min read

Escape Your Pricing Strictures

by Paren Patel , 22.08.2012

In order to survive and continue to be successful in a challenging marketplace, companies must adapt and adjust their tactics to the requirements of the external environment. GfK Roper Reports Worldwide 2012 tells us that only 16% of global consumers think that now is a good time to buy, as opposed to a good time to wait or someplace in between. With such a low proportion willing to spend money, it is clear that consumer confidence is still in the doldrums in many parts of the world.

Despite this gloomy picture, one sector which has continued to return strong sales despite increasingly expensive offerings is the mobile phone market, so what can be learnt from this industry and adapted in order to maintain consumer demand? Perhaps the key is in the pricing model. Microsoft believes this is the case and has adopted a similar structure. Earlier this year, the company announced that it would be selling the Xbox 360, including a Kinect motion sensor, for $99 with a two year subscription package to Xbox live gold for $15 a month.

With a standard subscription to the online gold service only costing around $40 for a year, Microsoft hopes to recoup the cost of the console and the Kinect motion through the $15 monthly subscription fee which customers are tied into for 2 years. As with buying a mobile phone, consumers are charged a heavily discounted upfront fee and a manageable monthly charge that includes additional services, which softens the financial blow of buying the product upfront.

Not only should this tactic boost sales of the console, Microsoft will also benefit from the upfront sales. For example joining up to this deal, over the course of 2 years the cost would be $460, however if a consumer chose to separately buy the elements of the deal individually they would end up spending roughly $370; not to mention that the retail price of the console may have decreased in the time it takes the customer to save up the money to buy one.

According to the GfK Roper Reports Worldwide Mood of the World Report 2012, 21% of global consumers intend to purchase a personal electronic item in the next year. Perhaps the introduction of similar subscription schemes would appeal to a much wider proportion of consumers. Of course this pricing strategy isn’t suitable for all business models, but it is worth considering how your company can adjust its pricing and offering to make consumers more willing to part with their money for your product or service.