Pricing for maximum value

Posted on July 20, 2011

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Traditional media is based on an economy of scarcity. the limited amount of inventory to reach the audience drives up the price point and create an economy based on those who can afford the reach and those who cannot.

with online ad markets, the increase in inventory, has reduced the value of generic inventory. however the ability to segment and target inventory has created a new economy of scarcity by matching the right ad to the right user. while still in its infancy, the google model has thrown away the rate card and put in place an auction to allow customers to purchase inventory based on their marginal value and not on googles’s perception thereof.

these slides are based on MIT’s pricing course and look at EVC as the way to charge optimum pricing based on perception and utility value.

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Posted in: EODM course