Selling cheap is easy. Capturing a high price requires good marketing.


The Swiss marketing association GfM has been awarding prizes to the most ingenious companies in Switzerland for the past 30 years. In 2014 the prize went to Swisscom, the country’s top telecommunications firm. It joins former laureates Mobility Car Sharing (2013), Freitag lab AG (2012) and other past winners such as La Mobilière, Geberit, Mammut, Jura, Logitech, Betty Bossi and Sika.

Good marketing creates something that customers want and will continue to buy. The GfM prizes show that marketing is much more complex than a good advertisement or new packaging. The competition looks for companies that have innovative marketing strategies and strong media impact as well as those which contribute to the field of marketing through scientific research and practice. Companies whose marketing strategies are sustainable do particularly well; 29 out of the 30 winners since 1984 are still leaders in their markets today.

Marketing is incredibly important for the Swiss economy. The country owes its prosperity in large part to exports — goods and services which are produced in Switzerland and sold abroad. The Confederation is constantly faced with the fact that its international competition is playing on the same field but has lower costs. This is nothing new for Swiss companies, but the continuing strength of the franc (or weakness of the euro) has ratcheted up the pressure on them.


As a consequence, Swiss companies must offer their clients products which are consistently of higher quality in order to stay competitive despite their higher costs. This means Swiss companies have to be superior marketers to meet customers’ needs better than their competitors do.

Great examples are the Swiss watch makers, which have managed to remain leaders in their industry. Rolex, Omega and Patek Philippe represent Switzerland on the top of the well-known Interbrand ranking of the best global brands.


In the pharmaceutical sector, Swiss companies Roche and Novartis have long been major players, just like the world famous Nestlé and its brands Nescafé and Nespresso are in the nutrition market. Although there have recently been a number of challenges facing the banking sector, UBS, Credit Suisse and Zurich continue to contribute to Switzerland’s economic strength.

However, the country’s success is not only due to its big companies. High-performing cooperatives and numerous innovative start-ups have also helped Switzerland prosper.

Take Migros and Coop for example. These cooperatives don’t have to generate profits for shareholders. Their main purpose is to provide their Swiss customers with the best products. For its part, Raiffeisen capitalizes on its clients’ desire to have a close relationship with the bank. La Mobilière, another cooperative, wins its customers over with its high-quality insurance but also with great advertising. The cooperative Mobility brought a new, comfortable and environmentally conscious form of transportation to a segment of the population who wanted to be able to occasionally use a car but not own one.


While these well-established organizations fuel the Swiss economy with efficient marketing, new start-ups are also shaping Switzerland’s future and economy. And they are not only based in Zurich. An important hotspot of innovation is developing in the Lake Geneva region.

At IMD in Lausanne, for example, each year we organize a start-up competition. New businesses are supported by MBA participants who help them establish their business plans. If they are already at an advanced stage of development, we put them in contact with participants from the Executive MBA, who are tasked with putting the companies in contact with a team of venture capitalists from Silicon Valley, the global headquarters for innovation.


Can we conclude that Swiss companies are great marketers? Personally, I am deeply convinced. Where is the proof? Many large and medium-sized Swiss companies are successful despite their high costs. Investing in training and education is very important for companies. But in the end, it’s the ability to co-create more value with customers, to communicate this value, and to capture it with better pricing that makes a high-cost economy thrive. And that’s what I call marketing.

Stefan Michel is professor of marketing and service management at IMD and director of IMD’s EMBA program. He will also direct a new IMD “Global Leadership in the Cloud” program on pricing. For more information on this new program, please email

The L.A. Dodgers Disaster: A Landmark Pricing Stalemate Costs Fans Dearly

Wrapped up in the near year-round sport that is America’s game, pro sports fans outside the west coast may have missed the long-running nightmare in the L.A. TV market that 70% of local Dodgers fans would like to wake up out of.

Because of a unique sports programming pricing dispute (one in which service providers maintain the cost is too high and stick with it), most area Dodgers fans are feeling a different kind of blue after missing almost all of the six-month long 2014 regular season and now the beginning of the 2015 season.

So while NFL fans recently celebrated the league’s suspension of its blackout rule, Dodger’s fans were preparing for the very real possibility of not being able to watch their playoff team for a second consecutive regular season, with the best alternative being to change cable TV providers.

Everyone Loses?

How the heck did this all happen?

Let me recap as I’ve been following this predicament since its beginning. In 2014, Time Warner Cable (TWC) bought the rights to Dodgers’ regular season games from a regional sports network (RSN) channel known as SportsNet LA in a roughly $8 billion deal. The team owns the RSN.

As you might expect, TWC planned on selling the rights to carry the sports channel to pretty much any TV distributor to make its investment in SportsNet LA a wise one by letting Dodgers fans that used other service providers watch the Dodgers games.

Then, a not-so-funny thing happened on the way to the bank that frankly is unique (in breadth and length) given the rising costs of carrying live sports content that TV providers have said yes to for many years. Most everyone large and small said “no thanks” to TWC, claiming their prices were (and still are a year later) just too high.

Live sports-rich DIRECTV passed, as did Comcast, AT&T, Verizon, DISH, Cox and more. Despite pleas for an end to the impasse by the city’s mayor, fans, legislators and the FCC chairman, the situation continues with almost only TWC cable subscribers able to watch the Dodgers’ regular season games. And in an era where technology old or new usually offers palatable workarounds, there are none for Dodgers fans.

No Way Out

Because Major League Baseball allows its teams to cut deals with live game TV distributors – deals that carry a big price tag – whomever lands the coveted content must license it to other distributors or a large number of fans are left in the dark.

It’s not about technology here. It’s about business a.k.a money. Part of the problem is the league allowing teams to cut individual distribution deals. Though it’s not an apples-to-apples comparison at all, it’s important to note that in the case of the NFL, “live game distribution is arranged league-wide and not by the clubs,” explained NFL Spokesman Brian McCarthy. NFL fans should be thankful for that and Dodger fans likely already green with envy.

Over the Content Cliff

This is far more than just a cautionary tale for all members of the sports programming ecosystem. It’s far more of a wakeup call, Gatorade bath and ice bucket challenge all in one to those that think they can continually charge more for their product without damaging repercussions.

Forget for a moment that there is no end in sight here and that a report last week claimed this situation has cost TWC a whopping $1 billion already. The worst part for fans is that they are powerless in this dispute. They are faced with the choice of switching cable TV providers to TWC, watching the games after they are over or waiting for the small subset that are nationally televised.

And in a business trumps technology instance, the “blackout” extends to online streaming of the Dodgers games. And there’s no wireless solution for other Dodger fans.

Fear the Backlash

The seemingly constant increases in cable TV prices, thanks to swelling sports contracts, special fees and pay-extra channel and sports programming tiers are making life tough for fans, but perhaps easier for those who have little or no interest in competitive sports.

Many in this group have already bolted cable for sports-absent online TV services such as Netflix and Amazon with more expected to sign up for newer OTT services such as HBO Now, which is ultra sports-lite. Sony’s gaming console-accessed Vue doesn’t even carry ESPN, and sports comes extra (not standard) with DISH Network’s Sling TV service.

DIRECTV updated its statement on the TWC-SportsNet LA impasse Tuesday. It reads:

“With the new season now underway, we hope Time Warner Cable and the Dodger front office will compromise with the rest of Southern California’s TV providers so fans who want to see the games can have them without burdening everyone else with significantly higher fees.”

The move away from cable-TV like services is very real. Part of it is pricing and part of it is programming. Non-sports fans can find what they crave in far more places and at a lower cost.

With fewer subscribers remaining, live sports fan will likely have to shoulder an even heavier load of the cost increases that are often passed along to viewers. With SportsNet LA, most all significant cable companies, former telcos-turned-TV providers and satellite TV service providers all said enough is enough and said “no” to TWC.

Painful History Lesson

When a team or league ends up with a single TV distributor carrying the vast majority of its games, there’s not much technology can do as far as powering options for them to watch the live matches. In the case of SportsNet LA, additional carriers chose not to pay for the sports programming because of the price.

Combine that with MLB’s policy of letting teams cut deals with distributors in their local area and you can see how this truly regrettable, fan-unfriendly situation came about.

I hope TWC can find one or more major providers to pay some rate to carry the Dodger games and end the suffering of most of the team’s local fans. I don’t have answers, but I sure have sympathy for them.

Looking at this from a bigger picture perspective, sports fans have witnessed a unique milestone moment of which they can say “remember when the price of Dodger baseball was so high that fans missed nearly an entire season?” Let’s hope we can keep it at that and see this as a painful lesson to be learned from.

Cablevision Debuts “Cord Cutter” Packages Combining Broadband, Free Antennas, And Optional HBO NOW

Cablevision made headlines as the first pay-TV provider to offer HBO’s new standalone service HBO NOW to its broadband customers, and today the cable company is again targeting cord cutters with new packages combining internet, a free digital antenna, and the option to bundle in HBO NOW if they choose. The “cord cutter package” as one bundle is officially called, is one of two new offerings the company announced today – the other combining a slower internet option, the antenna and a Wi-Fi voice service.

Explains Kristin Dolan, Cablevision CEO, in a statement announcing the new bundles, “as a connectivity company, Cablevision is reimagining its relationship with its customers.”

Dolan adds that the packages are meant to provide “real alternatives that fit new consumer lifestyles.”

Specifically, the company notes that it’s going after “cord cutters” – those who are abandoning their pricy cable TV subscriptions, as well as so-called “cord nevers” – meaning those younger consumers who simply never sign up for cable TV in the first place.

The two packages initially sounds like they have relatively low price points compared with traditional cable TV bundles, as the bulk of the pricing is covering the broadband service (or broadband + phone service.)

In the cord cutter package, customers have Cablevision’s “Optimum Online Ultra 50″ internet service (50 Mbps down/up to 25 Mbps up) and receive a “complementary” digital antenna (the reliable Mohu Leaf 50) allowing them to watch over-the-air broadcasts without a cable box or pay TV subscription.

This is the first time Cablevision has ever handed out digital antennas like this to customers, we should note. Of course, Cablevision customers could have configured this setup for themselves before by dropping to a broadband-only package and buying their own antenna, but clearly the goal here is to simplify the process for those wishing to cut the cord as well as entice new customers with the promise of a free antenna.

The catch here appears to be in the fine print – the “cord cutter” service is $44.90 per month, but only for the first year. (We’ve asked for Cablevision to provide details on the next-year pricing, which was not immediately disclosed, and we’ll update with their response.) Plus, Cablevsion has tacked on a $4.95/month modem lease fee.

The second package, dubbed the “everyday low price” bundle, is less expensive at $34.90/month (not a promotional price). This includes Optimum Online Internet Basics (up to 5 Mbps down), Wi-Fi voice service, and the same free antenna. Both bundles also include access to Cablevision’s 1.1 million hotspots and the modem fee. The Wi-Fi phone service, however, additionally requires the purchase of a Motorola G smartphone for a one-time fee of $99.95 for access to Cablevision’s unlimited data, talk and text that comes without a traditional cellular plan.

Both packages also allow customers to bundle in access to HBO NOW for another $15 per month as an option.

Cablevision is not the first pay-TV provider to target cord cutters – earlier this month, Verizon also launched new TV packages that allow customers a la carte programming options. Here, customers initially get a slim package of TV channels that include the major networks and a few of the more popular cable channels (e.g. CNN, AMC, Food Network, etc.) and then add on as many other channel “packs” as they choose, which are grouped into genres like sports, kids, pop culture and lifestyle.

Verizon said its cheapest plan is $55/month and includes two channel packs. Additional packs are $10 per month. And customers can swap out packs as they like after having one for 30 days, which is a more flexible option that ever allowed before.

But while Verizon’s deal smartly targeted consumer demand for flexibility, it seemed to have failed to address consumers’ financial interests when it comes to cord-cutting. One reviewer even struggled to build a bundle that was significantly less than what he was already paying before the new option.

In addition to Verizon, Dish Networks has also been going after cord cutters with Sling TV, a streaming service that starts at $20 per month and lets you add on optional themed channel packs for $5 each, as well as HBO for $15/month. But Sling has experienced some growing pains, and may not be ready for primetime.

These moves come at a moment when the traditional pay-TV industry is having to compete with a shift in consumer opinion over the value of paying for cable or satellite television subscriptions.

But what’s funny about the cord cutting trend is that it may be – at least, right now – more talk than action. Some recent studies showed that, in reality, consumers were doing more “cord shaving” (making their pay TV bundles cheaper) than “cutting.”

And just this week, Nielsen said that cable subscribers who also have a subscription-video-on-demand service are more likely to drop that than they are cable TV. The firm stated that 93% of homes with both were more likely to drop broadband or their subscription video offerings, rather than their cable TV.

Another Look at Pricing Psychology Statistics

Another Look at Pricing Psychology Statistics

Price is always going to be a controversial issue for retailers, so we really don’t mind putting in new data whenever we come across it. Recent research shows that some of the most beloved of pricing strategies may be based on outdated pricing psychology. In other words, the magic is gone.

We have discussed at some length the seemingly infallible power of the number “9” in retail pricing in a recent blog post, so we won’t go into that again. All you have to take away from that is that “9” has a mystical ability to make items seem cheaper than they really are. This is particularly true in the U.S., where tax isn’t included on the listing price.

A USA Today article states that 90 percent of retail prices end in “9” or “5.” Add in the digit “0” and the total increases to 97 percent. However, the “5” and “0” were only thrown in to mix things up a bit. The truth is, anywhere you look online or offline, most of the price tags you see end in 9. Steve Jobs made millions for Apple by selling songs on iTunes for 99 cents.

However, 9 only works up to a certain point. Once your item sprints past the $500 mark, consumers will no longer be charmed into buying by simply ending it “9,” “5,” or “0”—that is, until you get to $900, at which point the spark briefly flares up until you get past the $1,000 mark. According to a Huffington Post article, only 25 percent of expensive homes had a list price ending in 9. But even at the 2-digit mark, the magic of 9 slowly fades away.

The $igns of the Times

A study performed by states that researchers at Cornell University found the inclusion or exclusion of the “$” sign before the price significantly affected the amount consumers spent at any one point (“$ or Dollars: Effects of Menu-price Formats on Restaurant Checks,” The Center for Hospitality Research, vol. 9 no. 8).

This explains how I’m always surprised when I get an à la carte meal from a fancy restaurant…

When customers at a café were presented with a menu with the usual “$” preceding the price, they spent X amount. When the “$” was eliminated, customers spent 8 percent more than X. Apparently, seeing the “$” sign triggered a pain-of-paying response. Customers perceived that the items for sale were more expensive than they actually are when preceded by the “$” sign.

Harvard Business School professor John T. Gourville went on the record in a New York Times article, saying that pricing success is all about the power of suggestion. There is a trend today where $5 (without the sign) appears to be replacing 99¢ as the new sweet spot, that price at which customers feel comfortable about paying without a second thought.

Rounded Numbers

A newer wrinkle in pricing psychology that affects the power of 9 is the use of numbers ending in 0, or rounded numbers. A report published in the Journal of Consumer Research (“This Number Just Feels Right: The Impact of Roundedness of Price Numbers on Product Evaluations”) indicates that consumers are now drawn to price tags with rounded numbers if they are making a purchase based on personal feelings.

Yes, that’s right: feelings. For example, if you are buying a tablet for your child’s enjoyment, you are more likely to buy one for $100 than if it was priced at $98.56. However, if you are buying the same tablet for office use (utility), you will be more likely to buy it at $98.56. Researchers believe that the five studies analysed in the report demonstrated the effect of the subjective experience on reason. In other words, people will make a purchase more often when the price “feels right.”

Does that sound a bit loony? Well, it’s probably not any stranger than the persistent perception that an item priced at $4.99 is $4 rather than $5. The difference is in the shift in customer preference. If you’re dealing in products that are likely to have an emotional value, e.g., stuffed toys, you could benefit from using rounded numbers rather than non-rounded prices. If you are selling office products, you can still stick to the tried-and-true “$4.99” model.

The report only confirms what the folks at were talking about more than a year ago. They referred to a pay-what-you-want download promotion launched by the developers of the puzzle video game “The World of Goo.” This promotion was put in place to celebrate the game’s first anniversary. There were 65,000 purchases worldwide, with payments pouring into PayPal ranging from one cent to $150. What was really interesting for our purposes is that fully 61 percent of the buyers chose rounded numbers (57 percent whole numbers, 4 percent with amounts ending in 50 cents). This appears to indicate that more consumers prefer to pay rounded numbers. It certainly makes balancing a checkbook easier.

The authors of the study also looked at how consumers tipped when paying a restaurant using their credit cards. The 9,000 credit card slips studied yielded 73 percent that showed whole-dollar tip amounts, with about 8 percent rounded to the half-dollar. There was also an observed tendency to tip in multiples of $5.

In cases where the bill did not end in a round number, about 25 percent of customers made the effort to do the math so that they could leave a tip that would bring their total bill to a rounded number. Data from 1,301 different self-service gas stations yielded similar results. More than half of the sales (61 percent) were rounded numbers.


These studies into customers’ price preferences that appear to contradict conventional wisdom may be attributable to the increased control that they have over where the meter stops. Self-service gas stations, credit card tips, and online commerce all turn the control over to the consumer, and the consumers are exerting it with a vengeance. Because rounded numbers are easier for the brain to process than non-rounded numbers, doing so just “feels” right.

Their preference for rounded numbers and elimination of currency signs may have been there all the time, but studying customer behavior has become much easier because the information is more easily obtained and analyzed.


It’s clearly important for online retailers to know pricing psychology. Overall, the oldies are still the goodies, because people don’t really change. In some aspects, however, conventional wisdom may have been just a little off when it comes to rounded numbers and the power of 9. Does this mean that we should totally nix our $9.99 offers? Not in all instances. It depends on the kind of products you are selling.

What matters is that we are constantly looking for updates that may affect how we do business, and pricing our products are service just right is an essential factor in e-commerce success. However, consider just nixing the “$” signs and see what happens.

How to Formulate A Premium Pricing Strategy

6 tips to earn the right to charge your customers top dollar.


Customers are constantly looking for ways to save money rather than spend more of it, so companies that position products in the premium price range may struggle. However, with the right formula, you can earn the right to charge customers more than your competitors do. If you’ve been marketing your products or services as low-cost options, it’s difficult to move up the price ladder without devoting significant dollars to aggressive marketing outreach and realistic differentiation between product offerings. The best approach is to launch products as premium offerings from the beginning–if that’s what your business model calls for–because it’s easier to mark products down (and nearly impossible to mark them up) once they’ve been identified with a specific price point.

Here are six factors that will influence your ability to establish and maintain your premium price position and reap the rewards:

Become a Premium Provider. Identify the features that would be considered high-end on the value scale, and then highlight those crucial elements in your marketing. Resist the urge to offer a basic service level or baseline product. Stick with the premium level of service if you plan to maintain your premium pricing strategy.

Define Your Value. Help your customers understand why your prices are higher. If you know how competitors are undercutting your prices, and you feel the competitors’ lower cost equates to poorer quality or service, explain this difference. In other words, don’t hide your price; instead, explain your value to the customer, and be prepared to demonstrate the ROI associated with your service or product.

Go the Extra Mile. You’d be surprised how many business owners declare they offer superior service simply because their people are friendly. Successful companies have more than friendly employees. They have employees who are so aware of customer needs that they anticipate them. I heard one business traveler’s tale about a trip to a Florida hotel. A member of the housekeeping staff at the hotel saw my friend approaching the elevator. While my friend was still 70 feet away, the staff member pressed the elevator button and held it open until he arrived. My friend was certainly capable of calling his own elevator, and the housekeeper obviously had other tasks to perform, but that simple act of doing something extra and waiting patiently for my friend to enter the elevator left such an impression that he offered the highest praise for the hotel to other business associates.

Don’t Sacrifice Price, Even When Times are Tough. Just explain why your product or service is worth the investment, but be a little flexible for long-time customers. Do yourself a favor, though, and make a list of the customers you are willing to be flexible with; then make sure your sales team is aware of which customers are on the list so they won’t be pressured to make snap decisions. Give employees freedom in dealing with customers, but make sure they know which customers are worthy of special treatment.

Don’t Play the Lowest Price Game. Weaker competitors are quick to cut prices to earn business. Don’t play their game. Many competitors will fail because they can’t generate cash flow to sustain this discounting strategy. Another disadvantage to playing the discount game is that this strategy is the fastest way to push your product or service into the commodity category. Select businesses have carved out a distinctive market by not discounting their products. The challenge is to create and sustain a brand that supports your premium pricing strategy.

Project Financial Stability. A colleague told me about his expensive dilemma. He needed to replace his entire home air conditioning system. He asked two local companies for estimates. The smaller, newer company, run by an entrepreneur, submitted a bid for $4,800. The more established AC company, celebrating its 30th anniversary, submitted a bid for nearly $5,300. While offering significant savings, the entrepreneur didn’t realize he was competing based on both price and permanence. The owner of the smaller business told my friend he couldn’t do the initial examination right away because his service truck was in the shop. My friend was worried that the 10-year warranty that both firms offered would be worthless if he went with the newer company. The entrepreneur would have won the business if he had projected more stability.

It’s natural for companies to focus on the weaknesses of their competition as a way to earn business. However, the true measure of a premium provider is a company that focuses less on what the competition does or doesn’t do and more on selling and delivering value to its own customers.

The $10,000 Apple watch – Worst practice for pricing consistency

You might wonder how the Apple Watch case relates to other topics of this blog. Taking into account that Apple is one of the most valuable brands on this planet, it is not exactly a startup. At the same time introducing the Apple Watch has been like entering a whole new market segment which presents them with exactly the same challenge as all other founders. The main question for them has been to figure out a monetization strategy for their new product.

Golden Apple Watch pricing off the rails

The Apple Watch editions

Given Apple’s former pricing philosophy it didn’t come as a surprise that the entry level product is priced at $350 which is north of most competitive offerings such as the Motorola Moto 360 ($249) and the Samsung Gear 2 ($299). The moment of collective speechlessness arrived when looking at the high-end gold version, which is priced at $10.000. I’m not to judge the design or the materials but purely the product pricing, which is off the rails. Pricing best practices dictate an anchor price which is set at a high, but not a ludicrous, level.

Comparison of price differences across product categories and companies


Historically high, but consistent price deviations for Apple products

Looking at Apple products, there has been a wide range of markups depending on the product category. When looking at the iPhone 6 Plus the highest-priced version has been 27% more expensive then the entry level product.

So far Apple’s highest price deviation has been a markup of 341% for the Mac Mini. Arguably this is due to  component prices which increase exponentially for high-end configurations.

Pricing consistency at its’ worst

Looking at the Apple watch, the Gold Version markup equals a 2,765% compared to the entry level version. Even the estimated cost for the gold materials of $1,200 cannot explain the markup since the product functionality is exactly the same as the one at a price of $599. Even so there might be a few buyers for this product one is wondering which customer segment Apple is targeting with this product.

Compared to any other Apple product family the Apple Watches are priced at the highest level of inconsistency.

Cross-industry comparisons | BMW & Vertu

For comparing I thought of two companies playing a similar role in their industries.

BMW as a car manufacturer of great performance and quality offers a high end version for most of their series. Looking at the 3 series there is an entry level product priced at about 30k EUR compared to the high end M version, which is priced at 72k EUR. This only equals a price markup of 143% even so the product performance increase is outstanding.

The BMW M3

Vertu as a luxury phone manufacturer has a product portfolio catering to the rich and famous. Even so their product innovations might not be outstanding from a technology angle, extraordinary materials and designs are giving the brand it’s edge. Looking at the price deviations the markups are ranging from 13% to 375% for different product families. The most expensive Platinum smartphone is priced at 52,000 EUR compared to the 11,000 EUR entry level product. Given their target group the price deviation makes perfect sense.

The VERTU Signature S Platinum

Take-aways for founders

Re-focusing on the pressing issue of new product pricing there are a few take ways from this case:

  • An out-of-this world anchor price ($10,000 in Apple’s case) will not boost the sales of alternative product versions, but only confuse other customers.
  • It seems that Apple apply’s pure markups to their cost base. In some cases this will lead to massive price inconsistencies. Make sure your prices within and across product categories are consistent.
  • For Apple even loyal customers will find the $10,000-price tag ridiculous. It remains to be seen how this will effect other product categories.