Reduce Price to Improve Revenues and Margins

CHOICE 1 OBJECTIVE: ATTRACT CUSTOMERS

CHOICE 2 SEGMENTS: LOSS LEADER SEGMENT / A LOW PRICE ON ONE PRODUCT TO OBTAIN REVENUES FROM ANOTHER PRODUCT IN A MANUFACTURING SERVICE BUSINESS

CHOICE 3 COMPONENT: PROVIDE A FREE, OR HEAVILY DISCOUNTED, PRODUCT FROM THE COMPANY, OTHER THAN THE PRODUCT ON SALE

No.	SIC	Year	Notes
1	3571	2003	Sun has suffered as users give up old-line servers in favor of cheaper models powered by x86 chips. Sun began fighting back this month with a line of blades that use those chips. Unlike its rivals, Sun is throwing in the software for free.
2	3571	2004	Sun believes the result of offering its new software free is renewed demand for its servers and services. The company will charge subscription fees for Solaris support and service programs that are typically sought by the businesses and organizations that Sun targets.
3	3861	2000	In web based photo services, Kodak's joint venture with AOL "You'veGotPictures" flopped. Fewer than 5% of AOL' s members use it. Sites like SnapFish and Ofoto were giving away the picture sharing for free while You'veGotPictures" charged $7 on top of the retailers $9 fee.
4	4700	1987	American Express introduced an Expense Management System to compete with American Airlines Capture. But American Express, which collects commissions on bookings and credit card use, will do all processing for free. Capture costs $50,000 for 5 yrs.
5	5812	1992	Coupons for BK's new dinner basket menu. Either $.99 Kids Meal with any dinner basket purchase, or $.99 dinner basket with any full price dinner basket purchase.
6	6211	1999	Ahead of most of its established brokerage competitors, Schwab encored onto the Internet in 1996 with eSchwab. In 1998 Schwab made the risky decision to extend to Internet traders the free customer service options that previously had only been available to customers paying much higher commissions to place trades through a "live” broker. When this policy was initiated in January of 1998, Schwab’s stock fell and revenues slipped. However, customer assets and accounts grew rapidly and Schwab soon came to dominate the online brokerage industry. By 1999, Schwab managed $433 billion in customer assets and carried over 2 million active web accounts; its 30 percent share of online trading volume was the largest by far of any brokerage firm.
7	7372	2000	Sun believes that its free downloadable office software and an upcoming portal that lets office workers tap into their company network from any internet connection will revolutionize the way the world computes.
8	7372	2001	IBM and Oracle are vying for the No. 1 spot in the corporate-software world. The latest conflict is over pricing. IBM typically sells its database software at nearly a fifth the price of Oracle's. However, consulting to make the products work ups the price.
9	7372	2002	Microsoft is headed for overwhelming dominance in media player use. But people who watch video or listen to sound on their PCs do so using free players from either RealNetworks or Microsoft. So where's the lucre in the industry? It's in the subscriptions. Future revenue will be tied to the entertainment industry's delivery of content for a fee.
10	7375	2005	In a quest to break Apple's grip on the online music market, Yahoo introduced a new service. The rental service is more complicated than the direct purchase offered by Apple with different categories of music facing different rules. Yahoo's program is accessed through free music jukebox software. A year of services runs at $60, monthly fees are $6.00. The service is easy to personalize and music can be shared with friends.
11	7841	2008	Blockbuster debuted a television set-top box for delivering movies on demand over the Internet. The Blockbuster OnDemand player, built by 2Wire, costs $99 plus movie fees. However, the deal includes 25 free movies, which normally cost $2.50, so the company says the box is effectively "free." Netflix subscribers who pay at least $8.99 a month for unlimited DVD rentals by mail can get streaming online movies and TV shows at no extra charge. Compared to Blockbuster's new OnDemand box and online rental fees, Netflix has the superior business model with its subscription offering. It's the only company with an all-you-can-eat video service. Blockbuster aims to differentiate from Netflix with quality rather than quantity. Blockbuster will start with 2,000 titles, including many new releases. Netflix has more than 12,000 movies and TV shows, but many are older movies, independent films and documentaries.

<< Return to Choice 3