Creative pricing strategies fit better today

As this shopping season draws to its conclusion there are winners and losers. The winners, for the most part, are those that have changed their pricing strategies to fit today's economic times and promoted their changing policies aggressively. The losers seem to be those who approached the season in the same manner as they did when times were much better.

Consider the jeweler who was known for his creative skills using gold, but when that metal became even more precious customers stopped buying. So the jeweler shifted a much larger proportion of his offerings to silver -- same creativity, same craftsmanship, lower prices and higher sales volume.

Consider the family restaurant that discovered that an increasing number of customers wanted to share one entrée instead of ordering two, either to save calories or money or both. Instead of not allowing this request, it created new menu items "for the lighter appetite." The smaller portions were less expensive than regular portioned meals, but higher priced than one meal split between two diners. While the average sale is lower than before, it is still higher than the single entrée and it is surprising how many people then order two desserts.

A distributor that normally charges customers a delivery charge instituted a new pricing policy that offered free freight for all orders higher than 30 percent more than the average sale. Customers have increased the size of their orders to take advantage of this offer while the costs of "picking and packing" have been reduced, almost offsetting the cost of absorbing the shipping charges. A critical factor in developing a promotional pricing strategy is to learn what customers want or need or are willing to pay for and then figure out how to grant them their wishes. If you can do that you might be able to actually increase sales volume and become a winner. If you don't try, you probably will be a loser and may not be around to profit when the economy becomes more robust. As you plan for the next season, consider what your customers want or need then start thinking about price creativity.

By Larry Galler - Times Business Columnist http://nwitimes.com

Champagne war between supermarkets

There seems no end between the price war for cheap champagnes.

Never seen. The battle for the cheapest champagne is going on for a while. Carrefour started in November to put the price of three champagnes just under ten euro. Delhaize followed quickly, as Colruyt, which today claimed promotion with a champagne for 8.75 euro in the leaflets, which was announced as the cheapest champagne available on the Belgian market.

Colruyt confirms that it remains loyal to their "red pricing system" and will adjust their prices as of Thursday. The chain goes even a step further than Carrefour and offers the house champagne 'Marquis Marmontel' for only 8.45 euro.

Are these the final prices or should we wait until New Year's Eve to get our bubbles from the supermarket? "For us this is the lowest price," says Carrefour. They won't say how much margin the supermarket chain exactly gain on their champagne. Except "Not taking a lot of margin, but they don't sell at a loss." General rule is that for every bottle of champagne there are 1.3 kilogram grapes needed. Champagne grapes cost around 5 euro per kilogram. There are still additional costs like for example: the bottle, cork, label, transport and distribution of the champagne. How far can a supermarket really go?

"It's all about negotiating with the champagne farmers in Reims," said Eric De Busscher, champagne importer for Colruyt. "Because we now have to adjust our prices, we will re-negotiate with our suppliers."

Champagne farmers need cash, is well known. "Last fall was particularly bad for champagne sales," says De Busscher. "This year fewer traders bought champagne, because they first wanted to lose their own stock. French exports sputtered and stocks began to accumulate. Therefore, more and more champagne farmers are willing to sell at lower prices."

Not only the crisis is the culprit for champagne. The cheaper cava and prosecco champagne's playing also important factors. This year in Belgium there has been sold 15 million bottles of Spanish cava, against 10 million bottles of champagne. And the Italian Prosecco is sold for the first time over 1 million of bottles.

BRUSSEL - Aan de prijzenoorlog tussen de goedkope champagnes lijkt maar geen einde te komen.

Nooit gezien. Champagne ‘De Richeville Réserve Brut', een ‘premier prix' of instapchampagne gemaakt door een coöperatie in Reims, voor 8,49 euro. ‘Om klanten te lokken net voor eindejaar', zegt Julie Stordiau, de woordvoerster van Carrefour.

De slag om de goedkoopste champagne is al een tijdje aan de gang. Carrefour stak in november het vuur aan de lont met drie champagnes net onder de tien euro. Delhaize volgde al snel, net als Colruyt, dat tot vandaag promotie voerde met een champagne voor 8,75 euro die in de folders aangekondigd werd als ‘de goedkoopste champagne verkrijgbaar op de Belgische markt'.

Colruyt bevestigt dat het trouw blijft aan zijn ‘rodeprijzensysteem' en vanaf donderdag zijn prijzen aanpast. De keten gaat zelfs nog een stapje verder dan Carrefour en biedt zijn huischampagne Marquis Marmontel aan tegen 8,45 euro.

Zijn dit de definitieve prijzen of moeten we nog wachten tot oudejaarsavond zelf om onze bubbels in te slaan? ‘Wat ons betreft is dit de laagste prijs', zegt Julie Stordiau. Hoeveel marge de supermarktketen nog heeft op de champagne, wil de woordvoerster niet kwijt. ‘Niet veel meer, maar we verkopen niet met verlies.' Algemene regel is dat je voor één fles champagne 1,3 kilogram druiven nodig hebt. Champagnedruiven kosten ongeveer 5 euro per kilogram. Daar komen nog de kosten voor de fles, de kurk, het etiket, het transport en de distributie bij. Hoe ver kan een supermarkt daarin gaan?

‘Het draait allemaal rond onderhandelen met de champagneboeren in Reims', zegt Eric De Busscher, champagne-inkoper bij Colruyt. ‘Omdat wij onze prijzen nu moeten aanpassen, zullen wij opnieuw onderhandelen met onze leveranciers.'

En dat de champagneboeren cash geld nodig hebben, is intussen genoegzaam bekend. ‘Vorig najaar was bijzonder slecht voor de champagneverkoop', zegt De Busscher. ‘Daardoor kochten handelaars dit jaar minder champagne in, omdat ze eerst hun eigen stock kwijt wilden. De Franse export sputterde en de stocks begonnen zich op te stapelen. Daarom zijn steeds meer wijnboeren bereid hun champagne te verkopen tegen lage prijzen.'

Niet alleen de crisis is de boosdoener voor champagne. Ook de goedkopere cava's en prosecco's spelen de champagne parten. Dit jaar zullen in ons land om en bij de 15 miljoen flessen Spaanse cava over de toonbank gaan, tegenover 10 miljoen flessen champagne. En ook de Italiaanse prosecco komt voor het eerst boven de 1 miljoen verkochte flessen uit.

Wednesday 23 December 2009 Auteur: (abl, ems)

Neelie Kroes European Commissioner for Competition Policy speech : commission accepts commitments from Rambus lowering memory chip royalty rates

Ladies and gentlemen,

The Commission has today adopted a decision that renders legally binding commitments offered by US company Rambus Incorporated. In particular, these commitments put a cap on royalty rates charged by Rambus for certain patents for “Dynamic Random Access Memory” microchips (DRAMS). DRAMS are used to temporarily store data, for example in PCs’ “working memory”.

The Commission initially had concerns that Rambus may have infringed EU antitrust rules on the abuse of a dominant market position by claiming abusive royalties for the use of these patents. The Commission's decision confirms that it now considers the commitments from Rambus are adequate to address these competition concerns. The case is important because it highlights the crucial importance of transparency in the process of setting technical standards. I will explain the background to this case. A US standard-setting organisation called JEDEC developed an industry-wide standard for DRAM chips. The standard was very successful. JEDEC-compliant DRAM chips represent around 95% of the worldwide market and are used in virtually all PCs. In 2008, worldwide DRAM sales exceeded 23 billion euros. Rambus is claiming royalty payments on all these products, which represents a very substantial cost to industry. The Commission was concerned that Rambus may have only been able to charge these royalties because of a so-called "patent ambush", in breach of EU antitrust rules’ ban on abuse of a dominant market position. A "patent ambush" means that during the standard-setting process a company intentionally conceals that it holds essential intellectual property rights relevant to technology used in the standard being developed. It only starts asserting its intellectual property rights, and claiming royalties on them, after the standard has been agreed, once other companies are “locked in” to using it. A company that engages in such deception can exclude potentially competing technologies from the market. Moreover a successful patent ambush can artificially inflate prices for intellectual property rights because the rights holder knows everyone must use that technology. In some cases, it can even allow companies to charge a royalty which, in the absence of the industry standard, they would not have been able to charge at all. This type of behaviour goes against EU antitrust rules that require standard setting to be open and transparent. In response to the Commission’s concerns, Rambus offered to charge lower royalty rates than before and in some cases to apply zero rates. Rambus has committed to put a cap on its royalty rates for products compliant with the JEDEC standards for five years. In particular, as part of an overall package, Rambus has agreed in the future: - not to charge any royalties whatsoever for the Single Data Rate (SDR) and Double Data Rate (DDR) microchip standards adopted when Rambus was part of the JEDEC standard-setting process and - to charge a maximum royalty rate of 1.5% for the later generations of JEDEC DRAM standards. Altogether, this amounts to substantially lower royalties than the 3.5% Rambus has been charging in its existing contracts. These caps will be in place for five years providing predictability and certainty which has a clear value for business. Potential new market entrants will also have a clear perspective of future royalty costs, facilitating a decision on whether or not to enter the market. In light of the commitments offered, there are no longer grounds for antitrust action in the present case. However, this does not mean that the Commission will stop monitoring standardisation processes. Lessons learned for standardisation The Commission is currently revising the antitrust guidelines for horizontal agreements and intends to improve the existing chapter on standardisation to provide more guidance on standard-setting. The draft will be ready for public consultation in early 2010.

Lessons learned from recent experiences such as the Rambus case will be reflected in this document. Standardisation involves competitors sitting around the table agreeing technical developments for their industry. Normally, antitrust rules do not allow competitors to jointly decide on market conditions. However, the Commission recognises the general benefits that standardisation brings, and so standard-setting is acceptable under antitrust rules provided this takes place under strict conditions of openness and transparency. This is essential to avoid standards being abused by narrow commercial interests. This is why many standards organisations require not only disclosure of potentially relevant intellectual property rights, but also a commitment to license those intellectual property rights on fair, reasonable and non-discriminatory - in other words FRAND - terms. These conditions precisely aim to prevent one company unlawfully capturing a standard and overcharging for its technology. There is an important pro-competitive rationale behind requiring disclosure of patents and patent applications in the framework of standard setting before a standard is set, thus helping to avoid "patent ambushes." The US competition authorities are taking the same approach. Federal Trade Commission Chairman Jon Leibowitz has recently stated that standard-setting is generally pro-competitive and that behaviour that could undermine its benefits for competition would need to be tackled. Assistant Attorney General Christine Varney of the US Department of Justice stated before Congress that "a significant intersection between antitrust and intellectual property is the application of the antitrust laws to standard-setting organizations" and that she hopes to bring further clarity to this increasingly important aspect. The European Commission does not use the antitrust rules to prescribe specific schemes to industry and standard-setting bodies but rather to set the limits within which they are free to adopt the policies of their own choosing. Different rules may be appropriate for different bodies and sectors. Should the need arise, then the Commission will also step in to support standard setting bodies, to help to design their rules so as to avoid “capture” of a standard by a “patent ambush” after it has been adopted. We are often asked, for example, for our views on whether prior disclosure of maximum royalty rates and licensing terms that would apply should a company's technology be made the standard would be allowed under antitrust rules. In my view, this would allow for the choice of technology in a given standard to be based on a full understanding of the price and quality trade-offs. The US Department of Justice has already indicated in two cases that such schemes did not pose any competition problems. An effective standard-setting process should take place in a non-discriminatory, open and transparent way to ensure competition on the merits and to allow consumers to benefit from technical progress and innovation. Abusive practices in standard setting can harm innovation and lead to higher prices for companies and consumers. For its part, the Commission will continue to vigorously enforce the EU’s antitrust rules in this area, for the benefit of technical progress and European consumers.

Source : European Union – press release