A Critical Review of Pricing Strategies for Online Business Models

Abstract

As the Internet grows rapidly, managers will face new challenges and opportunities in developing innovative marketing strategies to sell their products. What kind of pricing strategy will adapt to this dynamic market? How do online companies attract more consumers through new pricing strategies? These are the typical questions that an online business manager has to address. Most of the online companies go beyond simply presenting products and services on the Internet. They create unique ways of interacting with and selling to online customers. For example, Accompany.com created a simple concept: volume-buying, which links small buyers into groups to obtain volume discounts. Similarly, Priceline.com allows buyers to propose prices of airline tickets. We believe that a satisfactory buying experience will be one of the key factors for online shoppers in making purchasing decisions on the Internet. We know that online shoppers are more and more concerned with such important issues as security, service, and convenience. Hence, marketing managers must not only think about providing the best prices, they must also create a satisfactory buying experience for online shoppers. In this paper, we present seven business models in the cyber market. The common link between these eight models is that all of them employ unique pricing strategies that are uncommon in traditional business models. In this paper, we try to explore how various business models use different pricing strategies to affect consumers’ decision-making. This paper will help e-business executives to understand how online pricing strategy influences the success or failure of online business models. We start with a brief introduction of the major online pricing strategies. We then present a general description of each pricing strategy and explain how it works. Next we identify the advantages and disadvantages of each strategy. Finally, based on this analysis, we predict trends in online pricing strategies in the future.