Pricing Solutions News

Digital retailers cut prices to lure CD buyers
As the music industry watches in horror while physical CD sales tumble and digital sales fail to bridge the gap, online MP3 retailers are trying to stem the bleeding with an age-old technique: slashing prices. Some new releases are being priced at a mere $3.99 for a limited time on Amazon MP3; the company offers some full album downloads for 99 cents. Apple’s iTunes store runs spotlight specials for as little as $4.99. And subscription-based service Rhapsody routinely has deals for $6.99. On average, a regularly priced full album digital download costs about $10.
Source: The Boston Globe, March 18, 2009

iTunes Price Change: Sales Down, Revenue Up In Week 1
The songs that comprised iTunes Top 100 sold 0.5% fewer units in the first week after the much-publicized new tiered pricing strategy. However, even though fewer units of those 100 songs were sold, their total revenue increased. The drop in sales was not large enough to offset the extra $0.30 received on nearly half of the Top 100 songs, as they were raised in price from $0.99 to $1.29. There has been some hope that higher track prices would encourage consumers to buy the entire album instead but there is no clear picture if this happened after the first week of the price change.
Source: Billboard.biz, April 15, 2009

Designer Clothing Prices DOWN
There was speculation that the abundance of extreme 70-percent-off-type sales that kicked in before the holiday-shopping season could knock clothing prices down across the board in the seasons to come. The general consensus was that the public would no longer be willing to pay full price for something. As it turns out, clothing prices are expected to drop significantly for the fall, but isn’t exactly because the pubic is not willing to spend. Retailers that have lost a lot of money in the downturn, including Saks, Neiman Marcus, and Nordstrom, are asking designers to lower prices because they don’t want to pay full price for things. Many have slashed budgets by up to 30 percent, and with the exception of a handful, designers are obliging and lowering prices.
Source: nymag.com, March 31, 2009

Time Warner Cable Backs Away from Pricing Change
Time Warner Cable caved—for now. In the face of widespread consumer outrage over its plan to change its pricing for Internet access, the company said it will shelve plans to implement the new price formula in several new markets. Time Warner Cable CEO Glenn Britt said the consumption-based model was needed to maintain an expensive, burdened broadband network, citing other countries that for years have had broadband-metering models, including Canada. But the plan unleashed a firestorm among the public and politicians who say the new method is discriminatory and would stifle innovation. Some politicians called for congressional hearings.
Source: BusinessWeek.com, April 16, 2009

“Pay what you want,” UK restaurant tells diners
A London restaurant has decided to do away with bills for the next month, asking customers to pay only what they want for meals in an unorthodox bid to beat the credit crunch. The Little Bay restaurant in central London will present diners with absolutely nothing when they ask for the cheque, leaving it up to them to decide what the meal was worth. This “pay what you want” concept has been popping up in various industries since British alternative rockers Radiohead shocked the music world in 2007 by implementing it to sell its album In Rainbows online. Research into the concept has shown promising results, and early numbers from the Little Bay experiment are looking good. Customers have reportedly been paying an average of 20 percent more than the original menu price.
Source: Reuters.com, March 3, 2009

Price hikes on menu at McD’s
The table is set for bigger price hikes at McDonald’s restaurants this year. Price hikes have been a key driver of sales growth for the chain, and bigger boosts would bring some relief to franchisees squeezed by higher food costs and expenses associated with McDonald’s push into specialty coffees. But raising prices during a recession could send cost-conscious customers running to rivals. To keep store traffic high during the downturn, McDonald’s Corp. has emphasized its Dollar Menu and rolled out a series of low-price promotions. McDonald’s collects royalties based on total sales volume from franchisees, who bear the brunt of profit pressures from rising expenses and promotional pricing.
Source: ChicagoBusiness.com, April 13, 2009

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