Advertisement

Innovations in Price Management

  • Hermann Simon
  • Martin Fassnacht
Chapter

Abstract

Price management has been a field of sporadic innovation. Auctions, nonlinear pricing, and bundling precede our current era. Innovations in pricing used to be rare and slow to spread, but we have seen rapid, widespread pricing innovations, thanks in large part to the Internet. Measurement technology (allowing precise price metrics), more powerful computers (enabling the analysis of Big Data), and creative business models all contribute to price management innovations. The Internet simplifies price comparisons, which results in higher price transparency. Over the long run, however, the increase in “value transparency” may prove to be more important. Innovations such as flat rates, freemium, name-your-own-price, and pay-what-you-want enable companies to tap more profit potential. Companies should be careful when opting for a new pricing model. Each tactic carries considerable risks when not used properly. Two-sided price systems, allowing companies to generate revenue from two sources, are becoming more common. Perhaps for the first time, we observe negative prices in some markets. Marginal costs of zero and the sharing economy are influencing price decisions and disrupting established business models. New payment systems and new forms of money such as bitcoin may have hitherto unknown effects on price management.

References

  1. 1.
    Barrot, C., Albers, S., Skiera, B., & Schäfers, B. (2010). Vickrey vs. eBay: Why Second-price Sealed-bid Auctions Lead to More Realistic Price-Demand Functions. International Journal of Electronic Commerce (IJEC), 14(4), 7–38.CrossRefGoogle Scholar
  2. 2.
    Coase, R. H. (1960). The Problem of Social Cost. Journal of Law and Economics, 3(1), 1–44.CrossRefGoogle Scholar
  3. 3.
    Demsetz, H. (1968). The Cost of Transacting. Quarterly Journal of Economics, 82(1), 33–53.CrossRefGoogle Scholar
  4. 4.
    Burstein, M. L. (1960). The Economies of Tie-In Sales. Review of Economics and Statistics, 42(1), 68–73.CrossRefGoogle Scholar
  5. 5.
    Adams, W. J., & Yellen, J. L. (1976). Commodity Bundling and the Burden of Monopoly. Quarterly Journal of Economics, 90(3), 475–488.CrossRefGoogle Scholar
  6. 6.
    Oren, S. S., Smith, S. A., & Wilson, R. B. (1982). Nonlinear Tariffs in Markets with Interdependent Demand. Marketing Science, 57(1), 287–313.CrossRefGoogle Scholar
  7. 7.
    Statista Inc. (2018). Apple’s revenue from iTunes, software and services from 1st quarter 2013 to 1st quarter 2018 (in billion U.S. dollars). https://www.statista.com/statistics/250918/apples-revenue-from-itunes-software-and-services/. Accessed 12 March 2018.
  8. 8.
    Fortune (2018). Spotify Stock Goes Public, Giving the Streaming Music Giant a $30 Billion Market Cap. http://fortune.com/2018/04/03/spotify-stock-market-cap-ipo-direct-listing. Accessed 19 April 2018.
  9. 9.
    Bradshaw, T. & Garrahan, M. (2015, June 06). Apple Streaming Service Leaves iTunes Behind. Financial Times, p. 12.Google Scholar
  10. 10.
    Garrahan, M. (2015, June 10). Apple and Spotify to Face the Music. Financial Times. p. 12.Google Scholar
  11. 11.
    Coscarelli, J. (2016). Adele’s ‘25’ Finally Comes to Streaming Services. https://www.nytimes.com/2016/06/24/arts/music/adele-25-streaming-spotify-tidal-apple.html?_r=0. Accessed 16 January 2017.
  12. 12.
    Anonymous. (2015). How Much do Musicians Really Make From Spotify, iTunes and YouTube? https://www.theguardian.com/technology/2015/apr/03/how-much-musicians-make-spotify-itunes-youtube. Accessed 16 January 2017.
  13. 13.
    Christman, E. (2018). U.S. Music Industry Hits Highest Revenue Mark in a Decade, Fueled by Paid Subscriptions. https://www.billboard.com/articles/business/8257558/us-music-industry-2017-highest-revenue-in-decade-fueled-paid-subscriptions. Accessed 19 April 2018.
  14. 14.
    Goldman, D. (2014). 5 Best Apps to Find Cheap Gas. http://money.cnn.com/2014/12/29/technology/mobile/gas-price-apps/. Accessed 16 January 2017.
  15. 15.
    Anonymous. (2013, August 23). Deutsche vergleichen Online Preise. Lebensmittel Zeitung, p. 44.Google Scholar
  16. 16.
    De La Merced, M.J. (2015, July 17). Data Start-up Lands Big Name. International New York Times, p. 16.Google Scholar
  17. 17.
    GfK (2015). Handys sind wichtige Einkaufsbegleiter. GfK-Studie zur Nutzung von Mobiltelefonen im Geschäft. Nürnberg. http://www.gfk.com/de/news-und-events/presse/pressemitteilungen/seiten/handys-sind-wichtige-einkaufsbegleiter.aspx. Accessed 30 June 2015.
  18. 18.
    Anonymous. (2015, May 28). Eine Ethik für das Digitale Zeitalter. Handelsblatt, pp. 12–13.Google Scholar
  19. 19.
    Levine, R., Locke, C., Searls, D., & Weinberger, D. (2011). The Cluetrain Manifesto: 10th Anniversary Edition. New York: Basic Books.Google Scholar
  20. 20.
    Domizlaff, H. (1982). Die Gewinnung des öffentlichen Vertrauens: Ein Lehrbuch der Markentechnik (New Edition). Markentechnik. Hamburg: Marketing Journal.Google Scholar
  21. 21.
    Stadie, E., & Zwirglmaier, K. (2015). Neue Technologien im Preismanagement. In L. Binckebanck, & R. Elste (Ed.), Digitalisierung Im Vertrieb. Strategien Zum Einsatz neuer Technologien in Vertriebsorganisationen. Gabler, Wiesbaden, pp. 105–121.Google Scholar
  22. 22.
    Rentmeister, J., & Klein, S. (2003). Geschäftsmodelle – Ein Modebegriff auf der Waagschale. ZfB-Ergänzungsheft, 73(1), 17–30.Google Scholar
  23. 23.
    Stähler, P. (2001). Geschäftsmodelle in der digitalen Ökonomie. Lohmar: Eul.Google Scholar
  24. 24.
    Burkhart, T., Krumeich, J., Werth, D., & Loos, P. (2011). Analyzing the Business Model Concept – A Comprehensive Classification of Literature. Proceedings of International Conference on Information Systems (ICIS), 1–19.Google Scholar
  25. 25.
    Simon, H. (2000). Internet und Flatrates. Workshop. Bonn: Deutsche Telekom. November 20.Google Scholar
  26. 26.
    Anonymous. (2015, March 31). Rundumverpflegt in die Ferien. Tierischer Volksfreund, p. 8.Google Scholar
  27. 27.
    Netflix.com (2015). Wählen Sie den Plan, der Ihren Bedürfnissen am besten entspricht. https://www.netflix.com/getstarted?locale=de-DE. Accessed 7 June 2015.
  28. 28.
    CNBC (2018). Netflix Adds 5.3 Million Subscribers During Third Quarter, Beating Analysts' Estimates. https://www.cnbc.com/2017/10/16/netflix-q3-2017-earnings.html. Accessed 15 January 2018.
  29. 29.
    Garrahan, M. & Bond, S. (2015, 22 January). Jeff Bezos, the Great Disrupter who has Turned the Book Publishing and Retail Sectors on their Heads, is Shaking up Film and Newspapers, but Both Sectors will Test his Customer-First, Profit-Later Strategy. Financial Times, p. 9.Google Scholar
  30. 30.
    Tix, M. (2017). Strom-Flatrate ist Ladenhüter. http://www.energate-messenger.de/news/176990/strom-flatrate-ist-ladenhueter. Accessed 12 March 2018.
  31. 31.
    Rifkin, J. (2014). Die Null-Grenzkosten-Gesellschaft: Das Internet der Dinge, kollaboratives Gemeingut und der Rückzug des Kapitalismus. Frankfurt am Main: Campus.Google Scholar
  32. 32.
    Anonymous. (2015, September 01). Zu viel gehört – Digitalhändler in Amerika reduziert Hörbuch-Flatrate. Frankfurter Allgemeine Zeitung, p. 11.Google Scholar
  33. 33.
    Anonymous. (2013, April 03). Nicht jedes Angebot ist ein Schnäppchen. Null-Prozent-Finanzierungen werden für den Handel immer wichtiger. General-Anzeiger Bonn, p. 6.Google Scholar
  34. 34.
    Anonymous. (2015, April 20). Heftiger Flirt mit der App. Frankfurter Allgemeine Zeitung, p. 22.Google Scholar
  35. 35.
    Anonymous. (2015, January 22). Microsoft überrascht mit Computerbrille. Frankfurter Allgemeine Zeitung, p. 19.Google Scholar
  36. 36.
  37. 37.
    Berman, S. J. (2011). Not for Free: Revenue Strategies for a New World. Boston: Harvard Business Review Press.Google Scholar
  38. 38.
    Zitzmann, M. (2015). Webzeitung “Mediapart“ – Ein Vorbild für investigativen Journalismus. http://www.nzz.ch/feuilleton/medien/ein-vorbild-fuer-investigativen-journalismus-1.18459759. Accessed 16 January 2017.
  39. 39.
    Anonymous (2016). Super Mario Run reviews hit Nintendo share price. http://www.bbc.com/news/technology-38365559. Accessed 16 January 2017.
  40. 40.
    Shmilovici, U. (2011). The Complete Guide to Freemium Business Models. http://techcrunch.com/2011/09/04/complete-guide-freemium/. Accessed 15 July 2015.
  41. 41.
    Vance, A. (2015). Elon Musk – Tesla, SpaceX and the Quest for a Fantastic Future. New York: HarperCollins. Kindle Version: Position 2266.Google Scholar
  42. 42.
    Lambert, F. (2018). Tesla Plans Expansion of Fremont Factory Supercharging Station – Making it the Biggest in America. https://electrek.co/2018/03/01/tesla-supercharger-fremont-factory/. Accessed 16 March 2018.
  43. 43.
    Tesla (2017). Supercharger. https://www.tesla.com/supercharger. Accessed 16 January 2017.
  44. 44.
    Priceline (2015). Investor Relations. http://ir.pricelinegroup.com/index.cfm. Accessed 15 July 2015.
  45. 45.
    Schmidt, K. M., Spann, M., & Zeithammer, R. (2015). Pay What You Want as a Marketing Strategy in Monopolistic and Competitive Markets. Management Science, 61(6), 1217–1236.CrossRefGoogle Scholar
  46. 46.
    Anonymous. (2013, March 18). Zwischen Fairness und Schnäppchenjagd. General-Anzeiger Bonn, p. 6.Google Scholar
  47. 47.
    Buskirk, E. van (2007, November 05). 2 out of 5 Downloaders Paid for Radiohead’s “In Rainbows”. Wired Magazine, p. 47.Google Scholar
  48. 48.
    Activehours.com (2015). https://www.activehours.com/. Accessed 18 May 2015.
  49. 49.
    Roggentin, A. S. & Bues, M. (2017). Pay-What-You-Want Pricing. A Structured Review on Drivers of Prices Paid by Customers. Marketing Review St. Gallen, 6/2017.Google Scholar
  50. 50.
    Schulz, F., Schlereth, C., Mazar, N., & Skiera, B. (2015). Advanced Payment Systems: Paying Too Much Today and Being Satisfied Tomorrow. International Journal of Research in Marketing, 32(3), 238–250.CrossRefGoogle Scholar
  51. 51.
    Oldemann, O. (2015). Innovating your Price Model: Pricing for TopLine Power. Amsterdam: Simon-Kucher & Partners. November.Google Scholar
  52. 52.
    Friemel, K., & Malcher, I. (2006). Gewusst wie. McKinsey Wissen, 18, 18–25.Google Scholar
  53. 53.
    Brignall, M. (2017). Pay-as-you-go car insurance – perfect for the low mileage driver? https://www.theguardian.com/money/2017/feb/11/pay-as-you-go-car-insurance-low-mileage-driver-cuvva-just-miles Accessed 4 December 2017.
  54. 54.
  55. 55.
    ENERCON GmbH (2010). ENERCON Windenergieanlagen – PartnerKonzept (EPK). http://www.enercon.de/p/downloads/Enercon_EPK_2010_deu.pdf. Accessed 26 January 2015.
  56. 56.
    Zuboff, S. (2015, March 23). Die Vorteile der Nachzügler. Frankfurter Allgemeine Zeitung, p. 15.Google Scholar
  57. 57.
    Morozov, E. (2013, November 02). Unser Leben wird umgekrempelt. Frankfurter Allgemeine Zeitung, p. 14.Google Scholar
  58. 58.
    Craymer, L. (2013). Weigh More, Pay More on Samoa Air. http://www.wsj.com/articles/SB10001424127887323646604578399943583708244. Accessed 15 September 2015.
  59. 59.
    Hope, B. (2015, August 10). Company Tracks Bank Cards and Sells Data to Investors. Wall Street Journal, 10–11.Google Scholar
  60. 60.
    Stewart, J. B. (2015, April 24). Chasing a Negative Mortage-Rate. International New York Times, p. 16.Google Scholar
  61. 61.
    Anonymous. (2018). What are Negative Prices and how do They Occur? http://www.epexspot.com/en/company-info/basics_of_the_power_market/negative_prices. Accessed 16 March 2018.
  62. 62.
    Anonymous. (2015, April 25). Negativzins wiederspricht nicht der menschlichen Natur. Frankfurter Allgemeine Zeitung, p. 29.Google Scholar
  63. 63.
    Anonymous. (2015, August 20). Negativrendite bleibt gefragt. Frankfurter Allgemeine Zeitung, p. 25.Google Scholar
  64. 64.
    Anonymous (2015, May 05). Großanleger erwägen Flucht ins Bargeld. Frankfurter Allgemeine Zeitung, p. 23.Google Scholar
  65. 65.
    Anonymous (2015, November 24). Mehr als 2 Billionen Euro Staatsanleihen mit Negativzins. Frankfurter Allgemeine Zeitung, p. 23.Google Scholar
  66. 66.
    Anonymous. (2015, October 23). Negative Zinsen auch für ganz normale Privatkunden. Frankfurter Allgemeine Zeitung, p. 23.Google Scholar
  67. 67.
    Reinhardt, D. (2018). Kredit von Smava und Check24: So viel Geld gibt es mit Minuszins. https://www.focus.de/finanzen/banken/ratenkredit/ratenkredite-von-smava-und-check24-so-viel-geld-gibt-es-mit-minuszins_id_8544941.html. Accessed 16 March 2018.
  68. 68.
    von Weizsäcker, C. C. (2015). Kapitalismus in der Krise? Perspektiven der Wirtschaftspolitik, 16(2), 189–212.CrossRefGoogle Scholar
  69. 69.
    Veerasamy, V. (2016). PayPal’s $60m Referral Program: A Legendary Growth Hack. https://www.referralcandy.com/blog/paypal-referrals/. Accessed 12 March 2018.
  70. 70.
    Lee, F. (2017, March 18). Pekings Plage mit den Fahrrädern. In Chinas Hauptstadt boomt der Markt mit Leihrädern. Nutzer werden teilweise sogar bezahlt. General Anzeiger Bonn, p. 11.Google Scholar
  71. 71.
    Anonymous. (2015, March 26). Wer teilt was mit wem? Frankfurter Allgemeine Zeitung, p. 26.Google Scholar
  72. 72.
    Anonymous. (2015, April 27). Mit Vollgas zum Transportnetzwerk. Frankfurter Allgemeine Zeitung, p. 18.Google Scholar
  73. 73.
    Anonymous. (2015, April 28). Der Fremde in meinem Auto. Handelsblatt, p. 23.Google Scholar
  74. 74.
    Burns, L. (2013, May 09). A Vision of our Transport Future. Nature, 497, 181–182.Google Scholar
  75. 75.
    Anonymous. (2017). http://www.globaltimes.cn/content/1052839.shtml. Accessed 12 March 2018.
  76. 76.
    Roberts, D. (2015, April 01). The Rise of the Jet Card. Fortune, p. 14.Google Scholar
  77. 77.
    Chip (2015). Ein-Klick Payment mit PayPal schnell und einfach bezahlen ohne Passwort. http://business.chip.de/news/Ein-Klick-Payment-mit-PayPal-Schnell-und-einfach-bezahlen-ohne-Passwort_78753875.html. Accessed 3 May 2015.
  78. 78.
    Millward, S. (2016). China’s Alipay just saw a record 1 billion transactions in a day. https://www.techinasia.com/alibaba-alipay-1-billion-transactions. Accessed 12 March 2018.
  79. 79.
    Anonymous. (2016, December 07). Amazon testet Supermarkt ohne Kassen. Frankfurter Allgemeine Zeitung, p. 23.Google Scholar
  80. 80.
    Barr, A. (2015, May 29). Google Unveils New Rival to Apple Pay. Wall Street Journal, p. 17.Google Scholar
  81. 81.
    Anonymous (2015, May). Mobiles Bezahlen – Wettkampf der Systeme. Der Handel – Das Wirtschaftsmagazin für Handelsunternehmen, p. 44.Google Scholar
  82. 82.
    Rogoff, K. S. (2016). The Curse of Cash. Princeton: Princeton University Press.CrossRefGoogle Scholar
  83. 83.
    Anonymous. (2015, May 28). Die Deutschen wollen das Bargeld nicht aufgeben. Frankfurter Allgemeine Zeitung, p. 25.Google Scholar
  84. 84.
    Anonymous. (2015, May 09). Ein weiterer Schlag gegen das Bargeld. Frankfurter Allgemeine Zeitung, p. 31.Google Scholar
  85. 85.
    Anonymous. (2015, June 13). Bürger horten immer mehr Bargeld. Frankfurter Allgemeine Zeitung, p. 30.Google Scholar
  86. 86.
    bitcoin.de. (2015). Retrieved from www.bitcoin.de. Accessed 30 April 2015.
  87. 87.
    Nestler, F. (2015). Deutschland erkennt Bitcoins als privates Geld an. http://www.faz.net/aktuell/finanzen/devisen-rohstoffe/digitale-waehrung-deutschland-erkennt-bitcoins-als-privates-geld-an-12535059.html. Accessed 6 March 2018.
  88. 88.
    Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. https://bitcoin.org/bitcoin.pdf. Accessed 28 April 2014.
  89. 89.
    Davis, J. (2014). The Crypto-Currency: Bitcoin and its Mysterious Inventor. http://www.newyorker.com/magazine/2011/10/10/the-crypto-currency. Accessed 15 June 2015.

Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  • Hermann Simon
    • 1
  • Martin Fassnacht
    • 2
  1. 1.Simon-Kucher & Partners Strategy and Marketing ConsultantsBonnGermany
  2. 2.WHU – Otto Beisheim School of Management, Chair of Marketing and CommerceDüsseldorfGermany

Personalised recommendations