Tag Archives: elasticity

Does the Kindle Tell You Something About Your Pricing?

Economics, Technology,

While I tend to think pricing too low is one of the most common mistakes in small business, there’s still something to be said for finding the pricing sweet spot.

Sometimes elasticity works. For example, in Amazon says it has sold millions of Kindles This Quarter, Business Insider notes:

Amazon [says it] has “already sold millions of our all-new Kindles.”

That suggests that Amazon has sold at least 2 million of the devices this quarter, and perhaps many more.

That’s “more Kindles than we sold during all of 2009,” Amazon’s supposed rep also writes.

Which proves once again, I suppose, that pricing is still magic. If you search for  Amazon Kindle is overpriced on Google you get a flurry of blog posts and business pundits saying just that … but almost all of them from 2007-2009 when it came out at $399 and then sold for a long time at $299. Now that it’s down to $139, nobody is saying that.

In standard economics, elasticity has to do with price and volume: the more elastic a product is, the greater the increase in sales volume for every unit of decrease in price. Pretty obvious, right? But no, actually, at least not always. Some things are more elastic than others. Think for a second about cheap sushi, for example. Would day-old sushi sell well? How about discount dentistry?

And then there’s this: theoretically, to break even on the price drop, amazon.com has to sell 2.15 kindles at $139 for every one kindle they would have sold at $299.  What do you think? I think they’ve hit a price sweet spot, low enough to attract a lot more buyers. Also, I think there’s another factor in the equation, because those higher-volume Kindles get manufactured for a lot lower unit price.

What do you think? Does this tell you anything about your business?

The Really Simple Math of Social Media

Social media, Twitter,

Here’s a walk down memory lane. Those basic math properties we had to memorize in the seventh grade. chalkboard

Transitive Property of Social Media

This one is taken from the transitive property of equality, which, in case you don’t remember your seventh-grade math, is that if a = b and b=c then a = c. For social media that’s

If social media increases transparency, then it’s as good or as bad for your business as is having the customers see you better.

I kind of like this. In the old days, we saw the business as what its advertising agency and marketing budgets were able to construct for as its facade, also called brand. Nowadays, to the extent the business is operating in Facebook or Twitter, we get a better view. Is it still all corporate and snazzy and artificial?

People are discovering that they like the story and the people in the business, aside from its paid advertising. I’d like to think this helps real people, and small business, compete against manufactured images and big marketing budgets and large business. Fingers crossed.

Applied Elasticity in Social Media

According to Wikipedia, elasticity is the ratio of the percent change in one variable to the percent change in another variable.

According to me, elasticity in social media means that the percent change in the number of active social media participants will be matched by the percent change in the number of social media experts and social media coaches. So the active social media population will always be 50 percent social media experts and 30 percent social media coaches.

Oh-oh. Does that sound cynical?

(Image credit: Marc Dietrich/Shutterstock)