Pricing Strategies: Barnes & Noble

"Although price has never been the number one reason book buyers cite as a factor in choosing where to shop, it has becoming progressively more important. And, of course, it is even more important online."

-Leonard Riggio, Chairman of Barnes & Noble, Inc.


Fixed pricing

Barnes and Noble makes good use of a fixed pricing strategy. Keeping both their online and offline sales consistent, Barnes and Noble applies the same pricing strategy online that a customer would experience in one of their stores. However, because of its online ordering system and fully automated distribution center, Barnes and Noble is able to ship products directly from their warehouses, adding additional savings for the consumer. Barnes and Noble's fixed pricing strategy includes the application of markup pricing, volume based pricing, bundling pricing, and promotional pricing.

Mark-up pricing

Mark-up pricing (the cost of buying the product from the producer plus amounts for profit and expense) is used by Barnes and Noble and other book retailers alike to sell such items as books, magazines, DVDs, music, and related merchandise. Barnes and Noble, in addition to these items, uses mark-up pricing to sell such items as their calendars, video games, toys and games, as well as home and gift items.

Volume-based pricing

Volume-based pricing, which includes establishing separate price levels based on quantity purchased , becomes very useful for any online retailer, including Barnes and Noble. Barnes and Noble offers bulk order discounts, with purchases amounting to over $25 receiving free shipping and delivery. Barnes and Noble offers such existing discounts as receive any Mother's Day tote for only $4.94 with the purchase of any two eligible items, and also buy any two paperbacks and receive the third one for free. Barnes and Noble is also able to establish discounts for bulk orders which include over 50 copies of the same book.

Bundling pricing

Bundling pricing-the strategy used to establish the price for a combination of more than one product/service-works well with a large retailer such as Barnes and Nobe because it has many available items in addition to books. Discounts in the past have included savings on orders that include both hardback books and paperback, or a combination of music/movies along with book orders.

Promotional pricing

Promotional pricing is a key strategy employed by Barnes and Noble, with particular short term discounts or incentives provided through becoming a Barnes and Noble club member or Barnes and Noble Mastercard holder. Barnes and Noble makes frequent sizable discounts available to its customers that hold club memberships. Barnes and Noble sends email alerts to club members informing them of available store discounts in addition to specialty discounts made available only to members. Barnes and Noble includes a special feature called "This Week at Barnes and Noble" which is included in the emails that are sent to members, enticing them to come into a local store that week or make a purchase online.

Dynamic pricing: Personalized pricing

Barnes and Noble has earned great financial success through its online component, but it is the dynamic pricing strategies that are included within its business plan that allow Barnes and Noble to remain at the top of the book retail business. Personalized pricing strategies allow for customization of price options for an individual customer. Barnes and Noble's online store makes great use of this strategic tool because consumers browse the website longer in order to finalize their order so that it provides additional discounts. Within their annual report for 2008, Barnes and Noble emphasizes the importance of increasing discounts to their best customers in order to strengthen their long term position in the marketplace. The Barnes and Noble card membership really helps to administer personalized pricing to include coupons for the week and loyalty discounts for simply being a member.

The Membership Program of Barnes and Noble has been extremely valuable. In 2007, Barnes and Noble added record high new members to the program, which included more new members than in any year since the program was launched in October 2000. Barnes and Noble was able to drive up club membership by increasing the discounts made available to its most loyal customers.

Barnes & Noble has been able to hold onto their title of top book retailer, with their brand name being their strongest competitive advantage due to the quality of both its products and services.

Web Business Models

Pure Play Business Level: Pandora internet radio

Pandora internet radio(www.pandora.com) operates at the pure play business level, existing solely on the internet. Pandora was founded in 2000 by Tim Westergren and since then has rapidly developed into the largest online music service, with over 20 million registered users and still growing. Pandora also acting as one of the most popular applications on the Apple iPhone. Pandora has developed valuable partnerships with big industry players such as AT&T, HP, Samsung, and Sprint and advertisers HP, Microsoft, Honda, Proctor and Gamble and Nike, that allow the site to stay well-funded. Pandora's personalized radio service has redefined the way music-lovers discover new music while listening to their favorite artists and songs.

Pandora makes use of the subscription business model in generating revenue, since it provides subscribers with opportunity to purchase songs, and entire albums by their favorite artists, working as a content service. Since it also operates as a community model, providing a social network where users can share music and personalized stations with friends. Pandora in having established very successful partnerships with industry leaders, has also managed to generate the most profit based on the affiliate business model, incorporating revenue sharing with top brand names, like Apple. The image below shows how users, in addition to establishing their own personalized stations, they can create their own blog discussing the music they have discovered and enjoyed.
Pandora recently expanded its reach by going mobile, so now subscribers can access their already existing stations while they are on the go and also create new ones. Accessing Pandora from one's blackberry, iPhone, or other smart phone, grants the user the same mobility with the site that would exist if they logged in from their own computer.

Performance Metrics
I think the site is verifiably successful at providing a unique service to its users. In order to gage this success, Pandora can look at how many users it gains per quarter, and how much music they purchase individually. Also, since the partnerships with industry and advertising leaders has kept the business well-funded, calculating the responses of users to the banner ads, number of clicks for example. Pandora should also do qualitative research to judge the success of the social community, including reading user blogs, and seeing how they utilize this environment.

Legal and Ethical Issues

The Legal and Ethical Environment Encompassing Consumer-Generated Content

Laws governing Internet usage are constantly under scrutiny and reconstruction. As web advancements continue to emerge, legal regulations quickly becomes outdated and inapplicable considering the extensive market that is the Internet. The liability of website publishers for consumer-generated content is dramatically limited by federal law. Web publishers for social networks like Facebook.com and college forums such as Ratemyprofessor.com, along with other sites providing reader-generated material are protected under the Communications Decency Act of 1996. The Act intends to protect these web publishers from legal responsibility for “libelous comments” written by third parties. Issues of both freedom of speech and privacy arise in debates over uncensored web postings. Freedom of speech is protected under the First Amendment, including unfashionable speech and opinions. However, the First Amendment’s protects true speech- not lies. This becomes an area of concern regarding the dissemination of uncensored consumer-generated content that seeks to publicize embarrassing rumors or gossip behind the appearance of voicing free speech. Legal restrictions are only so constricting, ultimately raising the question of whether web publishers should be held to a higher ethical standard-one that looks to prevent such defamation through censoring consumer-generated content or redefining a website’s mission. Internet regulations become more complex when websites promote themselves as enabling online anonymous free speech, which stimulates the posting of potentially defaming material, only furthering the legal and ethical problems surrounding these social sites reliant on reader-generated material.

Case Study: JuicyCampus

JuicyCampus.com was an anonymous, gossip site inviting college students to freely discuss topics of interest on college campuses. In 2007, the site was initially launched on seven college campuses and after gaining immediate popularity, decided to go nationwide. Only a few months after its inception, Ivester reported getting over 1 million unique visitors monthly. Despite the site’s success in receiving a high volume of users, the anonymity given to posters caused much of the site’s content to be malicious gossip aimed at embarrassing other students. For those people who have been unfortunate enough to have seen or heard about their name being mentioned on this site, the impact has been devastating. The vicious groupings of students, including “sluttiest freshman” and “worst hook-ups” are posted and archived, ready for friends, family, and the victimized students themselves to see. Although JuicyCampus’s founder Matt Ivester claims that the site’ objective in enabling anonymous posts was to allow the free flow of important college interests, it would be impossible for him to deny the massively negative impact the anonymity of the posts has caused. Granting students the ability to hide behind their anonymity allows for vulgar and immature tendencies to be unleashed in a reckless environment.

Based on the site’s purpose, it would not be surprising to expect that Juicycampus would be the target of multiple defamation lawsuits, since the posted untrue claims have certainly been damaging to those mentioned within the site. However, Ivester claims that no lawsuits have been filed. Based on the Communications Decency Act of 1996, Ivester, as the web publisher, is not liable for any of the defaming content because it was all generated by third-party users. Also, the anonymity of the site’s posters protects them as well. Defamation cases are tough to win, especially when referencing a college gossip site and considering the difficulty of proving defamation (especially when you don’t know who is writing about you). With the freedom of speech and privacy of the gossip-posters protected, it makes it extremely hard to hold them accountable for statements and claims made on a college gossip website. With the apparent sweeping trend of student bashing that takes placed in this isolated setting, Ivester cannot as easily escape ethical discrepancies as legal ones.

On February 4, 2009, Ivester announced through his website that he would be shutting down Juicycampus permanently. He referenced the current economic slump as cause for his depleting revenue, despite an overwhelming number of monthly visitors and posts. However, speculation has been sited that a number of lawsuits are being filed, resulting from the detrimental effects of Juicycampus on certain individuals.

Although legal action could not be sought for violation of freedom of speech, the Attorney General of New Jersey seeking to prove that Ivester was in violation of the Consumer Fraud Act, which concerned his disclaimer that all users of the site would not use their anonymity to harm or misrepresent any individual. Although it was an unsuccessful and roundabout approach to bring Ivester to legal action, this attempt shows the degree of frustration one appointed official reached with the success of a degraded gossip site.

Although this site no longer exists, it doesn’t mean that others won’t mimic its approach, or that they haven’t already. More gossip, college sites are to come and the legal regulation will probably have to change with the times in order to handle the issue of anonymity in web postings.

Mass Customization: NikeID and Puma Mongolian Shoe BBQ

In the second generation of the Internet, as power shifts from sellers to buyers, businesses are focusing on developing digital, highly-interactive relationships with consumers: Embracing online mass customization versus, previous methods of mass production. As increases the involvement consumers have in the making of their own, unique product(s). By involving consumers on a higher level through digital technology purchasing of their products, businesses can establish a more intimate attachment with its target audience. Nike and Puma, two major competitors in the athletic shoe industry, have each developed attractive marketing approaches that allow them to profit from the execution of an online mass customization strategy.

NikeID

The theory behind Nike’s NikeID Studio in New York City is the idea that there is an extremely vast selection of colors and styles of shoes to choose from and with which to create and purchase. The overall theme of NikeID appears to target an urban culture-flashy colors, city atmosphere, and offering multiple ways of designing the prime customized shoe, in terms of customizing both looks (color, size, style) and performance (wide/narrow, independent siding, pick your outsoles). NikeID sells this idea of “show your colors on the field and your style on the street,” appealing to this young adult, urban, hip-hop demographic that are asked to add a little personality to their athletic shoes. The NikeID interactive experience focuses mainly on choosing a color basis for your shoe design. Nike offers a wide variety of possible design styles to test out in several colorful expressions from which to choose.


Puma Mongolian Shoe BBQ

Whereas Nike created NikeID as a unique way to personalize one’s athletic shoes with an individual, unique ID, Puma took a much more thematic approach to the concept of “preheating your creativity” in the sense of designing the right shoe recipe. Puma’s digitally interactive site, Puma Mongolian BBQ, received its highly unusual name from a historical reference to Ghengis Khan’s Mongolian army in the Far East many centuries ago. The soldiers of the Mongolian army would individually gather meat and vegetables and were then asked to create a personalized meal comprised of their medley of ingredients. The design of the Puma website, including images of restaurant-size kitchens and signs listing the daily specials of the Mongolian BBQ, further solidifies the cooking theme of Puma’s marketing strategy. In contrast to the wide variety of styles offered by Nike for shoe customization, Puma offers fewer options as far as templates from which you, as a consumer, are to build your shoe design. The Puma website seems much less flashy than the Nike one, targeting young professionals. The website uses less bright and bold colors, and focuses on a simple, clean and crisp image.

First-Hand Customer Experience: Time, Quality, Performance and Service, and Cost

Time
In analyzing the customer experience, first-hand, I chose to consider the customer experience from four different perspectives: time, quality, performance and service, and cost. I spent about twenty minutes on NikeID’s website and I thought that in that time I was able to grasp a good understanding of the website and the different options I had in customizing my own shoes. I spent roughly the same amount of time on Puma’s website, but I felt that there was less information to absorb, fewer navigational tools, and drop menus. I also realized that the Puma site took longer to load certain pages, even when it was finalizing the design of my shoe, the website voiceover asked me to be patient for up to five minutes.

Quality
The quality of both sites was really very impressive. The theme and creativity involved in designing the Puma website really give the brand something to make it stand out from Nike and possibly other competitors. Both companies appear to successfully manage their brand image-Nike appears more urban and vibrant while Puma seems to target creative young-professionals. The quality of design was about the same for each site, concerning how much of the design the consumer is actually able to contribute. Both sites are using the same form of technology-the Adobe Flash. However I believe that both sites equally apply their technology well for the chosen target audiences they intend to attract.

Performance and Service
Both sites performed well in the actual designing and customization of the shoes. However, Puma did seem to take longer to refresh, load, and register information. Also, I found it difficult to navigate around the site when I wanted to go back to the Home page. These obstacles made using the Puma site more time-consuming.

Cost
Neither site charges the consumers for designing their own shoes. The prices also do not noticeably vary from one brand to the other.

Both Nike and Puma effectively employed an online mass customization strategy. I personally preferred the shoe that I made on Puma more so than the one I made on Nike, which really just boiled down to my liking of the color purple. However, I preferred the NikeID site because I felt it was easier to use and more fun to look around the additional sites that gave insights into related affairs, events, and products.