11.10 Trends in Developing Products and Pricing

Impact of the Internet on Pricing

The internet, corporate networks, and wireless setups are linking people, machines, and companies around the globe—and connecting sellers and buyers as never before. This link is enabling buyers to quickly and easily compare products and prices, putting them in a better bargaining position. At the same time, the technology enables sellers to collect detailed data about customers’ buying habits, preferences, and even spending limits so that they can tailor their products and prices. Advances in technology and the significant growth of e-commerce from even traditional retailers has drastically changed the retail landscape. Amazon's Prime membership, which offers free shipping for most items along with other features for an annual fee, has taken some market share from traditional low-cost retailers such as Costco.⁹

Online price-comparison engines, known as shopbots, are continuing to add new features. Price comparison sites like CamelCamelCamel (for Amazon price tracking) and Google Shopping help consumers find the best prices, often highlighting available coupons and discounts. In the past, consumers had to click deep into a retailer’s site to find out about these additional savings. Capital One Shopping is a browser extension that compares prices across retailers and alerts users when lower prices are available elsewhere. BuySAFE provides shopping guarantees for purchases made through participating online merchants. When shoppers buy from BuySAFE-verified merchants, they receive purchase protection up to $1,000 if the seller fails to deliver as promised.

Use of these sites has increased as people have become more reliant on the web both as a research tool and as a place to shop. According to reports, more than 60 percent of consumers use their phones to comparison-shop while in stores.¹⁰ Much of the growth has come from the more-established sites such as Shopify, Bizrate, and PriceGrabber, as well as the shopping sections of Microsoft's MSN, Google, and Capital One. The big attraction with shopping comparison services, of course, is the hunt for a better bargain. Merchants like the sites because they help drive consumer spending. Consumers who use comparison-shopping sites for product information or in-store discount coupons spend more than those who don’t.¹¹

One-to-One Marketing

One-to-one marketing is creating a unique marketing mix for every consumer. The key to creating one-to-one marketing is a good marketing database. The information contained in a marketing database helps managers know and understand customers, and potential customers, on an individual basis. A marketing database is a computerized file of customers’ and potential customers’ profiles and purchase patterns.

Database marketing can get a customized, individual message to everyone simultaneously through targeted ads on social media sites or through email campaigns. This is why database marketing is sometimes called micromarketing. Database marketing can be used to create a virtual "relationship" between customers and businesses that parallels the relationships people used to have with in-store merchants. “A database is sort of a collective memory,” says Richard G. Barlow, president of Frequency Marketing, Inc., a Cincinnati-based consulting firm. “It deals with you in the same personalized way as a mom-and-pop grocery store, where they knew customers by name and stocked what they wanted.”

You have also probably heard the term big data. Companies such as Meta and Alphabet can process information and then tailor information to provide marketers with higher-probability targets. For instance, imagine that you and some friends are discussing a vacation and you are searching for possible beach locations. That search data can be combined with demographic data and sold to companies that provide travel services to beach destinations. You and your friends then are likely to see travel ads in your social media feeds. Likewise, imagine you are searching for the newest streaming movies to watch on a long flight. You have also recently searched for ways to remove clothing stains. Now when you go to Amazon or social media sites, you see several ads for new movies and laundry cleaning products. All of this was done through the use of big data and analytics to provide consumers solutions they are looking for as well as products that they don’t even know that they want. Exhibit 11.9 contrasts the differences in approaches in traditional advertising versus targeted marketing using big data.

Companies such as Ford, Kimberly Clark, and Citicorp have databases of tens of millions of names. The information contained in these databases can be quite detailed. For example, a credit card company can pull from its database all customers who made purchases during the last month at Lowe's, who have also attended a concert, who have traveled outside the U.S. in the past year, and who have children.

Companies are using their marketing databases to implement one-to-one marketing. For example, John Deere uses precision agriculture data and digital tools for customized recommendations. Climate FieldView (Bayer/BASF) offers personalized agronomic insights. Various other agri-tech companies use data-driven personalization for seed/input recommendations for their customers.