Lesson 3/Week 8: Pricing/Channels and IMC

On to the last two questions for this week.  First, how does Google utilize price and place to enhance the value of its offerings and why does their choice work well together?

For Google Fiber, their price point of $120 includes not only the fastest internet in the country, at GB/s speeds, it also includes the boxes that people need to actually receive the cable.  Sometimes, these can cost another $10/month or more with other providers.  I get angry now whenever I see the $59.99 cards in the mail for TV/Internet bundling.  This is because after you add all the fees (like HDTV access), taxes, equipment rentals, etc., it will cost more than Google and you get an inferior product.  People thus perceive a lot of value at that price point. 

Google utilizes place in this offering by going into markets that they feel they can capture a significant portion right off the bat.  Most cable areas are served by only one company, maybe two.  So Google has tried to focus on mid-size cities where it can potentially dominate.  That’s why Kansas City and Austin were chosen first.   They are large enough to provide enough customers to make the fiber build worth it.

For other products like Chromebook and the Nexus Smartphone, they have tried to bring prices down to make their products accessible to customers, and provide a contrast to higher priced Apple products.  Its primary channels are Best Buy, cellular retail stores, and Amazon.  With Amazon, the place enhances value because a low price for the Chromebook is reinforced by the convenience of ordering online.  Many times there is free shipping on Amazon, reinforcing a low cost strategy.

Last, we were asked about whether the company has a unique approach to communicating with their target audience and if that approach is well suited to other elements of their mix.  I think the company has a very unique approach to communicating with Google Fiber.  The process starts by working with the respective city to sign agreements to allow the building of the fiber network.  Concurrently, neighborhoods are hit with television and mail advertising, providing a window of time to commit to buying Google service.  In this way, they find out if the market will support the development costs before they incur high CAPEX.  It also causes potential customers to become marketers for the product, because if enough people do not sign up, the development is abandoned.  Those that really want it become recruiters for more customers.  It all causes more word of mouth and buzz.   

This approach is a good fit with the other elements of their mix.  They don’t launch unless it’s going to be profitable, but the price point is compelling enough that their direct communications work to create ‘pull’.