What do colleges have in common with Kohl’s?

I oft say that anybody who pays sticker price at Kohl’s should look over their shoulder to make sure that Darwin isn’t chasing them.

Maybe the same should be said of parents who pay list price tuition to fund their kiddies through college.

Lots of talk re: how college costs are soaring.

According to the WSJ …

Published tuition rates have soared in the last decade, but only a small percentage of families actually pays full freight.

Between grants to needy students and merit scholarships to entice other desirable candidates, schools these days are giving back nearly 50% of gross tuition revenue in the form of aid and awards.

In other words, list prices are going up, but more stuff is being sold at sale prices.

 

 

Increasingly, colleges are using pricing methods previously the domain of airlines and discount retailers …

What do colleges have in common with Kohl’s?

I oft say that anybody who pays sticker price at Kohl’s should look over their shoulder to make sure that Darwin isn’t chasing them.

Maybe the same should be said of parents who pay list price tuition to fund their kiddies through college.

Lots of talk re: how college costs are soaring.

According to the WSJ …

Published tuition rates have soared in the last decade, but only a small percentage of families actually pays full freight.

Between grants to needy students and merit scholarships to entice other desirable candidates, schools these days are giving back nearly 50% of gross tuition revenue in the form of aid and awards.

In other words, list prices are going up, but more stuff is being sold at sale prices.

 

 

Increasingly, colleges are using pricing methods previously the domain of airlines and discount retailers …

Your price sensitivity is asymmetric … and we know it.

According to TheVerge.com …

Big grocery chains are increasingly turning to big data and mathematical models to take the guessing out of the process of pricing thousands of items on their shelves,

 

 

The models can detect your yogurt flavor preferences and your “internal hierarchy of brands” … i.e. which brands your think are better than others.

And, there’s more …

What do colleges have in common with Kohl’s?

I oft say that anybody who pays sticker price at Kohl’s should look over their shoulder to make sure that Darwin isn’t chasing them.

Maybe the same should be said of parents who pay list price tuition to fund their kiddies through college.

Lots of talk re: how college costs are soaring.

According to the WSJ …

Published tuition rates have soared in the last decade, but only a small percentage of families actually pays full freight.

Between grants to needy students and merit scholarships to entice other desirable candidates, schools these days are giving back nearly 50% of gross tuition revenue in the form of aid and awards.

In other words, list prices are going up, but more stuff is being sold at sale prices.

 

 

Increasingly, colleges are using pricing methods previously the domain of airlines and discount retailers …

Cheap Tricks … err, make that cheaper tricks.

Warning: Adult Content.

The Economist – a reputable publication — recently reported the results of a groundbreaking economic analysis.

Specifically, staffers “analysed 190,000 profiles of sex workers on an international review site … with data going back to 1999 … with prices corrected for inflation.”

What did they find?

“The most striking trend our analysis reveals is a drop in the average hourly rate of a prostitute in recent years”

=====
What explains the 30% drop in prices?

Well, pardon the pun, it’s pure economics …

Your price sensitivity is asymmetric … and we know it.

According to TheVerge.com …

Big grocery chains are increasingly turning to big data and mathematical models to take the guessing out of the process of pricing thousands of items on their shelves,

 

 

The models can detect your yogurt flavor preferences and your “internal hierarchy of brands” … i.e. which brands your think are better than others.

The models can identify the precise price point at which you would switch between brands or how much incentive you’d need to buy the bigger pack.

It’s not enough to simply know that a 12-pack should cost less per item than a six-pack, nor that branded yogurts should command a price premium … the models try to calculate exactly how much each of those prices should vary.

The models recognize that people are really price-sensitive when buying cold desserts and that a “buy one, get one free” offer is more cost efficient than a straight 50 percent price cut (that’s because some people will still take just one).

And, the models can also detect more nuanced dynamics such as “asymmetric cross-price elasticity” … e.g. an eight-pack’s price affects sales of four-packs more strongly than vice versa.

Think about it next time you swipe your store’s loyalty card.

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What do colleges have in common with Kohl’s?

I oft say that anybody who pays sticker price at Kohl’s should look over their shoulder to make sure that Darwin isn’t chasing them.

Maybe the same should be said of parents who pay list price tuition to fund their kiddies through college.

Lots of talk re: how college costs are soaring.

According to the WSJ …

Published tuition rates have soared in the last decade, but only a small percentage of families actually pays full freight.

Between grants to needy students and merit scholarships to entice other desirable candidates, schools these days are giving back nearly 50% of gross tuition revenue in the form of aid and awards.

In other words, list prices are going up, but more stuff is being sold at sale prices.

 

 

Increasingly, colleges are using pricing methods previously the domain of airlines and discount retailers …

Sucka Alert: It’s after 5 p.m., so the price is higher…

Excerpted from the book Pricing Segmentation and Analytics by Bodea and Ferguson

One example of using price segmentation in the price analytics process has been applied at a grocery store chain.

Previous studies have shown that consumers who shop at a grocery store after 5 p.m. on weekdays are generally less price sensitive than consumers who shop on weekdays before 5 p.m.

This finding is intuitive as the consumers who are shopping after 5 p.m. are generally working professionals who are on their way home from work and do not bother to comparison shop, while consumers who shop before 5 p.m. consist of homemakers and retired individuals who, conceivably, are more price conscious and have more time to comparison shop.

To take advantage of this knowledge, there is a grocery store chain in Texas that raises the prices of almost all items after 5 p.m. on weekdays and lowers them again before opening the next morning.

I’m a strong advocate of “dynamic pricing” but this one gives me the creeps … I’d like to be a fly on the wall when customers catch on to the pricing scheme.

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