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Tuesday, March 22, 2011

2. SkinnyPrices "The Concept"



Have you ever been at a mall shopping, when you see something you like and say to yourself, "Wow…I really like this product but not for that price!" or “Maybe if I come back next week this product will be on sale or discounted.”This is the common pain point SkinnyPrices has resolved.


Pricing strategies are as old as time but the standard practice of pricing hasn't changed much over the years. Generally, a manufacture will design and produce a product. Then they will do market research, on what the market will bear and also compare it to pricing points of similar products in the market. Manufactures will then recommend a price. The M.S.R.P. or manufactures suggested retail price.


When it comes to pricing typically both the seller and the buyer are usually unhappy. The seller typically thinks they could have charged more for their product and the buyer usually feels they paid too much. This leaves both wishing for a better model.


New pricing innovations can have drastic changes in the market place. One example of this would be the advent of eBay with its online auction system which has led them to a current market cap of 39 billion. Another example is Priceline with its patented innovative "name your own price" strategy which has propelled it to a market cap of 22 billion. As you can see pricing innovations can be a real game changer. 


SkinnyPrices has created a patent pending business method that changes the way people shop for products in an online market. When you shop on the site, the product starts at the M.S.R.P. and slowly lowers in price as you stay on the website. Any time a user feels that the product is a good value they can purchase the product, but if they wait too long another user may agree that price works for them and purchase it first. This competitive shopping environment makes for an exciting shopping experience while also finding an acceptable pricing point for products. To participate in the benefits of this unique pricing system the users will also have to be willing to view a 30 second video advertisement every 6-9 minutes.


What makes this all work is the delicate balance of keeping the correct ratios of # of users vs.  # products vs. # viewed commercials. Too few products to the user ratio and it would make it too difficult for users to successfully purchase products. Too few commercials to user ratio and the prices would decrease too slowly to keep users interested. Too many commercials and the users would get aggravated and leave the site.


Our patent pending business method (algorithm) addresses these problems and leads to a successful new online market place. This type of new pricing model will be referred to as SkinnyPricing.


Definition:

SkinnyPricing: An online market place where users compete to make purchases on products that decreases in price in direct ratio to users willfully viewing advertisements.


This business model allows SkinnyPrices to have two income streams. There will be a profit margin on the advertising dollars, along with the profit margin between the wholesale price and retail price. The exciting proposition is that we essentially will be selling all our goods at M.S.R.P. and are not in a “race to the bottom” pricing model like typical online retailers.


It doesn’t matter what price the product sells for SkinnyPrices will always make a profit. Even products that drop to zero dollars still allow SkinnyPrices to make our standard profit margin. This just meant that enough users had viewed commercials to bring that product all the way to zero dollars. It was the advertising that has off set the price.


In addition to being an effective pricing model advertisers will also benefit. Advertisers have been looking for new mediums for video advertisements as more users are Digital Video Recording (DRV) shows and fast forwarding through the commercials. Hulu incorporates video commercials but lacks any kind of feedback. Other advertising media is textual based like Google Adwords. Our advertisers will love that users are willfully watching the advertisements because they understand the concept that by them watching the advertisement they are directly lowering the cost of the products. So like television gives free entertainment of shows by having users watch commercials we give great value on products by having users watch commercials.


The site will also incorporate either a security question to verify that users have viewed the advertisement. (Ex. What color was the car in the Ford commercial?) Or a feedback question (Ex. Do you like Ford cars?). This will give advertisers the ability to verify the viability of our service or give them insightful information that they would love to gain from users. SkinnyPrices will also start to build demographic information on its users to increase the CPM rate for advertising dollars. In an example of this we could offer users that they don't need to view a commercial for 30 minutes if they tell us what their career, interests, or income level is.


The other very exciting benefit to this business model is the scalability. We can keep starting costs low and start with drop-shipping our products because we are not in the standard model of competing on price. SkinnyPrices will not need to buy large orders of products to drive down our wholesale costs. We can slowly take on inventory as we grow and become a bulk purchaser at the appropriate time.


Another option with this business model is to set it up as a platform. So instead directly selling products ourselves we could facilitate using our pricing model as a platform for sellers just like an eBay or Amazon does. 


We would be a first mover with this exciting new business model which affords us the benefit of market penetration and brand awareness. With our patent pending status we would create barriers to entry for competitors. Our copyrighted and trademarked terms would rank SkinnyPrices in the highest search results for this new business concept.


To stay ahead of competitors, in the platform model, we would set up key contracts with sellers which would make it difficult for competitors to steal those relationships if they were able to get around our patents. 


This outlines the basic concept of SkinnyPrices. We are very passionate about our business method and are willing to answer additional questions for those that express interest in learning more about how we are going to be a game changing market mover. Thank you and have a great day. 


Here is my first drawing of my logo on a white board.

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