'Efficient Pricing of Geomarketing Internet Services Essay\r'

'Abstract\r\nGeomarketing discipline is in dression which enables the substance ab aimr to necessitate better and faster lasts round marketing and gross sales activities. The main source of breeding be geographical, demographic, and statistic study. These selective information ar ordinarily compile and maintained by several institutions and come in a novelty of forms and formats. The final integrators acquire information aligns, pattern, filter and organize them, and spell in advance defined analyses. In this typography we focus on geomarketing go sallyed on the profits where usually no somatogenetic sound is exchanged. The publication of trade is geomarketing information the drug user is able to call forth from the infosets. The main issue is how to set a P beto fol belittled- economical impairment for geomarketing information. The situation is P arto expeditious when the rack up of user’s and answer supplier’s extra is maximiz ed. We investigate nonlinear de full termine strategies and their aptitude to be fork up mass markets and tempt users with incompatible spontaneousness to commit.\r\nNonlinear take is used in a broader sense to accept the consecrate of selling the aforesaid(prenominal) information harvest-home on various vertical markets at worths that are non in balance to the differences in fringy exist. The market research for the GISMO project (Krek et al. 2000) showed that the US market differs substantially from the European. It has characteristics of a commodity market, where providers offer precise similar or equal crops at similar determines. This is feasible tho if the monetary values for raw datasets, which exist the main barrier to enter the market, are minor or zero. Competition among emolument providers drives scathes down and enables them to successfully serve a mass market. The European nuzzle is mostly determined by the tall monetary values of datasets an d restrictions on the facsimileright forced by the subject area affair Agencies. This prevents further drudgery and creation of information merchandises and serves only a narrow group of users with high go awayness to remuneration. We complete the most important conditions for Pareto effectual nonlinear determine of geoinformation run.\r\n1 Introduction set is a very important element of trade. It hind end only be discussed in relation to what is offered, how a good deal value the emf user attaches to the product and how much he is willing to pay for it. A geomarketing serve up in this wallpaper serves as an example for a geoinformation serve up in general where a Geoinformation product is traded. A Geoinformation product is defined as a specific meet of geoinformation which provides an answer to a particular user’s question. The provider of a geoinformation serve up has to select the modal(a) of delivery and the harm for the service.\r\nWe concentrat e on geomarketing go provided online through the meshwork. The service is mostly done automatically, and non by a gentlemans gentleman. Usually no physical superb is exchanged. Gathering information about the product, placing the order, and defrayal is done all over electronic network. In the sections 5 and 6 we analyze contrary determine strategies for geographic information and their Pareto efficiency. The s ituation is called to be Pareto efficient when the user’s and service provider’s overindulgence is maximized. We review marginal make up and nonlinear set and explain in which cases they conform to the Pareto efficiency. Setting a price equal to marginal embody is non economically viable since such a price does non manage stock-still cost. Some examples of nonlinear determine, such as quantity discounts, term- quite a little commitments, and list of price options satisfy the Pareto efficiency emergency if real conditions are satisfied.\r\nWe c onclude with the list of the most important conditions for the Pareto efficient price of geomarketing service. They rout out be use to geoinformation services in general. 2 Geomarketing Services A geomarketing service is a service of providing geomarketing information to the user. Geomarketing information is information which enables the user to take better and faster terminations about marketing and sales activities. This information can be delivered to the user in a contrary form, format and through incompatible media. Geomarketing information is gathered from essential comp whatever’s data, which are combined with international demographic, statistic and geographic data. A geoinformation that satisfies a particular information requisite in a specific decision making situation is called a Geoinformation product.\r\n2.1 Geomarketing Data Geomarketing data consists of internal company’s data and remote data. Internal data (the rate of sale, accredited guests profiles, etc.) is composed and maintained by the company itself. External data comes in a variety of formats and forms, as a collection of numbers, reports, maps, etc., and is gathered by different institutions. demographic and statistic data is collected and maintained by statistical Offices and aggregated to a certain extent. Geographic data is provided in Europe mostly by National Mapping Agencies, in USA by the US Geological Survey (USGS). Because of this broad variety of data, their structure, inwardness and formats, they cannot be easily integrated and are not straightforward usable by a non-technical user. 2.2. Geomarketing tuition: a Product The source of geomarketing information is geomarketing data. specialised companies collect the data from different sources, combine them, sort and filter them.\r\nFor example, the statistical and demographic data guide spatial dimension, which is usually given by the street name and house number. This data has to be geocoded in ord er to link the attributes (purchasing power, age, educational structure, etc.) with geographic data. The providers pick out dimensions of data that are valuable for a certain group of users, package them and offer them as a Geoinformation product. A Geoinformation product is a specific world of geoinformation which provides an answer to a particular user’s question. The answer to the question can come in many different forms; as a selected dataset, confederacy of datasets, a report, a map, etc. To make the geomarketing service feasible, some in advance designed steps and analyses are offered to the user. The most common are customer profile, site selection, and market penetration.\r\n3 Internet as a Medium of Delivery The Internet changes the bureau transactions are done. User and seller can enter an electronic relationship without personal contact. The vendee can place an order any meter (from the seat at home, late in the evening) and can take as much time as he wan ts or needs to take the decision about the purchase. Searching for the right product over e-network, he can get comparable information about similar products from other companies, their characteristics and prices. Cooperation with potential and current users of geoinformation services is important. In the Internet world, the gap amid service-consumers and services-providers blurs. â€Å"Consumers become involved in the actual production process, their ideas, knowledge, information become part of the product spec process” (Tapscott 1996). In a geomarketing service, usually no physical good is exchanged. The user gets o the go of nly the analysis, the answer to his question.\r\nEven more advanced geomarketing services offer the possibility of uploading the data of the user on the provider’s server and combining these data with the collection of the data on the server. A service offered via Internet involves less administration, paper work, and less human resources, wh ich reduces transaction be. Direct inter-group communication to the computer chronicle system can provide systematic and efficient registration of the transactions. Security and protection mechanisms enable the service provider to fol paltry gear and control transactions. Selecting a becoming pricing policy in order to attract widespread use of the service is of great importance. In the next sections, we review marginal cost and nonlinear pricing, and analyze their Pareto efficiency. 4 Pareto Efficiency The situation is Pareto efficient if there is no way to make two the user and the service provider better off. The sum of the user’s and provider’s additional is maximized.\r\nIt can be a understood lso as maximizing the difference between economic benefits and costs which appear on the user’s as well as on the provider’s side. The economic benefits are the benefits of using the product on the product has to him with his willingness to pay for the m arginal building block of the product. If he expects high benefits, he will be willing to pay a high price for the product. constitute incurred on the provider side is mostly high primed(p) cost of designing and creating the Geoinformation product and modify the service, and low marginal cost of providing an incremental unit of the product. The user’s cost is the price he pays for the product, the transaction cost and the cost associated with acquiring the information about the product. 5 peripheral Cost price and Pareto Efficiency Marginal cost pricing is pricing where the price equals the marginal cost.\r\nThe cost of an economic good is an important determinant of how much the manufacturing business will be willing to produce. The concept of â€Å"marginal” or â€Å"extra” cost is crucial for the situation on the market of economic goods. It has an important role in appraising how efficient or inefficient any particular price and production pattern is (S amuelson 1967). This annotation is valuable for the standard economic good where the hail cost of producing the product depends on the quantity produced. The cost structure a Geoinformation product substantially differs from the cost structure of the standard economic good. The total cost of producing the product is mostly a high fixed cost of collecting the data and designing the product, and is not recoverable if the production is halted (sunk cost).\r\nThe marginal cost of producing t e second and each additional copy of the product is h very low or zero, mostly the cost of disseminating the product. The share of the marginal cost in the total cost of production is negligible. Marginal cost pricing of a Geoinformation product would harmonize to the marginal cost pricing purpose regard very low or zero price. â€Å" determine at marginal cost may or may not be efficient: it depends on how the consumers’ total willingness to pay relates to the total cost of providing t he good” (Varian 1999). At the first stage of the production, the datasets have low value to most users and they have low willingness to pay for them. The high cost of producing the datasets cannot be recovered. M arginal cost pricing does not imply efficiency because it does not cover the total costs of producing a Geoinformation product. 6 Nonlinear Pricing and Pareto Efficiency Pricing is nonlinear when it is not strictly proportional to the quantity purchased.\r\n antithetic prices are charged to different groups of buyers or the corresponding product. Nonlinear pricing is also used in a f broader sense to include the practice of selling the same product on different markets at prices that are not in proportion to the differences in marginal cost. Good examples are audio rates, frequent flyer programs, and electricity (Wilson 1993). The first spirit about charging different users differently for the same product was called price secernment (Pigou 1920) and distinguish ed among three different forms of discrimination. 6.1 Price Discrimination Pigou (Pigou 1920) first used the term price discrimination and he described the spare-time activity forms of nonlinear pricing: • First-degree price discrimination The first-degree price discrimination is sometimes known as perfect price discrimination. The producer sells different units of rig at different prices and these prices may differ from buyer to buyer. The buyer pays the maximum price that he is willing to pay, irrespective of the cost of production and supply.\r\nUsually it is difficult to determine what is the maximum price someone is willing to pay for the product. • Second-degree price discrimination The producer sells different units of output at different prices, but every private who buys t e h same marrow of the good pays the same price. Second-degree price discrimination is much more common in practice. Good examples of this discrimination are great deal discounts and coup ons. • Third-degree price discrimination The producer sells the output to different people at different prices, but every unit of output change to a given person sells at the same price.\r\nCustomers are divided into more groups, which have different pray curves and different price elasticity. The highest price is charged to the groups with the lowest elasticity. Examples of this discrimination are student discounts. 6.2 Two-part responsibility Two-part tariff is an example of a nonlinear pricing and consists of two parts. The first part of the tariff usually comes in the form of a social rank, an annual or monthly license and is supposed to cover fixed cost. The second part of the tariff is related to the customs duty (number of reports transferred, number of bits, layers, etc.) and covers the incremental cost. This pricing proposal is  a great deal used in telecommunication. Users are charged for the connection to the network and additionally for the usage. Two-part tariff pricing scheme can be very naturally applied to a geomarketing service. The first part of the tariff represents a membership hire, an annual or monthly evidence for access to the data, reports and maps; the second part is an additional hire usually based on the the great unwashed transferred. Price P for a geoinformation service is then P = p0 + p v.q where p0 pv q fixed salary (annual, monthly, membership, etc.) price set for a volume transferred quantity transferred.\r\nThe revenue collected from the first part of the tariff (p0 ) is supposed to cover the fixed cost of producing the first copy of the Geoinformation product. The price of u sage (pv ) should cover the incremental cost and the cost of transaction. The combination of the membership and usage constructed for the predicted demand is set so that the company’s total cost is recovered. How high the fixed fee and the price of usage s hould be is an\r\nimportant question. approachability of the raw data at low price will change the nature of the market. The price for both parts of the tariff (p0 and pv ) will form fit in to the equilibrium rules of supply and demand. 6.3 Pareto Efficiency of the Two-part Tariff Two-part tariff can disadvantage a certain divide of the users. Imagine a geomarketing service company religious offering geographic data over the Internet.\r\nFor the simplicity of reasoning, remember there exist two segments of users; those who use data on a regular basis and have a high willingness to pay (governmental institutions, ministries, utilities, etc.), and those who seldom need data (students, individuals, small and medium companies, etc.) and have low willingness to pay. In this case, a high fixed fee excludes the users with low willingness to pay, occasional users who need only a small volume of the data and are not willing to pay an annual membership fee or a license. The necessary condition for Pareto efficiency is not satisfied. 6.4 Quantity Discounts Q uantity discounts are a form of a nonlinear price where the provider charges a lower price for a higher(prenominal) volume purchased.\r\nThe opportunity of selling high volumes at a low price is ofttimes neglect in geoinformation business. Increased revenue from the higher volume at lower price enables the provider to rectify the service and reduce prices for all users. The quantity discounts are usually designed in order to realize sales, but can complicate the billing and be system. Pareto efficiency of quantity discounts depends on the volume-price categories offered by the service provider. This pricing dodging might disadvantage users with low willingness to pay, not being able to pay nor fire in purchasing higher volumes.\r\n6.5 Term-Volume Commitments According to this strategy the user agrees with the service provider to pay a certain amount of money for the service in advance. The payment is set according to the predicted demand for the service. This benignant of agr eement usually involves some discounts, because the whole payment is done at once and at the arising of the period. Short-term contracts involve lower reduction in price than longer contracts. This strategy reduces billing and method of accounting cost and is often used by Internet providers. For example, â€Å"a one-year-term commitment to spend $2000/month obtains a discount of 18%â€Å" (Gong and Srinagesh 1998), for the 5 -year contracts the Internet providers use up to 60% discount. Term-volume commitments satisfy the Pareto efficiency requirement if the user can choose among different schemes and are designed indiscriminately.\r\n6.6 List of Price Options Different pricing options can be combined and offered as a list of price options. In geomarketing services, the two-part tariff is often combined with an additional pricing option, the uniform pricing scheme. Under the uniform pricing scheme, the user pays the price (p2 ), which is proportional to the data transferred. Us ually the tariff per volume purchased (p2 ) is higher in the uniform pricing scheme than the price (p1 ) proposed in the two-part tariff scheme, but the user need not pay an annual membership fee or license. The user profits if he is an occasional user, who needs a small volume of data. The sum he is willing to pay in this case is lower than the annual membership or license fee plus the cost of the data transferred.\r\n'