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Chapter 5

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Management Core
MGCR 331
Patricia Kirkpatrick

ECONOMICS OF DIGITAL GOODS chapter 23 ebookCost structureDigital goods have a very high cost structure The main cost comes from the first copy of the digital goods The distribution is easy The marginal cost of making the digital good is 0 Makes them vulnerable to being a commodity since its easy to distribute and reproduce The new entrants just need to sell it at a lower price because they dont need to worry about distribution cost Challenge1Make sure their product doesnt become a commodity 2How to make the most profit out of productStrategies1 Cost leadershipReduce average price by selling to the highest number of customers 2 DifferentiationHave a unique product Enhance your product Intellectual propertyDifferential Pricing as a strategy for challenge 2Will help to make the most profit 1Group pricing2VersioningCreating categories of productHighend versionslowend versions3Bundling 4Personalized pricingProviding discounts make special offers by studying the customers online behaviorCharge every customer according to his willingness to pay
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