing
ing, "Today, most of our clients are on cost-plus, so if oday, most of our clients are on cost-plus, so if
ing, "T
customers? customers? GS On
inter
interchange goes up or down, it is all on the merchant." change goes up or down, it is all on the merchant."
For Kusum L. Ailawadi, a marketing professor at For Kusum L. Ailawadi, a marketing professor at
He noted the increasing trend toward transparency e noted the increasing trend toward transparency
Dartmouth College, and Paul W. Farris, a communications Dartmouth College, and Paul W. Farris, a communications H
among merchant acquirers: "Margin compression is why chant acquirers: "Margin compression is why
professor at the University of Virginia, there are no easy professor at the University of Virginia, there are no easy among mer
many companies have hybrid interchange tables and a y companies have hybrid interchange tables and a
answers. Their Wall Street Journal article, "How Companies answers. Their Wall Street Journal article, "How Companies man
Can Get Smart About Raising Prices," takes aim at common Can Get Smart About Raising Prices," takes aim at common f few points added in here and there – along with [Durbin] ew points added in here and there – along with [Durbin]
not being passed through – I have seen everything from hrough – I have seen everything from
missteps – such as sacrificing quality and having clear-missteps – such as sacrificing quality and having clear- not being passed t
.07
ance sales – made by companies in an effort to downplay ance sales – made by companies in an effort to downplay .07 basis points to .50 to .55 and even .75."basis points to .50 to .55 and even .75."
rising prices. rising prices. 2. Be in s
2. Be in sync with your marketync with your market
"Passing along costs while keeping customers happy is
"Passing along costs while keeping customers happy is T
Timing is critical to pricing strategies. Ailawadi and Farris iming is critical to pricing strategies. Ailawadi and Farris
a tough balancing act – but it can be done," they wrote.
a tough balancing act – but it can be done," they wrote. r recommend aligning price increases with new product ecommend aligning price increases with new product
"Companies should resist the urge to cut promotions or
"Companies should resist the urge to cut promotions or announcements since most customers expect to pay more ince most customers expect to pay more
announcements s
camouflage price increases, which often backfire.
camouflage price increases, which often backfire. for new, improved products and services. They also sug-or new, improved products and services. They also sug-
f
gest keeping a close eye on your competition. keeping a close eye on your competition.
gest
"Instead, they should focus on minimizing the pain for
"Instead, they should focus on minimizing the pain for
shoppers who are most sensitive to price increase, by tar- "The market leader should lead at the appropriate time The market leader should lead at the appropriate time
shoppers who are most sensitive to price increase, by tar-
"
geting discounts at them and offering different versions of and
geting discounts at them and offering different versions of
and give rivals a chance to raise their own prices and give rivals a chance to raise their own prices and
their product at different price levels." f follow along," the authors wrote. "Following in the wake ollow along," the authors wrote. "Following in the wake
their product at different price levels."
of an industry trend toward price increases represents f an industry trend toward price increases represents
o
Ailawadi and Farris recommend proactively manag-
Ailawadi and Farris recommend proactively manag- the best chance for smaller companies to follow suit and he best chance for smaller companies to follow suit and
t
ing prices instead of waiting for something to blow up.
ing prices instead of waiting for something to blow up. recover margins by raising prices." ecover margins by raising prices."
r
Following are six guidelines for creating smooth transi-
Following are six guidelines for creating smooth transi-
tions within evolving pricing structures in order to main-
tions within evolving pricing structures in order to main- T
This view was supported by AdamVetter, who wrote, his view was supported by AdamVetter, who wrote,
tain consistent, steady portfolio growth. "Usually, a price increase must be accompanied by some "Usually, a price increase must be accompanied by some
tain consistent, steady portfolio growth.
1. Maintain trans additional service that at least partly offsets the anger additional service that at least partly offsets the anger
1. Maintain transparencyparency
regarding the increase. regarding the increase.
Full price disclosure can boost consumer confidence. ull price disclosure can boost consumer confidence.
F
"Research shows that consumers respond not just to
"Research shows that consumers respond not just to
4
488
