| Pricing Strategies 317
Chapter 11 | Pricing Strategies 317
HP, Epson, Canon, and Lexmark have long dominated the $50 billion printer industry with a maddening “razor-and-blades” pricing strategy (as in give away the razor and then make your profits on the blades). They sell printers at little or no profit. But once you own the printer, you’re stuck buying their grossly overpriced, high-margin replacement ink cartridges.
For example, you can pick up a nifty little HP multifunction inkjet printer for only $69.99. But the HP tricolor inkjet cartridge that goes with it costs $28.99. And a 100-count pack of HP four-by-six-inch photo paper costs another $22.99. The price per ounce of inkjet printer ink can exceed the per-ounce price of an ex- pensive perfume, premium champagne, or even caviar. By one estimate, if you bought a gallon of the stuff at those prices, it would cost you a horrifying $4,731.
The big manufacturers have seemed con- tent with this captive product pricing strategy. In fact, they pull in four times more revenues from ink cartridges and paper than from the printers themselves. Customers don’t like be- ing held hostage and having to pay through the nose for ink and paper—some are out- raged by it. But what can they do? Only HP car- tridges work with HP printers. Buying another brand isn’t the answer, either—all of the man- ufacturers pursue the same pricing strategy.
Enter Kodak—with a unique solution. Kodak recently introduced its first line of printers— EasyShare All-in-One printers—with a revo- lutionary pricing strategy that has turned the entire inkjet printer industry upside-down. In a twist on typical industry practice, Kodak sells its printers at premium prices with no dis- counts and then sells the ink cartridges for less. EasyShare printers sell for $129.99 to $299.99, depending on features, about $50 higher than comparable printers sold by com- petitors. However, EasyShare black and color ink cartridges go for just $9.99 and $14.99, re- spectively, about half the prevailing competitor prices. It’s a whole new concept in printer pric- ing and economics.
To make the strategy work, Kodak first had to create a new kind of inkjet printer. It de-
veloped an innovative technology that uses tiny nozzles to squirt pigment ink drops that are just a few atoms in size. EasyShare printers take about 55 seconds to produce a four-by- six-inch print, longer than some competitive printers that do it in 32 sec- onds. But the resulting pho- tos take up to 90 years to fade versus dye-based inks that can begin to fade in as little as a year.
Moreover, Kodak found
a way to contain all the print- ing electronics within the EasyShare printer itself, whereas rivals include some of the electronics in the car- tridges. This lets Kodak charge less for the car- tridges. As a result, accord- ing to one independent lab study, Kodak’s new printers “whomped” rival’s printers in price per printout. The study showed that con- sumers using an EasyShare printer can save on average of $110 a year based on printing four pages per day compared to using a com- petitor’s printer.
Thus, Kodak had the right printer and the right ink prices. Now, all it had to do was to reeducate consumers about printer pricing—about the benefits of paying more up front to reduce long-run print- ing costs. To do this, Kodak launched a “Think Ink” mar- keting campaign, built around the visual image “ThINK,” with the first two letters in black and the last three in gold. The campaign asked this piv- otal question: “Is it smarter to save money on a printer or save money on ink? (Hint: You only buy the printer once.)”
The ThINK campaign began with online viral efforts, centered on a series of popular “Inkisit” videos, featuring two dorky guys, Nathan and Max, who love to print photos but who don’t like the ink’s high cost. In the videos, posted on YouTube and an entertain- ing Kodak microsite, they asked enthusiasti- cally, “Have you ever thought about what life would be like if ink was cheaper?” Then came the bread-and-butter “ThINK” media campaign, targeting budget-conscious con- sumers who want to print at home but have limited this activity because of high ink costs.
Real Marketing 11.1
Kodak: A Whole New Concept in Printer Pricing and Economics
Kodak’s revolutionary pricing sells printers at full prices but ink cartridges for less. At Kodak's Print & Prosper Web site, you can even calculate how much you're overpaying for ink with your current printer.
Parts
» | Marketing: Creating and Capturing Customer Value 3
» | Marketing: Creating and Capturing Customer Value 11
» | Marketing: Creating and Capturing Customer Value 13
» | Marketing: Creating and Capturing Customer Value 25
» | Marketing: Creating and Capturing Customer Value 29
» | Company and Marketing Strategy: Partnering to Build Customer Relationships 37
» | Company and Marketing Strategy: Partnering to Build Customer Relationships 41
» | Company and Marketing Strategy: Partnering to Build Customer Relationships 43
» | Company and Marketing Strategy: Partnering to Build Customer Relationships 51
» | Company and Marketing Strategy: Partnering to Build Customer Relationships 55
» | Company and Marketing Strategy: Partnering to Build Customer Relationships 57
» | Company and Marketing Strategy: Partnering to Build Customer Relationships 63
» | Analyzing the Marketing Environment 65
» | Analyzing the Marketing Environment 71
» | Analyzing the Marketing Environment 73
» | Analyzing the Marketing Environment 77
» | Analyzing the Marketing Environment 79
» | Analyzing the Marketing Environment 81
» | Analyzing the Marketing Environment 85
» | Analyzing the Marketing Environment 87
» | Analyzing the Marketing Environment 89
» | Managing Marketing Information to Gain Customer Insights 97
» | Managing Marketing Information to Gain Customer Insights 99
» | Managing Marketing Information to Gain Customer Insights 103
» | Managing Marketing Information to Gain Customer Insights 109
» | Managing Marketing Information to Gain Customer Insights 111
» | Managing Marketing Information to Gain Customer Insights 113
» | Managing Marketing Information to Gain Customer Insights 115
» | Managing Marketing Information to Gain Customer Insights 127
» | Managing Marketing Information to Gain Customer Insights 131
» | Consumer Markets and Consumer Buyer Behavior 133
» | Consumer Markets and Consumer Buyer Behavior 137
» | Consumer Markets and Consumer Buyer Behavior 141
» | Consumer Markets and Consumer Buyer Behavior 143
» | Consumer Markets and Consumer Buyer Behavior 159
» | Consumer Markets and Consumer Buyer Behavior 163
» | Business Markets and Business Buyer Behavior 165
» | Business Markets and Business Buyer Behavior 175
» | Business Markets and Business Buyer Behavior 179
» What is Eaton’s value proposition?
» | Customer-Driven Marketing Strategy: Creating Value for Target Customers 189
» | Customer-Driven Marketing Strategy: Creating Value for Target Customers 193
» | Customer-Driven Marketing Strategy: Creating Value for Target Customers 197
» | Customer-Driven Marketing Strategy: Creating Value for Target Customers 203
» | Customer-Driven Marketing Strategy: Creating Value for Target Customers 205
» | Customer-Driven Marketing Strategy: Creating Value for Target Customers 207
» | Customer-Driven Marketing Strategy: Creating Value for Target Customers 209
» | Customer-Driven Marketing Strategy: Creating Value for Target Customers 211
» | Customer-Driven Marketing Strategy: Creating Value for Target Customers 213
» | Customer-Driven Marketing Strategy: Creating Value for Target Customers 219
» | Products, Services, and Brands: Building Customer Value 223
» | Products, Services, and Brands: Building Customer Value 225
» | Products, Services, and Brands: Building Customer Value 229
» | Products, Services, and Brands: Building Customer Value 237
» | Products, Services, and Brands: Building Customer Value 245
» | Products, Services, and Brands: Building Customer Value 247
» | Products, Services, and Brands: Building Customer Value 249
» | Products, Services, and Brands: Building Customer Value 251
» | Products, Services, and Brands: Building Customer Value 257
» | New Product Development and Product Life-Cycle Strategies 259
» | New Product Development and Product Life-Cycle Strategies 271
» | New Product Development and Product Life-Cycle Strategies 273
» | New Product Development and Product Life-Cycle Strategies 279
» | New Product Development and Product Life-Cycle Strategies 281
» | Pricing: Understanding and Capturing Customer Value 289
» | Pricing: Understanding and Capturing Customer Value 291
» | Pricing: Understanding and Capturing Customer Value 295
» | Pricing: Understanding and Capturing Customer Value 299
» | Pricing: Understanding and Capturing Customer Value 305
» | Pricing: Understanding and Capturing Customer Value 307
» | Marketing Channels: Delivering Customer Value 339
» | Marketing Channels: Delivering Customer Value 347
» | Marketing Channels: Delivering Customer Value 351
» | Marketing Channels: Delivering Customer Value 367
» | Retailing and Wholesaling 373
» | Retailing and Wholesaling 377
» | Retailing and Wholesaling 379
» | Retailing and Wholesaling 393
» | Retailing and Wholesaling 395
» | Retailing and Wholesaling 397
» | Retailing and Wholesaling 401
» | Retailing and Wholesaling 405
» | Communicating Customer Value: Integrated Marketing Communications Strategy 407
» | Communicating Customer Value: Integrated Marketing Communications Strategy 411
» | Communicating Customer Value: Integrated Marketing Communications Strategy 413
» | Communicating Customer Value: Integrated Marketing Communications Strategy 415
» | Communicating Customer Value: Integrated Marketing Communications Strategy 429
» | Communicating Customer Value: Integrated Marketing Communications Strategy 433
» | Advertising and Public Relations 435
» | Advertising and Public Relations 439
» | Advertising and Public Relations 441
» | Advertising and Public Relations 443
» | Advertising and Public Relations 445
» | Advertising and Public Relations 447
» | Advertising and Public Relations 449
» | Advertising and Public Relations 453
» | Personal Selling and Sales Promotion 463
» | Personal Selling and Sales Promotion 469
» | Personal Selling and Sales Promotion 471
» | Personal Selling and Sales Promotion 481
» How is the sales force at Nestlé Waters structured? outsells its top competitors.
» | Direct and Online Marketing: Building Direct Customer Relationships 495
» | Direct and Online Marketing: Building Direct Customer Relationships 499
» | Direct and Online Marketing: Building Direct Customer Relationships 507
» | Direct and Online Marketing: Building Direct Customer Relationships 509
» | Direct and Online Marketing: Building Direct Customer Relationships 515
» | Direct and Online Marketing: Building Direct Customer Relationships 525
» | Creating Competitive Advantage 527
» | Creating Competitive Advantage 529
» | Creating Competitive Advantage 537
» | Creating Competitive Advantage 549
» | The Global Marketplace 551
» | The Global Marketplace 553
» | The Global Marketplace 561
» | The Global Marketplace 573
» | Sustainable Marketing: Social Responsibility and Ethics 581
» | Sustainable Marketing: Social Responsibility and Ethics 583
» | Sustainable Marketing: Social Responsibility and Ethics 587
» | Sustainable Marketing: Social Responsibility and Ethics 595
» | Sustainable Marketing: Social Responsibility and Ethics 603
» | Sustainable Marketing: Social Responsibility and Ethics 605
» | Marketing by the Numbers A21
» | Marketing by the Numbers A27
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