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3. Combination
The most profitable option for a company is to utilize a combination pricing method which inherently includes both direct and indirect pricing. The advantages are clear--not only can a company sell you a product at a predetermined cost, it can also sell the attention you give to its site to other companies in the form of advertising.
Why is this combination method so difficult to obtain? The problem can basically be summarized as elasticity of demand--in effect, how price sensitive a consumer is to your product. If a consumer feels your product is worth the price you charge, they'll bite. If not, they'll walk. This gives me a chance to illustrate one more aspect of the growing gap between web-based marketing and traditional methods. Due to the construction of the web as a medium, consumers have a growing number of alternative (read: competitive) choices to whatever product you decide to offer. For instance, if you were searching for world news events and instinctively pulled up the CNN web site, but discovered they were charging $25 for access, would you just pay the money and go on with your life? I would expect not. Instead, you would go to another on-line news organization, such as USA Today, and get your information there for free.
In essence, the web offers an increasingly more efficient way for consumers to comparatively shop around. They can compare prices, features, and benefits of competitive products more easily than ever before. While this is great for consumers, it can be disastrous for companies that egotistically believe its products are superior to any other and consumers should be willing to pay for this superiority. According to a recent book, many analysts believe this is the major reason behind the downfall of Apple Computer.
Getting back to the aspects of combination pricing, a living, breathing, and (most importantly) successful company to implement this method is The Wall Street Journal. The WSJ bucked the typical route of offering free web-based news feeds and instead implemented an on-line subscription fee. Although a risky move from a business analyst level, the WSJ proved that they knew their product, their competition, and their target market. In part, this is due to the historically high-end and well written newspaper--in essence, the Wall Street Journal's brand awareness, product quality, and public perception allowed the company to charge a subscription fee while other companies are offering similar information for "free".
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