Pricing Solutions News

$700 for Nokia’s new phone. Are they nuts?
Nokia’s flagship smart phone, the N97 has gone on sale in the U.S. at the whopping price tag of $699. This price isn’t that shocking considering the phone will also be offered in Europe for a comparable price. But in the U.S. where consumers are accustomed to paying $200 for a smart phone, it seems a bit ridiculous. To make matters worse, just days before the N97 made its debut, Apple announced its new iPhones would soon be hitting the market, and at a much cheaper price. The 32GB iPhone, which has the same amount of built-in memory as the N97 will cost $299. Apple will also be offering an 8GB model for just $99. The iPhone doesn’t come without strings; customers must sign a 2 year contract to get the discounted price and are subject to an early cancellation fee if terminated before the 2 years are up. However, when you add the $300 price tag with the $175 termination fee, iPhone subscribers will still only pay $475 for the device-or about $225 less than the Nokia N97.
Source: cnet.com , June 9, 2009

Office suppliers bet on "value" to win shoppers
Anlaysts expect Staples and rivals Office Depot and OfficeMax to play the "value-for-money" card prominently to woo recession-weary customers this back-to-school season, while hopefully avoiding the need to slash prices. Staples plans to expand its private-label offerings in a bid to give cash-strapped shoppers more value for their money. But "value" does not necessarily mean offering cut-rate goods. Simply lowering price doesn’t stimulate demand; it’s going to be all about offering quality products at a reasonable price. For the big three in the industry, private label accounts for anywhere between 20 to 30 percent of sales. While private-label products tend to cost less than brand-name products, they also tend to carry higher margins for retailers, helping profits.
Source: Reuters.com, June 8, 2009

Designers tout luxury for less with $300 Coach Bags
Between 2005 and 2007, the average wholesale price of luxury goods increased 10 per cent to 15 per cent each year. A shrinking global economy is reversing that trend. Sales of brands that cater to the wealthy may drop 10 per cent this year after holding steady in 2008. Vera Wang, known for her $9,500 (U.S.) wedding gowns, has cut the average retail prices for her bridal wear by almost a third as shoppers become increasingly cost-conscious in the recession. Coach Inc. is selling more handbags for less than $300, and Saks Inc. dispatched managers to Europe to help suppliers come up with lower-priced products for its stores. The moves are part of an industry-wide push to expand a tier of luxury that uses simpler designs and less costly materials after years of ballooning prices.
Source: Bloomberg, June 3, 2009

Cash-strapped consumers hunt for bargains
Cash-strapped consumers are buying more sandwich wrap, home hair colouring kits and family-friendly DVDs as they eat out less and do more at home, the head of Canada’s largest retail chain says. But even Wal-Mart Canada Corp. acknowledged its sales growth slowed as the economy dove into recession. However, while the overall market for big tickets items, such as big screen TVs and furniture, is shrinking, Wal-Mart said it is making gains as consumers shop for value. The retailer is selling more private label products, seasonal items, such as patio sets, and recently introduced dollar-store priced items. Such goods are priced at $1 and $2 instead of odd prices, such as $2.87, making it easier to shop to a budget.
Source: The Toronto Star, June 2, 2009

Nvidia accuses Intel of unfair pricing
The European Commission fined Intel $1.06 billion Euros and ordered it to change its business practices for competing illegally against Advanced Micro Devices. Nvidia, one of Intel’s biggest competitors, has now added their two-cents regarding what they are calling an “unfair” pricing strategy implemented by Intel. Nvidia makes graphics chips that pair with Intel’s low-powered Atom in lower-priced netbook computers. Intel sells an Atom chip by itself for $45, but sells a three-chip set for $25 to lure business away. Nvidia claims these prices make it impossible for them to compete and serve this market. Nvidia hasn’t taken legal action yet, but claims they will “do whatever we have to do when the time comes” if Intel refuses to compete on a fair basis.
Source: Reuters UK, May 18, 2009

Victory for consumers in bra war
Marks and Spencer has agreed to end its policy of charging more for larger bras after a campaign led by customers. The store took out newspaper adverts admitting it had "boobed" and promised to standardize prices. The “Busts for Justice” campaign, which had attracted over 13,000 supporters on Facebook, called the £2 surcharge for bras sized DD and up “ridiculous” and “unfair” and called for a boycott of the company. Marks and Spencer initially defended its pricing policy, stating that the extra £2 was necessary for larger bras because they cost more to make. As the “Busts for Justice” support group grew, M & S backed down and will now charge the same price for its bras no matter what the size.
Source: BBCNews.co.uk, May 8, 2009

Please contact Greg Thomas (gthomas@pricingsolutions.com), Leader, Pricing Research Practice, or 1-416-943-0505, ext. 120, to discuss how we apply our pricing expertise, innovation and collaborative approach to your research projects.