It was a nice experiment. Apple sells the phones for almost full price and gets a share of revenues from those who subscribe to AT&T. The AT&T did not suffer badly - it pays only for those who actually use its services. At first, it looks pretty good, especially for Apple. It is a nice example of market segmentation (discrimination). If warranty and safety is valuable (or service provided by AT&T does not seem much worse than others), you pay full price. If you do, you still pay for the phone. Apple gets less, but more than if you would not buy at all.
What did not work well is that more people choose to unlock and jailbreak than anybody expected. In the profit equation, revenue was probably high enough, but the share of people delivering this revenue was too small.
Tuesday, June 10, 2008
Why revenue sharing failed
Posted by
Myslivec in San Diego
at
9:54 AM
0
comments
Labels: IPhone, price discrimination
Sunday, November 4, 2007
Discrimination
The US is the country of discrimination. No, I'm not talking about racial discrimination - I haven't seen any, so I can't really tell. I mean price discrimination.
First, it is everywhere. And it is huge. And it has many levels.
It starts with "club cards". Many shops offer (excessively) high prices, but reduce them significantly for members of their "club". It is usually free and requires your address etc.Even with this card, some discounts apply only if you buy larger quantities (but not always, even when you see 4 for $4 you pay $1 for 1, regardless how much you buy).
Then, there are coupons. There is plenty of them. The discount differs based on how difficult it is to get them. The easiest are available at the stand with the particular food - you just take it. Others come in the mail or with Sunday newspapers. Some of those can be copied or doubled, but those really valuable cannot. Some even impose minimal purchase.
Also, there are hidden offers. Starbucks has "short" coffee that you cannot find on their menu, but you can ask for it. It contains less water but the same amount of coffee as the "tall", but is cheaper. Similarly, Amazon has offer that are almost impossible to find - sometimes offered by other sellers on Amazon marketplace.
There are also mail-in-rebates, which take long time to get the discount, but sometimes it is significant.
Last, but not least, there are various time-limited offers, offering various discounts. One of the most famous is woot.com, the type one day, one offer, where they sell limited quantities for really discounted prices. Except you do not know what they will sell tomorrow and how fast it will be gone.
This is an example of a developed market. There are very rich customers around here, who simply do not care and thus pay high price and poor ones who do. Price discrimination allows one shop to serve both and make nice profit on both.
Posted by
Myslivec in San Diego
at
9:05 AM
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comments
Labels: price discrimination, prices, shopping, shops
