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products； the performance is disproportionately greater。 The runaway
success of Dyson’s vacuum cleaner would tend to endorse this argument。
Real…time pricing
The stock market works by gathering information on supply and demand。
If more people want to buy a share than sell it； the price goes up until
supply and demand are matched。 If the information is perfect （that is；
every buyer and seller knows what is going on）； the price is optimized。 For
most businesses this is not a practical proposition。 Their customers expect
the same price every time for the same product or service – they have no
accurate idea what the demand is at any given moment。
However； for businesses selling on the internet； puter networks
have made it possible to see how much consumer demand exists for a
given product at any time。 Anyone with a point…of…sale till could do the
same； but the reports might e in weeks later。 This means that online
panies could change their prices hundreds of times each day； tailoring
them to certain circumstances or certain markets； and so improve
profits dramatically。 easyJet； a budget airline； does just this。 It prices
to fill its planes； and you could pay anything from ￡30 to ￡200 （including
airport taxes） for the same trip； depending on the demand for that flight。
Ryanair and Eurotunnel have similar price ranges based on the basic rule
– discounted low fares for early reservations and full fares for desperate
late callers！
Internet auction pricing
Once the prerogative of the fine art and antiques markets； auctioning is
a fast…growing pricing strategy for a whole host of very different types
of business。 The theory of auctioning is simple。 Have as many interested
potential buyers as possible see an item； set a time limit for the transaction
100 The Thirty…Day MBA
to be pleted and let them fight it out。 The highest bidder wins and；
in general； you can get higher prices than by selling through traditional
pricing strategies。 eBay was a pioneer in the new auction house sector and
is still perhaps the best known。 But there are dozens of others covering this
area and other auction houses you can plug into：
。 eBay （ebay。uk/university） has its own ‘university’ training
160；000 or so people in the UK； PowerSellers as they are known； in the
art of successful auctioning。
。 IBidFree （ibidfree）； set up by Shane McCormack； a
former eBay seller； with the proposition that you can have all the features
of eBay but for free。 IBidFree was created as a perfect opportunity
for the person working from home trying to market their products
without all of their profits being swallowed up by charges and fees。 The
rules are few and； unlike eBay； sellers are encouraged to place a link in
their auctions back to their own websites。 They are also allowed to email
each other directly to allow for be。。er munication。
。 UBid （ubid）； founded in 1997； went public in 2005。
Its online marketplace provides merchants with an efficient and economical
channel for selling on their surplus merchandise。 UBid currently
carries over 200；000 items for auction/sale each day。 You have to bee
a certified merchant to sell on the site； which cuts down on fraud。 The
fees are no sale； no fee； and then from 12。5％ down to 2。5％ on sales of
over 1；000。
You could consider starting your own online auction house。 The case study
example below is a good one； with an interesting twist。 To lend a bit of
extra credibility； the products being sold can be seen in the showroom。
Pay…what…you…like pricing
This strategy is based on the auction concept but buyers set their own
price。 The twist is that there is no limit on supply； so everyone can have
one at the price they want to pay。 Radiohead； the band； released its seventh
Founded in 2006 by Allison Earl Woessner； Auction Atrium （
auctionatrium） is an auction pany for fine art； antiques and
collectables in the ￡30 to ￡3；000 price bracket。 Auctions run for 7–10 days
and bidders can e and inspect lots downstairs in the pany’s
Notting Hill showroom。 Julian Costley； former CEO of E*Trade； joined
the pany as a non…executive director in September 2007 and the
business is gearing up for expansion。
Marketing 101
album In Rainbows in October 2007 as a download on its website where
fans could pay what they wished； from nothing to ￡99。99。 Estimates by
the online survey group Score indicate that of the 1。2 million visitors
to Radiohead’s website； three out of five downloaders paid nothing and
the payers averaged ￡3 per album； so allowing for the freeloaders the
band realized ￡1。11 per album。 The band reckons that was more than they
would have made in a traditional label deal。 In fact the version of the album
released in this way was not the definitive one； that was released three
months later in CD format； debuting at No 1 in the United States and the
UK。
A number of restaurateurs have experimented with this pricing strategy
with some success； but as yet it is in its infancy。 Still； eBay is only a ‘baby’ in
the business model world； so watch this space； as they say in the marketing
world。
Promotion and advertising
The answers to these five questions underpin all advertising and promotional
strategies：
。 What do you want to happen？
。 If that happens； how much is it worth？
。 What message will make it happen？
。 What media will work best？
。 How will you measure the effectiveness of your effort and expense？
What do you want to happen？
Do you want prospective customers to visit your website； phone； write to
you or e…mail you； return a card； or send an order in the post？ Do you expect
them to have an immediate need to which you want them to respond now；
or is it that you want them to remember you at some future date when they
have a need for whatever it is you are selling？
The more you are able to identify a specific response in terms of orders；
visits； phone calls or requests for literature； the be。。er your promotional
effort will be tailored to achieve your objective； and the more clearly you
will be able to assess the effectiveness of your promotion and its cost versus
its yield。
How much is that worth to you？
Once you know what you want a particular promotional activity to achieve；
it bees a li。。le easier to estimate its cost。 Suppose a ￡1；000 advertisement
is expected to generate 100 enquiries for your product。 If experience tells
you that on average 10 per cent of enquiries result in orders； and your profit
102 The Thirty…Day MBA
margin is ￡200 per product； then you can expect an extra ￡2；000 profit。 That
‘benefit’ is much greater than the ￡1；000 cost of the advertisement； so it
seems a worthwhile investment。 Then； with your target in mind； decide
how much to spend on advertising each month； revising that figure in the
light of experience。
Deciding the message
Your promotional message must be built around facts about the pany
and about the product。 The stress here is on the word ‘fact’； and while
there may be many types of fact surrounding you and your products； your
customers are interested in only two： the fact