The Flip

“The world's simplest shoot and share video cameras”

Gaby Carpanzano

Ashley I. Mail

Melanie Ronner

Aloysha Fadeichev

Ayush Kaushik

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Agenda

Phase One

• Service

• Continuum of Evaluation

• Categories of Services

• Types of Marketing in Service Industries

Phase Two

• Price Cues• Setting Price Policy

• Pricing method • Elasticity

• Break Even Point• Initiating and responding to price-

Changes/strategic option

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A service is defined as any act or performance that one party can offer

to another that is essentially intangible and does not result in the ownership of

anything.

•The service we provide is the warranty for every Flip camcorder.

•The warranty period is one year for new Flip camcorders, and 90 days for refurbished Flip camcorders.

Service

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• The warranty covers defects only.

• Also included with the warranty is 1 year of complimentary Assisted Support. Support resources can be found online as well as by phone.

• Before a warranty claim can be made, problems with any product must be presented to a Flip Video Support Technician, who can determine if there is a defect.

• The status of warranty claims can be checked online through a special section of theflip.com.

Service

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The Flip SlideHD’s warranty is high in credence qualities because of the uncertainty of whether the consumer will

use the service or not.

Continuum of Evaluation

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Flip Cam

Pure Tangible GoodProduct which is sold without any type service.

Tangible Good with Accompanying ServicesProduct accompanied by one or more services (ex. warranty, replacement)

HybridProduct and services are equal

Major Service with Accompanying Minor Goods and ServicesServices accompanied by little services or products.

Pure Service- Only service

Five Categories of Service

Flip SlideHDTangible Good

with Accompanying

Services

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Practices of Service-Quality Management

Strategic Concept- 13-60 year olds, for personal video use.

Top-Management Commitment- Taking care of the customers, applying the warranty to all and

helping customers with any types of problems with the Flip SlideHD.

Warranty:

“Flip Video Cameras come with a limited warranty that covers your hardware against defects in

materials and workmanship for one year. The limited warranty extends only to products

purchased from Flip Video or a Flip Video Authorized Reseller”- www.supporttheflip.com

•12 month warranty for all new Flip cameras

•90 days warranty for refurbished cameras

Including:

•Replacement of product

•Repair the product

•Refund the cost of the product

•No cost for the repair

Practices of Service

Quality Management

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High Standards:Strive to have one of the best customer services with Customer

Satisfaction Guaranteed. Answering questions over the phone, e-mail or

answers to most frequent asked questions could be found on the Flip

Camera website.

Self-Service Technologies:

Flip offers free express shipping and delivery to all dysfunctional

devices.

Monitoring Systems:

Flip provides customer surveys and all the details of the camera on the

website, as well as on product packages.

Satisfying Customer Complaints:

Flip encourages disappointed customers to complain and makes sure

their employees solve the problem on the spot. This is why the customer

service is available 24/7 via telephone .

Satisfying Employees as well as Customers:

Positive employee attitude provides positive customer service and

pleased customers.

Practices of Service

Quality Management

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Price Cues

“Left to right”

•$229.99 vs. $230.00

•Consumers tend to process prices “left to right,” rather than rounding

•Prices ending in an odd number also may give the idea of a discount or a

bargain

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1. Select the price objective

Product – quality leaders

•Offer affordable luxuries at prices just high enough not to be out of reach

•We are selling a convenient, and affordable video camcorder at a high enough price where we are not just focusing on one group of people with a specific income, but to a larger demographic with a wider range of income

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2. Determining Demand

Price sensitivity

Customers are less price sensitive to low cost items or items they buy infrequently

•Customers would be less sensitive to the Flip SlideHD at $229.99 which offers great ease,

convenience, and opportunities to capture life’s random moments

•Buy infrequently - most people don’t go and buy a video camera every year

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2. Determining Demand

Trade-off

People are willing to make between price and product characteristics

Are people willing to get an:•Inexpensive camera with limited characteristics•Expensive camera with limited characteristics•Inexpensive camera with a variety of characteristics•Expensive camera with a variety of characteristics

We have to weigh the price and the features and opportunities that come with the camera -$229.99 vs. ease of use, great software, easy upload, great features, and capturing things as soon as they begin

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2. Determining Demand

Target Price

•If we only target price-sensitive customers, we may be losing money and potential customers

•We need to target the Flip SlideHD to both price-sensitive and non price-sensitive customers

Demand Curves

Estimate by using a survey

•How many Flip SlideHD’s would a customer purchase at different proposed prices

•Set different prices online or to set different prices in different territories and compare the results

•Analyze past prices and quantities sold to see if we need to change something or take a different route

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3. Estimating Costs

Different types of costs

•Fixed costs •Variable costs

•Total costs •Average cost •Target costing

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3. Estimating Costs

Fixed costs

Do not vary with production or sales

•Salaries•Bills

•Other things that have to be paid for regardless of how much we produce

Variable costs

Vary with the level of the product

•The price of the Flip SlideHD as a whole •The parts that make up the Flip SLideHD

Vary depending on how many Flip SlideHD’s are in demand

Total Cost

Total Cost = Fixed costs + Variable costs for a given

level of production

Add together things like:•Salaries•Bills•Rent •Parts of the Flip SlideHD•The Flip SlideHD

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3. Estimating Costs

Average cost

Cost per unit at the level of production

AC = TC/productionAC = $229.99/# of Flip SlideHD’s produced

Average of what we are selling our product at divided by the number of Flip SlideHD’swe are producing

Target costing

Costs change as a result of a concentrated effort by the company’s designers, engineers, and purchasing agents

Flip must examine each set of elements •Design•Manufacturing •Sales

We need to consider different ways of bringing the final cost into our target cost

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4. Analyze Competitor’s Cross Mix

Competitor’s Prices

We must also look at our competitor’s prices

Ex. What are Kodak’s costs, prices, and possible price reactions?

We need to see if our competitor’s product has something the Flip SlideHD does not

This allows us to determine whether we are selling the Flip SlideHD too high, too low, or at the right price

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5. Selecting Pricing Method

1.Makeup Pricing

2.Target Return

3.Value Pricing

4.Going-rate

5.Auction Type

6.Perceived Value Pricing

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Pricing an item by adding a

standard increase to the

products cost

Ignores demand,

perceived value, and

competition

Makeup Pricing

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Target Return

The firm determines the price

that would yield its target rate

of investment (ROI)

Ignores price elasticity and

competitor’s prices

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Value Pricing

Firm wins loyal customers by charging a

fairly low price for high quality offering

Everyday low pricing

•Retailers use this type of pricing

•Charge a constant low price with few or no

price promotions and special sales

High low pricing

•Charge high prices on an everyday basis

then runs frequent promotions which prices

are temporarily lowered below the EDLP

level

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Going-rate

Firm bases its prices largely

on competitors prices

Must keep it the same or

change more or less than our

competitors

Pocket-sized video cameras –

prices are going to vary,

especially what specific

features the camera comes

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Auction Type

Tries to dispose of excess inventories or used goods

Flip does not do any auctions whether it is an:

English auction

•Flip would sell a product and our customers would

raise their bids until the top price is reached

Dutch auction

•Flip may propose pricing to many customers or vice

versa, one customer may ask for bids from Flip

Sealed-bid auctions

•Buyer submits one bid and cannot know the other

bids

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6. Perceived Value Pricing

An increasing number of firms now base

their price on CPV

Made up elements

•Buyer’s image of the product performance

•Channel deliverables

•Warranty quality

•Customer support

•Trustworthiness

•Advertising

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Perceived Value Pricing

Flip must deliver the values we

promised, and the customer has to

feel that we delivered them

We need to deliver more value than

our competitors and show this to

our customers

We really need to learn what our

customers need and how they will

go about choosing a pocket-sized

video camera

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6. Select Final Price

We need to take into account the brand’s quality and advertising relative to competition

We need to have high quality and high advertising

Price must be consistent with company pricing policies•Flip Camera brand does not have a pricing department •With a pricing department – we can develop policies and establish or approve decisions •We need to make sure that the salespeople make prices that are reasonable for the customer and profitable for Flip

Impact of price on competitors •How will our competitors react?

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Elasticity

•There is little elasticity with the Flip Slide HD because there are not many

products like it on the market

•Ergo, because of little elasticity, there has been no change in the

product’s price

•Because this camera has so many distinct and desired features it is

possible for the price to stay comfortably at $229.99

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Break Even Point

0

Sales volume in units (thousands)

Revenue (

thousands)

100

200

300

400

500

600

200 300 400 500 600

Break Even Point

Fixed Price

Total Cost

Total revenue

Total profit

“When management estimates how many units of the product the company will have

to sell to break even with the given price and cost structure”

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Initiating and responding to priceChanges/strategic option

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Customers will assume that the Flip SlideHD is not high in

quality

A low price cannot buy loyalty because the customer

would go to any other firm with a low price

Higher price competitors will try to match the lower price

A price war may be initiated – competitors will start to

battle it out

If we lower the price. . .

Initiating Price Increase

Delayed Quotation Pricing

•Flip would not set a final price until the camera would be

finished or delivered

Reduction of discounts

•Flip would no longer offer cash and quantity discounts

•However, Flip does offer bulk purchasing

Escalator clause

•Flip would require the customer to pay today’s price of the

camera ($229.99) and then all or part of any inflation

increase that occurs before the delivery

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Responding to Competitors’ Price Changes

How do we respond to our

competitions change in price of

their product?

We have a high product

homogeneity market

If this does happen, we would

have to try to enhance or change

our product to stay at our current

price, or we would just have to

reduce our prices as well

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5 things to consider doing:If you plan on competing with your competition:

1. Raise price and raise perceived quality

1. Maintain price and perceived quality

1. Partially cut price and raise perceived quality

1. Fully cut price and maintain perceived quality

1. Maintain price and reduce perceived quality

Flip would:

•Partially cut price and raise perceived

quality

•Not want to cut it so drastically where our

revenue is going to be severely reduced

•Not want to damage the Flip name and

product 34

Wrap-up

Phase One

• Service

• Continuum of Evaluation

• Categories of Services

• Types of Marketing in Service Industries

Phase Two

• Price Cues• Setting Price Policy

• Pricing method • Elasticity

• Break Even Point• Initiating and responding to price- Changes/strategic option

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