Welcome to the Itemized Economy
Maybe it’s the Wal-Mart mindset, which has made us all cheapskates, or maybe it’s the Internet, which has made us all better shoppers. But in more and more industries, customers are demanding—and getting — the opportunity to buy exactly what they want and nothing more. In advertising, for example, customers of Google and Yahoo’s Overture Services pay only for surfers who actually respond to their ads. In 2001, before Google embraced pay-per-click pricing, it had $86 million in revenue; in the 12 months ending September 30, sales hit $2.7 billion. A la carte pricing is creeping into all sorts of everyday transactions, from 99-cent music-by-the-song downloads to $5 stock trades. Law firms are breaking out charges for partners and associates on their bills; and lawmakers ask cable operators why viewers can’t just subscribe to their favorite channels rather than a 70-channel package. At the same time, the rise of digitized content—plus developments such as online self-service—makes it easier for sellers to atomize previously linked goods. Instead of buying a year’s subscription to the New York Times for $481, you can purchase a single article from the online archives for $2.95. While itemization presents a huge marketing challenge, it won’t kill off the bundle completely. Rather, companies need to shift their focus. Customized bundles of higher value can replace standard packages, and for many customers, the right bundle of products or services is the best buy.