This week in pricing: Subscriptions, disruptors and the bill for Brexit

Plans afoot to refund consumers for returning recyclable cans and bottles

Do small cash incentives drive consumer behaviour enough to improve recycling rates? Charging for plastic bags had an impact... but, maybe, that was less to do with the magnitude or economic consequence of the 5p charge and more to do with the heightened awareness a price point creates on the behaviour of asking for a bag. Being given money back for recycling is a different concept – one is a punishment, one a reward. I imagine that the monetary power of the reward will probably be less behaviour inducing than the friction caused by a penalty.
 

Are we looking at an 8bn bill for retailers from Brexit tariffs?

Almost £8 billion could be added to the cost of consumer goods, according to recent research by Retail Economics and Squire Patton Boggs. The question is whether these Brexit tariff costs will be passed on to consumers in the form of higher prices. Almost certainly is the answer. The impact will vary by category though, with some items (eg chocolate) facing up to 30% import duties. Not that it will be as simple as ‘chocolate attracts 30% therefore the price of chocolate has to rise”. I expect that the cost increases will be recovered where the price sensitivity is lowest i.e. the additional cost of chocolate will be recovered from a number of items in the basket. Either way, it will force retailers to think much harder about their pricing strategy as simple cost-plus just wont work.


Research Paper: Surviving and thriving in the Brexit era

Managing Brexit: What does successful price management entail


 

Disruption reaches estate agents: Purplebricks receives investment from Axel Springer

One of the last ‘agent’ style businesses is seeing its price model disrupted. Travel agents, insurance agents etc. have all had to deal with huge disruption but for a long time, estate agents hadn’t really moved from the traditional x% commission model. Now purplebricks latest investment round values it at £850m, which compares to market cap of Countrywide (the UKs biggest estate agency) of £211m. The fascinating aspect to this is that PurpleBricks entire business model is built around its disruptive price model – a flat and fixed fee regardless of outcome. Their price model removes uncertainty and allows them to claim significant savings vs a commission based approach. However, unlike commission, PurpleBricks charges you whether you sell or not, so in that case they would cost a lot more than a commission based approach (which would cost nothing). It proves once again that disrupting traditional industries is about more than just being cheap… you have to be different.
 

Youngsters picking paid Netflix content when it comes to TV

Who said, in the internet world, that paid media content would struggle? The BBC admitted this week that 16 - 24 year olds spend more time on Netflix than all BBC content combined (both iplayer plus linear). The corporation is having to drastically revamp its communications with this age group as they increasingly turn to digital content. And ultimately, it seems that price matters less than value – you can charge a price and still offer value for money, even in a world of free alternatives.


It's a product world: The evolution of the subscription economy