Google Glass Case

Chi Nguyen

MKT 370

Section 10-11:30

                                Google Glass Case

1.

The Google X laboratory is taking advantage of the trend called “Social Influence.” With the help of social media, which is causing the dissemination of product reviews to accelerate, we now know if a product is a hit or a bomb much faster. Moreover, word of mouth speed is also causing more variation in the success of new products. Therefore, although there are fewer hits, hits are blockbuster hits. Therefore, instead of spending a large amount of money on one big project with a high risk, companies are much better off spending their money on a series of small projects. The risks associated are smaller, and there will be a higher chance for one project to become a hit. Google realizes this “Social Influence” effect, and thus places small bets in areas that seem very “speculative or even strange” because presumably one will become a hit and will pay off rapidly through word of mouth effect.  This strategy will also result in wider rotating product lines.

2. The pricing approach discussed in class that Google is almost surely using is price skimming, as opposed to market penetration because they are setting the price for the Google glass really high (at $1500). After everyone who is a diehard Google Glass evangelist buys, they are most likely going to lower the price to get to the next layer of customers, and this price lowering process continues.

The pros of price skimming is that the high price of Google glass could be perceived as high quality of the product. Moreover, besides the higher price signaling higher quality, there is also a psychological appeal of being different from other people and at the same time of belonging to an elite group of a few people that own Google Glass. In addition, because there is virtually no competition at the moment, early adopters are willing to pay a much higher price for the product, and will become loyal to the brand, thus, spreading news about the glass through word of mouth. This will make it easier to capture the next customer layers including the “explorers” and “shoppers.” Last but not least, the higher price could help Google recover its expense on research and development of the product more quickly.

The cons of price skimming is that being a new product that no one has even seen before with such a high price, Google can miss out on a lot of potential customers who might be interested but are suspicious about the functionality of the product and deterred by the expensive price tag. Moreover, by pricing the Google glass at such a high price, Google leaves room for other competitors to develop similar products with a cheaper price, thus losing some of its potential customers. In addition, early adopters of the glass could possibly get upset when Google drops the price of the product, which could result in bad publicity and a low level of customer loyalty.

I think Google should continue using its pricing strategy because Google is a multinational corporation, well known for many of its highly innovative products. Most of Google’s Internet-related services and products are widely used by people all around the world, so consumers are more likely to trust the quality of the glass and to pay the expensive price to buy the product. Moreover, the Google glass in itself is a highly innovative product that most people have never thought possible. Therefore, the higher price definitely signifies the high quality, and the scarcity of the product also makes it more desired, especially by early adopters.