Tuesday, March 31, 2009

Quadrant #4: Explicit Time + Explicit Space

Advertising
Industry website: http://www.knowthis.com/tutorials/principles-of-marketing/advertising/1.htm

Industry overview:

Companies in the advertising industry control pricing by explicitly defining the rates and amount of space for ads shown. Rates differ based on ad specification such as 728x90 leaderboard or billboard, type of industry, day of week, form of advertisement, and region. Though there are many different forms of advertising from online to print to video, the pricing scheme holds true for all. Companies are able to leverage the space of their content and price advertisements accordingly.


Four industry examples:

Google AdWords (http://adwords.google.com)

Google AdWords allows all interested parties to advertise their product/service throughout Google and its advertising network. Though advertisers decide how much they want to spend, the company informs advertisers that they only pay when a user clicks on their ad or their ad receives an impression. The cost per click and impression varies based on the popularity of the keywords for the ad. In addition, the amount of time an ad appears depends on the advertiser's daily budget. Once the daily budget runs out, the ad will no longer show.



New York Times (http://nytimes.com)

The New York Times offers advertisers various forms of media to utilize, ranging from newspaper to magazine to online. The company defines rates by industry category, ad specs, region, and whether the ad is to be shown during the weekday or weekend. For example, the New York Times charges performing arts advertisers $755 to run a 1 page, nationwide weekday ad. According to the New York Times, 71% of its magazine readers have taken action in response to the ads they have seen in the magazine.

Example of rates: http://www.nytimes.whsites.net/mediakit/pdfs/newspaper/rates/2009/RateCard_A&E09_EW3.pd

San Jose Mercury News (http://sjmn.theadwizard.com)

The San Jose Mercury News offers print and online advertising. Advertisers can choose whether to advertise only online or both online and through its newspaper. Private parties can also advertise their events through classified ad listings. Prices for ads range based on ad specs, day of week, and industry. The San Jose Mercury News offers different pricing for retail, national, and national-telecom.



NBC.com (http://nbc.com)

NBC.com offers a unique form of advertising as the company heavily promotes the usage of video advertisements. Advertisements can be shown either on the nbc.com main page or within commercial breaks of online episodes. NBC charges for its video ads based on cost-per-impression, the duration of the ad, and the specific show that the ad will be seen. The company charges higher rates for more popular shows such as 30 Rock and The Office.


Quadrant #4: Explicit Time + Explicit Space

Shopping Malls
Industry website: http://en.wikipedia.org/wiki/Shopping_mall

Industry overview:
Companies that own retail property sell their space and time explicitly. Retailers that want to rent space need to sign leases for a specific amount of time and pay for space according to square footage and type of product/service. Contracts range from short-term leases with a minimum of 3-6 months to long-term leases. Costs for space also depend on the desirability of the location within the property. In addition, space for kiosks and carts are available to rent.



Four industry examples:

Westfield Group (http://westfield.com/uscentres/?redirect=no)

The Westfield Group owns and operates high-quality shopping centers in the United States, Australia, New Zealand, and the United Kingdom. The company is the world's largest listed retail property group with 119 shopping centers, valued at more than $60 billion. Westfield manages every aspect of shopping center development including design, construction, management, and marketing. Around 23,000 retailers have stores in the company's shopping centers. Westfield prices space by square footage and duration by number of months and years.


Dubai Shopping Malls Group (http://www.dsmgdubai.com)

The Dubai Shopping Malls Group currently owns 35 malls throughout Dubai. Under the guidance of the Dubai Economic Department, the group was formed to leverage marketing initiatives and provide better service to customers. Malls in the portfolio include Souk Madinat Jumeriah, Century Mall, and Palm Strip. Dubai Shopping Malls Group prices space and time explicity. The company charges by square footage and the number of months and years.


Chelsea Property Group (http://www.cpgi.com)

Chelsea Property Group is the world's largest owner, developer, and operator of upscale outlet centers. The company's portfolio currently consists of 49 outlets in the United States, Japan, Korea, and Mexico. At the end of 2008, 99% of the company's retail space was leased, generating same space sales of $513 per square foot. Chelsea Property Group bases its pricing by the amount of square footage and lease duration.


Takashimaya Co. Ltd. (http://www.takashimaya.co.jp/corp/english/index.html)

Takashimaya Co. Ltd owns a Japanese department store chain with outlets in Japan, Singapore, Taiwan, Paris, and New York. The department store carries a wide array of products from apparel to cookware to wedding dresses. For 2006, Takashimaya was listed as #1197 on the Forbes Global 2000 list. Takashimaya defines prices explicity based on square footage of space and the duration of leases.

Real Estate-Housing (Explicit space, Implicit time)

http://en.wikipedia.org/wiki/Real_Estate
Real Estate housing sells explicit space (square feet) and implicit time. The purchasing price differs according to the size, ambience, location, and quality of the space. Once the house or building (permanently affixed to the land) is purchased, it is up to the buyer how lond he/she will hold on to the property. The buyer can sell it after a year or keep it forever. It is relatively hard for the real estate company to control time.

1. realtor.com
http://www.realtor.com/
Although people are paying according to the size of the space, space division also affects customers' decision of purchase. For example even though the size of the space is same, one could look for 1 bedroom with a bathroom and a large living room, whereas another might look for 2 bedrooms with 2 bathrooms and a relatively smaller living room. Realtor.com asks customers their desired space division and ease the selection process.


2. apartments.com
http://www.apartments.com/
Other than size and division of the space, there are many factors that affect customer purchase. For example, types of housing, apartment amenities, and community amenities could be important factors for customer decision. apartment.com offers various characteristics of housing for easier housing selection. Although it is hard to control time they are differentiating from competitors by providing more accurate space selection.


3. Century21.com
http://www.century21.com/
Here is another example which give various choice of factors that might affect customers decision. Factors includes proximity, price range, size range, space division, type & style and other features. The customers not only pay for the space but also for their selection.


4. Craigslist.com
http://www.forrent.com/
Unlike house purchasing, house rental sell explicit space and explicit time. It specifies certain amount of space and the duration for rent. University housing is a good example. The duration contract of housing rent is normally a year. As space gets larger and duration gets longer the price goes up. A better way to manage rental space could be sublets. If a customer already paid full rent for the months but won't use the space for two weeks, he can sub-lease the space to another person so that he can better manage his cost.

Quadrant #3: Explicit Space + Implicit Time

Landscape Architecture (explicit space, implicit time)

Industry website: http://www.laprofession.org/practice/process.htm
Paragraph overview:
  • The process of landscape architecture involves numerous processes. Depending on the scale of the project and type of customer, a landscaping service can be completed in 2 hours or two months; processes on the part of the landscape architect range from site analysis to feasibility studies to completing a master plan; clients vary from residential homeowners to commercial companies to industrial enterprises. With landscaping services, the possibilities are endless. Landscape architecture fits in the category of explicit space and implicit time because landscaping services are typically provided to a client based on their explicit space specifications, but time is implicit since plant growth is taken into account as well as changing artistic vision between the client and architect.



4 companies:
  • ServiceMagic (http://www.servicemagic.com/rfs/aboutus/howItWorks.jsp)- This company is an intermediary in the distribution process of contracting. It connects homeowners to prescreened service professionals, who then negotiate further with clients. How it works is that a customer searches online for a contractor and finds ServiceMagic. The customer then fills out an online interview with project details. ServiceMagic matches the customer with a landscape architect bases on the project details, and sends the request to up to 4 architects' e-mails and cell phones, and the customer selects the right professional. This company manages space and time uniquely because it allows the customer more control of the space requirements through the initial interview, and allows architects to evaluate their own time requirements to see if they match with the client's desires.


  • EDSA (http://www.edsaplan.com/)- EDSA's expertise is evident in their portfolio of completed projects around the world. This firm focuses on serving larger clients such as resort destinations, residential communities, urban redevelopment, and corporate campuses.Team leaders collaborate across distances with a keen attention to detail, which enhances the quality of the project. This company uses this attention to detail and its elaborate portfolio to leverage its use of time: "We keep our clients goals on the forefront and a defined yet flexible end-point on the horizon." By letting clients know up-front that time should be flexible, it allows EDSA to maintain more control over the end-date.


  • Private Landscape (http://privatelandscape.com/)-Private landscape is in many ways a standard landscape architecture company in which the customer designates a specific space, and the project is completed during a certain range of time. However, as this firm works with many smaller customers (residential), customers usually prefer exact end dates. To contribute to the concept of implicit time, Private Landscape offers maintenance service, which allows their services to be ongoing, with an intangible end date.


  • Chamberlin Landscape Online Design (http://www.chamberlinlandscape.com/design.html) - With Chamberlin Landscape, the services offered are twofold: The designers of the company use site maps of your property to design a landscape; they also offer consulting services to help customers evaluate bids from architects as well as ideas for the site design. The company makes a unique use of space in that the site is evaluated online and the original design is also done through the internet. Chamberlin Landscaping offers the latest in Internet Landscape Computer Imaging 3D Modeling and C.A.D. Because of this service (plans submitted and altered through the internet), they charge for their internet services by the hour. More advanced CAD design gives more time flexibility (basic drawings are by the hour, more detailed drawings are sold for a "Max designer time of [x] hours").



Cab/Taxi Companies
Industry Website: http://premium.hoovers.com/subscribe/ind/fr/profile/basic.xhtml?ID=187
Paragraph overview:
  • Taxis or cabs are a form of transportation that give the customer the most freedom in space--they allow customers to get from one distinct location to the exact location that they desire to go.While this is customer-specified space in terms of what the customer is purchasing (exact locations), the cab company has control over the atmosphere in the vehicle, or generally the "space" of the vehicle itself. Time is implicit; A customer knows where he or she wants to go, but not how long it will take to get there. Taxis transport customers after being dispatched as per customer request or reservation.Taxis also pick up passengers that hail them on city streets or taxi stands.

(above) - a meter in a cab


4 Companies:
  • New York City Taxi and Limousine Commission (http://www.nyc.gov/html/tlc/html/passenger/taxicab_rate.shtml )- New York City yellow cabs are known for their enforcement of regulations in regards to rates, so customers are loyal. NYC Taxi uses revenue management to optimally set prices so that their drivers do not feel the need to break regulations and set their own prices. Not only is classic taxi rate-setting used (per mile), there are also price changes to account for heterogeneity in the transportation process. For instance, units are measured in miles if the cab is going at a certain sustaining speed, but the units are measured in minutes if the cab is stopped or is traveling at under 6 miles per hour. Also there is a surcharge for late-night and early-morning travelers who are more price inelastic (at these times in NYC, public transportation is stopped or slowed greatly, so a cab may be their only option).


  • Regional Transport Office (Chennai, India) (http://www.tn.gov.in/sta/vehicles.htm#Autorickshaws and http://www.expressindia.com/latest-news/why-autorickshaw-rides-cost-a-fortune/405514/)- The Regional Transport Office in Chennai, India, supplies permits to the many drivers of autorickshaws. While autorickshaw drivers are required to put meters in their vehicles, this city (as well as several others in India) is known for lack of enforcement of regulated fares, and what leads to a bargaining between customers and drivers. Although the drivers there are known to be among the worst in the world (in terms of arbitrary and illegal fare hikes), the root of the problem seems to be a revenue management issue. The problem is that government regulated fares are so low per kilometer that if using mandated fares a driver makes very little for the distances driven. Not only could fares be increased, but methods could be instituted to legally charge higher fares during busy times of the day or in traffic, or charging a base fee.


  • VIP Taxi (Moscow, Russia) (http://www.vip-taxi-moscow.ru/en/ and http://english.pravda.ru/society/stories/01-10-2008/106508-moscow_luxury_taxi-0)- VIP taxi makes the most of the space that it does have control over--the car itself. This company has recently begun offering its services to wealthy Muscovites. The service has only luxury cars in its car fleet - Maybach, Rolls-Royce, Maserati and others. The choice of a luxury car depends strictly on the amount that a passenger would be ready to spend for a ride, Newsmsk.com reports. Since the company does not have much control over space, and time can be uncertain, and the cost of the vehicle needs to be considered, the way they charge is per hour. Instead of a meter that measures distance, their units are time.


  • Ithaca Cab Company (http://www.ithacataxi.biz/pricing.html)-The City of Ithaca has a fare structure which divides the city into "zones". Therefore the fare you pay is dependent on the zones in which your travel will take you within the city limits of Ithaca. This structure therefore does not require the use of a taxi meter to determine fees. Customers can obtain price lists online if they are traveling outside of the city of Ithaca, but will remain in Tompkins county. So pricing is based on distances from dispatch, since most passengers call ahead rather than "hail" cabs in Ithaca, NY.



Moving Companies (Explicit space, implicit time)

http://en.wikipedia.org/wiki/Moving_company

Moving companies sell explicit space but implicit time. Normally, customers pay according to the size of the truck but not neccessarily to the amount of time needed. Moving companies have great possibility of implementing revenue mangement, by assessing the space usage and expecting the travel duration from departure to the destination. Also, the firm can consider diving space usage if there are couple of people going to the same city or town but have only a few stuff to move.

1. U-Pack Moving
http://www.upack.com/lp/moving.asp?r=m01100&refnum=googlemv&c=G%2FMOVING%2FUS&g=E%2Fmoving+companies&m=exact&k=moving+companies&ad=2752562686&gclid=CLL-qde9zpkCFRUhnAodEg8PuA
U-pack move is cheaper than other companies because fuel charge is already include in the price and there is no hidden fees or surcharges; customers just pay according to either the space of the truck or the size of the residence. The customer pack, load, and unload their belongings. Therefore, U-Pack save time by limiting the service. They do not spend time helping customers pack and move stuff. All U-pack does for the customer is driving to the destination. Below are their pricing catergories:

Studio Apartment
1 Bedroom
1 Bedroom plus
2 Bedroom
2 Bedroom Plus
3 Bedroom
3 Bedroom Plus
4 Bedroom
4 Bedroom Plus
5 Bedroom
5 Bedroom Plus
5' * 10' Storage
10' * 10' Storage
10' * 20' Storage



2. U-Haul
http://www.uhaul.com/
U-Haul Differrentiates their space (which customers are paying for) by following factors: 1) they have the most capacity in the industry, which mean the customer can load more boxes if they chose U-Haul over the competitors. 2) deck height is lower than the competitors so that the customers can load their possessions right from their house, while competitors' truck professionals at a loading dock. 3) they have lower and wider ramp which will let the customers move their possession to U-Haul truck more easily. They have duration limit according to the distance but their price only changes according to the space unit. Below are various truck sizes.

10' truck (apartment)
14' truck (1-2 bedroom)
17' truck (2-3 bedroom)
26' truck (4+ bedroom)

3. 123 Movers
http://www.123movers.com/form.asp?s=packing&z=14850
123 Movers have unique way of setting price. While the majority of moving companies charge price according to the size of their trucks, 123 Movers is asking the estimated weight of the possessions. Below are the way they categorize the price:

partial house. under 2000 lbs
Studio. 2000 lbs
Studio. 2450 lbs
1 Bedroom. 2940 lbs
1 Bedroom. 3850 lbs
2 Bedroom. 4550 lbs
2 Bedroom. 6300 lbs
3 Bedroom. 7700 lbs
3 Bedroom. 8750 lbs
4 Bedroom. 9800 lbs
4 Bedroom. 11200 lbs
Over 11300 lbs
Office Move

4. Moishes
http://www.moishes.com/specialRates.asp
The customer can get a special offer if his/her move date is flexible. Every month they have pre-determined dates with special rates and sales for move. Customers can get a chance to schedule their move and and save hundreds of dollars. Although other companies decide the price for the customers, Moishes lets customers to control price by frequently checking special offer dates. Also, Moishes controls time by setting moving start time for each special offer dates.

Monday, March 23, 2009

As we have alluded to in class, Broadway theaters have started to recognize the impact of revenue management pricing. Some of the characteristics of the theater (such as fixed capacity, perishable inventory, and variable demand among others) make it an ideal setting to implement differential pricing.

Ideally, each seat in a theater would be priced according to the demand of that seat. However, more practically, rate fences are developed to create variable pricing across broader customer segments just as in other industries that work with revenue management. Students can be priced differently, prices can change depending on how far out the tickets are purchased, tickets can be priced based on weekend/weekday shows. The possibilities are just as extensive in the theater industry as in the hospitality industry.