redesignAnswer: If two 12-packs of Diet Pepsi cost $6.98, how much does one cost?

Like many marketing and pricing questions, this one doesn’t have a “right” answer. It depends on the philosophy of the company and what you’re trying to achieve.

Here, you’re balancing the consumer desire for “fairness” with the desire to maximize either revenue or margin.

The “fair” answer is $3.49, which is exactly half of the cost for two. The revenue maximization answer is $6.97, because it basically forces everyone to buy two.

There are other considerations, too:

  • Will you look like you’re forcing consumers into bad choices? Especially with health concerns, you might look dickish to regulators. A great example of this is when McDonald’s offered 1 pie for 99 cents and two pies for $1. This played into the notion that McDonald’s wants you to eat poorly. Bad for PR.
  • CPGs like PepsiCo offer a wide range of marketing incentives depending on volume.

In general, I find that stores like Target tend toward the “fair” end of the spectrum in unit pricing. Drug stores such as, Walgreen’s and CVS, and C-stores, like 7-11, tend toward the revenue maximization.

The picture in the question was taken at a 7-11. The price for two was $6.98. The price for one was “up to $5.99” on the sign. I didn’t try to buy a single unit just to see what the actual price was.

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Maximizing the value of deals on Facebook and foursquare

Facebook Places punch card

I was walking down the street the other day and did a search on Facebook Places. Up popped up a deal for Boyd’s Coffee: get 10 punches and get a free drink. As a potentially new customer, this was not the least bit attractive. I had no idea what their coffee tasted like. In order to get a deal, I’d have to visit at least 10 times. It may work as a retention tool, but not as an acquisition tool. A better offer for new customers would be 50 cents or a dollar off a drink.

Likewise, many of the mayor offers on foursquare aren’t appealing to the casual user. As foursquare has gotten more popular, it may take visiting nearly every day to win a mayorship at popular venues.

Most traditional marketing tools have focused on either acquisition or retention. Coupons (including Valpak and Groupons) get people in the door. Loyalty programs (like punch cards) entice existing customers to come back.

Facebook, Foursquare and the like offer the promise of doing both — if offers can be adapted for the user. As long as I haven’t checked into the venue before, I get a $1 off coffee coupon. Once I’ve redeemed that, it becomes the punch card.

Because Facebook and foursquare use persistent identity, they are less susceptible to abuse than paper coupons. This allows merchants to make richer introductory offers if they choose: the merchant could offer a free coffee the first time.

The platforms could also be adapted to support refer-a-friend promotions. For example, Tristan Walker recently tweeted about an incredible banana beignet dessert at Tamarine. I added that to my to-do list. Businesses could use these data to recognize and reward key influencers.

While the existing platforms are somewhat limited, they could quickly evolve into tools that give small businesses CRM tools that the big guys have.

A Facebook deals sticker at Boyd's Coffee

Target-ing iPad savvy shoppers with a fresh take on paper

Target continues its mobile innovation with the launch of its iPad app. The app makes it easy to find the nearest store and look up this week’s specials.

Target has had a long history of innovation. I’ve written before about a combination MP3 player/gift card and Target’s Android and iPhone apps.

While browsing through the circular, you can build a list of items that you want to buy. You can also get additional information on items for sale.

It would be nice if it also told you what aisle the item was stocked in, availability at your nearby store and synchronized the list you build with the iPhone or Android apps. In-store availability and aisle location is provided for a limited number of items. (Target’s database, which is available on iPhone/Android, seems to be more robust, but the linkages haven’t been made.)

Target has offered its circular online for years. But the flash-laden app seemed overdone, sluggish and just didn’t have the same feel as flipping through the paper circular. The iPad app pretty much replicates the experience of paper minus the environmental guilt. (And fussing with pages that stick together.)

Newspapers should be very worried. Free standing inserts that provide half the bulk of many Sunday papers are an important revenue source. They are also an important circulation source: while many editors may recoil in horror, yes, some people do do buy the Sunday paper just for the ads.

Newspapers can also learn from the Target app. I’ve been using the iPad apps for the WSJ, New York Times, Washington Post and USA Today. In translating a primarily paper experience online, Target has done a better job than all of them.