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Itunes Price Study

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CHAPTER 6- ANALYZING MANAGERIAL DECISIONS iTUNES MUSIC PRICING

MAUREN PIUCCO

Songs have different values to consumers. The category may be the same, which is music, but the sub-categories has many variations. Consumers value each sub-category different, which some people may give more or less value based on what type of music they like or if it is a new release or not. I do not know which one of these characteristics they should prioritize setting up price discrimination but I assume it could be implemented (the price differentiation) in order to maximize revenue since people would be willing to pay more for something they value more.

According to our textbook, there are several others pricing policies that can be implemented such as: * Block Pricing: A consumer might be motivated to buy more songs at once if more he buys cheaper it gets per song, for example. First song is 99 cents, second song is 98 cents and so on. People buy a lot from impulse and this strategy might explore this consumer behavior. * Two-part tariffs: consumers could pay a monthly fee to use iTunes, maybe a VIP membership for example, and then have advantages such as access to new releases first, special discounts and promotions, and then also pay per song. The company would have the upfront fee’s and also the per song fee’s. * Group pricing: the company could differentiate consumers providing different prices for different group of consumers for example. For example, like on cinemas or concerts, students could have discounted prices to be able to consume more and other groups might pay regular price. It can increase the demand of one particular group that has less resources and has been consuming less, increasing their buying habits therefore increasing revenue.

The risks of implementing such price differentiation might be that a new market like this would not…...

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