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Pricing strategies in

Cyber Marketing
by

ORS Rao,
CEO & Director
Cygnus Business Consulting and
Research
www.cygnusindia.com

July 6, 2007
Agenda

• Introduction
• Cyber marketing
• Business Models
• Revenue Models
• Marketing strategy
• Pricing Mechanisms
• Major Players- Global
• Major Players- Indian
• About Cygnus
Cyber Marketing

• Cyber marketing, also known as


web/online/internet marketing generally
refers to selling activity via the Web or e-
mail.
• It involves using various interactive Web
technologies to market and sell products
and services to the potential customers
Business Models

• Business-to-Business (B2B): It involves


the transaction of goods or services between
businesses and not with consumers .Ex:
Online Procurement/ tenders
• Business-to-Consumer (B2C): It involves
activities of commercial organizations
providing products and/or services to the end
consumers.Ex: Hotels, travel
• Consumer-to-Consumer (C2C): This model
involves the facilitation of web transactions
between consumers through a third party.
Ex: online auctions.
Key elements of successful
internet marketing

• Attract customers- Generate good


traffic to the website/portal
• Attractive Pricing
• Close the sale
• Get your money
How to generate traffic?

• Clarity on products/services
• Target markets
• Value proposition
• Well designed website
• Search Engine Optimisation
• Track useful hits and analyse hits
• Fulfill responses quickly
• Willingness to change all the above
Revenue Models
• Indirect Merchandising: through affiliate partner sites
who are paid commission on sales .
• Community business model: The firm website provides
individuals with the ability to connect to other individuals
for common information sharing. Revenue is usually
generated through contextual advertising and
subscriptions.

• Subscription based model: users are charged a periodic


fee, either on daily, monthly or annual basis to subscribe
for any online service of the firm.

• Utility Model: based on the "pay as you go" principle. The


user is charged as per the extent of usage of the content in
the site unlike in the subscription model.
Modus operandi for sales
• Thru Brokers: who bring buyers and sellers
together and facilitate transactions in return for a
fee or commission.

• Based on Advertisement: broadcaster provides


content on the website and also displays banner
ads that can capture the viewers’ attention.
• Information Intermediaries: assist buyers
and/or sellers understand a given market through
its information.

• Direct Merchandising: The manufacturing firm


of a product/service directly reaches the buyers
without any intermediary
TV vers Websites as
marketing media
Cyber marketing
• Survey done in US on marketing media
– Noticing Advts- TV:85%, Web:28%
– Trusting the message : TV: 63%,Web: 23%

• But the younger generation (age group 18-


34) are likely to notice and trust websites
more than the rest
• This is the reason why:
– Microsoft acquired digital marketing firm
aQuantive for USD 6 billion
– WPP bought 24/7 Real Media for USD 649 million
– Google snapped DoubleClick for USD 3.1 billion
– Yahoo acquired RightMedia advertising for USD
680 million
Pricing and cyber
marketing
• Internet an Equalizer – all Netizens have equal knowledge on products and
prices – transparency and visibility
• Internet Research data shows that charging the wrong price online can
easily drop total revenues by 50%, or more, and cause e-commerce
failures.
• Internet pricing research shows that net-shoppers generally expect at
least a 10% to 20% discount for buying your product or service on the
Internet. Expected discounts for information products are even higher,
ranging from 10% to 100% of the conventional offline retail price
depending on the topic and type of information.
• Think thru the right price to charge before a launch, after a launch, or
what to charge years later when there are many new competitors and the
competition is stiff.

• How do you find out the price Internet prospects are willing to pay ?

• Pricing Tools
– Market Surveys
– Pricing Strategies Software –for modeling and Simulation pricing ,revenues and
profits across the product life cycle
Pricing
• What is price? What customer / end consumer pays
for a product or service.
• When the distribution channel is long (such as when
there is a manufacturer, broker/distributor, retailer,
and end consumer), multiple mark-ups can occur
between the wholesale and the retail price.

• Optimal pricing strategy depends not merely on your


costs
¾ Forces within the business environment like
competition
¾ Availability of substitute products
¾ Nature of Products/services – shelf life / perishable
¾ Customers – willingness to pay
ƒ Utility
ƒ Perception ,particularly for new /intangible products
/services like software
¾ Positioning - how the product/service is perceived by
target customers
Pricing strategies
• Cost plus mark-up
• Competitive pricing
• Time based pricing – perishable products/services - Ex:
hotel rooms, travel
• Commodity pricing – how to sustain?
• Penetration pricing – follow up product / service to
make up profit/cross sell
• Loss leader – kill/eliminate competition – price
wars/ risky? Ex: PCs in India in late 80s
• Close out
• Multiple unit pricing – Volume Scaling up
• Membership or trade discounting
• Bundling
• Skimming the cream – High tech / R&D backed up
products - Ex: Pharma / Memory Chips – entry level

Pricing Flexibility critical for cyber marketing


Pricing mechanism

• Pricing, by various firms, is used with the


objective of either
– Short-term profit maximization which is an
approach by companies looking for
immediate revival in financial position.
– Gaining market share which is a strategy to
maximize the number of online subscribers
for long-term benefits.
Pricing mechanisms

• Name the Price: A mechanism where the


customers have the option to state the range of
prices for purchasing the required
products/services.

• Lowest Price: Some websites provide an option


to locate the lowest prices for required items.
Ex:Tarvel guru
• Auctions: process of buying and selling goods by
offering them for bidding, taking bids and then
selling the item to the winning bidder. Ex:
Deccan airlines
• Catalogue pricing – price lists
Auctions
• Person-to-person: Buyers run the auction
and sellers would bid on the listing and sellers
willing to sell at the lowest price win the bid.
• Commercial auctions: It involves selling of
products by companies in an auction format.
The highest bidder gets it
• Real-time Webcasts: They are auctions that
are broadcast to the Internet and pre-
registered participants bid either from the
auction premises or from the Web.
• Reverse auction: Allows individual buyers to
enter a price of their choice for particular
items at the purchasing agent’s Web site and
the seller may or may not agree.
Major Players-Global
company Products/services Pricing model

E-bay Online auction and shopping The company follows an online .


website where people and auction business model. It serves
businesses buy and sell goods as a marketplace for individuals
and services worldwide. and businesses that use the site to
auction off goods and services.

Amazon.com is diversified into the sale of The company follows a brokerage


various product lines like model whereby it sources and
books, DVDs, music sells a range of products to
CDs, computer software, its customers
video games, electronics
etc.

AOL Shoppingl Leading online retail It has an affiliate or indirect


marketplaces in the world. merchandising business model
that offers merchants more
sophisticated retailing and
merchandising programs.
Major Players-Global
Company Products/services Business/pricing model

Yahoo! Shopping A major provider of a range of The company follows the web advertising
online products and services to model as the volume of viewer traffic is
consumers and businesses quite large.
worldwide.

MSN Shopping An online comparison shopping The company has deployed a combination
site. It contains millions of of advertising-cum-infomediary model.
product offers from thousands of
retailers and allows users to search
or browse for products.

BizRate.com An online comparison shopping It has an affiliate or indirect merchandising


site with multiple domain product business model that offers financial
offers that allow users to compare incentives to affiliated partner sites.
product features and prices.
Major Players-Global
Company Products/services Business/pricing model

PriceGrabber.com An online comparison shopping site. It The company follows a


helps millions of customers in obtaining combination of Infomediary and
information about various products, advertising model
services, merchants and sellers.

NexTag, Inc. A comparison shopping website allowing The company follows the Pay per
users to grab information about various click advertising model.
products, services, merchants and sellers.
mySimon A comparison shopping website founded The company follows the Pay per
in April, 1998 and acquired by CNET click advertising model.
Networks in 2000. The site offers
shopping recommendations, buying
advice, and side by side price comparisons
for various products.
Major Players-Global
Company Products/services Business/pricing model

Google Product Search Google Product Search The company follows the Pay
(Formerly Froogle) (formerly known as Froogle) per click advertising model.
is a price comparison service
launched by Google Inc.

Entertainment Tonight ET online is the official Web The company follows


(ET) online site of Entertainment Tonight subscription and utility
(ET), the leading models.
entertainment news program
in the world. The official
website covers latest
entertainment news, Paid
exclusive interviews of
celebrities and so on.
Major Players-India
Company Products/services Business/pricing models
IndiaMART The company incorporated in 1996 . The company follows a purely .
InterMESH Limited owns & maintains one of the largest B2B business model.
( Rs 9 crore in 2004- B2B marketplaces in India, It also
05) runs ABCpayments.com which offers
end to end payment solutions for its
customers.
Tradeindia.com maintained and promoted by - The company follows a B2B
Infocom Network Ltd. It runs an business model.
online B2B e-marketplace, offering
comprehensive business solutions to
the global EXIM community through
its wide array of online services,
directory services and facilitation of
trade promotional events
Indiamarkets A major online marketplace in India The company follows the B2B
(Rs 800 crore in (2004- that offers a range of end-to-end business model.
05) Business-to-Business solutions,
including purchase and distribution
automation tools such as eBuy and
eSell.
Major Players-India
Company Products/services Business/pricing model

01markets.com marketplace launched by Wipro in 2000. utility business model.


It provides a platform for procurement ( Pay for use)
(Rs 85 crores in 2004- of a wide range of IT products and
05) services, including services such as
auctions, reverse auctions, content
services and buyer/seller matchmaking
services.
Metaljunction.com a joint venture of Tata Steel and SAIL Affiliate business model.
(Rs 50 crores (2004- set up in 2001. It offers E-selling and E-
05) Procurement services for metals. In
addition, it also provides access to
finance for its distributors/channel
partners.

India Infoline A Comprehensive information site on Direct merchandising as


Rs. 287.1crores stock market, online trading, well as the advertising
(2006-07) investments, Portfolio Management model.
Services, equity, derivatives and so on.
Conclusion
•Globalization of Internet marketing will continue
rapidly with increased competition .
•Developing a successful internet marketing strategy
and the ability to connect with buyers the key to online
success.
•Multi-channel online selling’ model , the ability for a
merchant to optimize their presence and reach
customers utilizing the multiple channels available
online, will be increasingly adopted by most firms across
the globe.
•Pricing strategy is critical for success but it depends on
products/services and target markets
•Most of the cyber marketing sites are comparison sites
and offer the customers a choice of multiple comparable
products
About Cygnus
• Cygnus in Latin means “SWAN” - a symbol of purity and swiftness
• Cygnus stands for :
• *Quality *Speed *Innovation * Satisfaction of its stakeholders
(Employees and customers)
• A Knowledge Products/services Organization
• Focused on : Knowledge creation, dissemination and deployment - for
profitable growth of its customers
• Market, People and Process driven
• 3 years old
• Knowledge centre in Hyderabad, India
• Over 600 customers across the globe
• Growing @ CAGR of over 50% (last 3 years)
Our Business Model
India (Low sales cost, Overseas (Higher sales
less profitability) cost, more profitability)

• Indian Industry • Global Industry


Insights Insights
Products • Industry /Company • Country profiles
Performance analysis
(IPR-
assets) • Company Databases
(Secondary Research) (Secondary Research)

• Market studies • KPO services


Services • TEV studies • Equity research
• Economy
(Faster
surveys/studies
revenues)
• Equity research (Secondary Research)
(Primary surveys +
Secondary research)
Business intelligence
products
• Economy :
¾ Economy Insights -- Country reports / State
Reports (12 states)
¾ Economy Monitors – Monthly update (Global /
Indian / 12 Indian States)
• Industry :
¾ Industry Insights – Sectoral Reports
(Global/Indian)
¾ Global Industry Monitors (GIM) – Monthly update
on 35 industries
¾ Chinese Industry Monitors (7 industries)
¾ Quarterly Performance analysis of industries and
Companies (QPAC) (25 industries- Industry and
company analysis and Inter Firm comparison)
• Company:
¾ Cygnus Progress – Online database of 2500 listed
Indian companies
¾ Company profiles (Top 200 Pharma companies)

– Breadth of offerings ( Industries and types of


reports)
– Innovative themes and Reader friendly
packaging…
Custom Projects

• Business Research (Corporates, Industry and


trade Associations, Consulates)
– Market surveys (B2B)
– Competition Analysis
– Market entry / growth strategies
– White papers

• Credit Research (Banks)


– Techno Economic Viability Surveys (Credit Appraisals)
– Sectoral studies

• Securities Research (Investment banks,


Financial Services companies)
– Equity research (IPO reports, Equity Valuations)
Our Industry Focus

• Technologies (IT ,ITES and Telecom)

• Life Sciences (Pharma, Biotech and


Health care)

• Banking and Financial Services

• Manufacturing

• Logistics
Our Knowledge Centre -
Infrastructure
• 10,000 Sq Ft of work area in
Central Hyderabad
• High speed dedicated Internet
Back bone
• High end servers – IBM E- Series
• Over 120 Intel P IV PC Desktop
Systems
• Two-tier Power back up
• Firewalls & Secure Logins to
ensure confidentiality of the
projects
Thank you
------------------------------
O.R.S.Rao
Cygnus Business Consulting and
Research,
5th floor,
Astral Heights, Panjagutta
Hyderabad- 500034
Ph: 040-23430202-05
www.cygnusindia.com
orsrao@cygnusindia.com