Pricing

Pricing

What is the relationship between price and demand?  Why is it important for a firm to price at the point at which marginal revenue is equal to marginal cost?

Price

  • Inverse relationship between price and quantity.
  • As a product price decreases/ decreases, demand will increase/ decrease.

Substitute Offerings/ Prices

  • Both the types of substitute goods and their prices affect the product demand curve.
  • If there are close substitutes, the product has limited maneuverability in terms of pricing.

Complementary Offerings/ Prices

  • The prices of complementary goods affect a product’s demand curve.
  • If the price of the complementary good decreases/ increases, then demand for the product will increase/ decrease.

Income

  • Income is positively correlated with demand. As income rise, so does product demand.

Market Size

  • As market size increases, so does product demand.

Taste

  • Regardless of market size, price, income, substitute and complementary products, consumers must have the desire to purchase the product.
  • The latitude that a firm has to price its product is dependent on the slope of its demand curve. The steeper the curve, the more power firms have in pricing.

Marginal Revenue

  • Is the additional (or negative) revenue reaped from lowering or increasing the product price by increments.

Marginal Cost

  • Is the cost associated with producing an additional good.
  • Marginal cost curve is often U-shaped – as more goods are produced, firms often experience increasing returns to scale.

Why should a firm consider fairness when pricing its goods?

As a general rule, firms should avoid competitive price cutting that could lead to a price war.

Fairness in Pricing

  • Consumer often think about pricing in terms of how fair the price is.
  • Three factors are taken into consideration:

1.Past prices

2.Close-substitute prices

3.Context (purchase environment)

How has the Internet enhanced opportunities for dynamic pricing strategies?

Interactivity – The Internet makes it easy and much less costly for buyers and sellers around the world to interact and negotiate.

Menu costs are the costs associated with changing the price of a good.

In a store or a mail order catalog, there are costs associated with changing costs, but on the Internet, this is easy and virtually costless.

Why would a firm want to implement a price-discrimination strategy?

First-degree Price Discrimination

  • Involves getting consumers to pay exactly what they are willing to pay for an item.
  • Implies that in order to charge each consumer exactly what they are willing to pay, firms must know what each consumer’s demand curve is – which is unrealistic.
  • What is more realistic is for the merchant to ascertain more information from consumers to gauge what they are willing to pay.

Second-degree Price Discrimination

  • Firm is trying to ascertain how much consumers are willing to pay not only for the first unit of a good, but for each additional good.

Third-degree Price Discrimination

  • Most common type of price discrimination.
  • Involves classifying consumers by category according to their willingness to pay.
  • E.g. price discrimination by age at theatres and airline pricing.
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Product

Product

How is product defined?

Can be defined as both tangible goods and intangible services generally created for the purpose of transaction.

How do Interactivity and Individual (the 2Is) impact product?

The 2Is allow a company to learn more about its customer, personalize a product to meet customer preferences, and offer CRM tools to provide more value for customers and cut costs for product sellers.

Websites which require customers to register to use the site have access to numerous tools to interact with the user as an individual.

•Once the user has registered, the site can recognize an individual customer both on the first and return visits.

•Using log files, a site can track a specific individual’s clickstream, i.e.where they go on a site, length of time spent, actual sequence of page views etc.•Based on such data, sellers greatly increase their ability to develop products based on their customers’ interests and preferences, especially in developing augmented products.•The Internet has also changed market research – today, syndicated reports can be found, assessed, and downloaded in a matter of minutes.. These reports are highly customizable and inexpensive relative to traditional research.

What are key marketing levers for product?

Customer Service Programs, Postsales Support

(Two primary benefits: can be used as a lever to provide a relevant basis for establishing an ongoing dialogue with the customer and enable an annuity stream which can be considerable )

Customer Care (Internet has enabled a radical shift from the traditional complaint management to customer care. / The Internet facilitates customer interaction, greatly reduces time to resolution and reduces costs)

Customer Relationship Management (The entire concept of CRM is to recognize individual customers, understand their value, apply sales and marketing resources that are in line with their value, and then let the customer train the enterprise in terms of how they would like to interact and receive their products and services.

Loyalty Programs and Privileges (Purpose is to recognize and reward a company’s best customers by providing additional services in appreciation of their loyalty. This in turn can increase a customer’s perceived value. )

Availability of Complementary Products (This assures the buyer of the basic product that has additional functionality, tools or other enhancements are available or will be available in the future thereby improving the potential value of the basic product. )

Upgrades (Upgrades have been effectively used to develop long-term customer relationships and offer the customer a better value proposition. / Important guidelines to note are that upgrades should be meaningful and relevant to the customer base, interface of upgrade should be similar to old product with no high learning curve to overcome and be upward compatible.)

Enabling Community (An active community around a product deepens the relationship between the product and the individuals in that community and can offer long-term, loyal and high-margin customers to a company. )

Additional Functionality (There are a number of enhanced functionalities that a website can use to augment a basic product and drive additional benefits to its visitors. Two general types: low-tech and broadband-enabled.

•Low-tech includes facilitated comparison shopping, product selection guides, live personal assistance or product demonstrations.

•The nascent stage of the Internet, slow connections and processing speeds are currently hindering the advancement of broadband applications such as simulcasting, web-conferencing, and streaming video capabilities.

Fulfillment Capabilities (The Internet allows for greatly increased fulfillment capabilities as a result of the 2Is. E.g. a customer can be given the choice of multiple shipping addresses for one shopping session. )

What does the overall product development process look like?

Customer needs, Production needs and capabilities, Research and Development, Competitors and Marketplace Forces

How can companies manage their product portfolio?

New product development, Enhancements and line extensions of current products and services, Development of existing products, Support of current products and services

How does marketing research fit within the product development process?

Test Marketing – Small-scale experiment in which a new product is introduced and supported by a clearly defined marketing mix.

How can a customer-centric approach to product development create strategic advantages? When a company delivers on its promise to produce a customer-designed product, long-term customer commitment is deepened.

How can products enable a customer relationship?

Deploying the product development levers that are appropriate for the existing relationship and

Emphasizing the elements of the value proposition that are most relevant at a given stage of the relationship.

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chap 13

Knowledge management and use in the marketing applications will play an important role in the success of customer service. Workers not only have enough information but they need to know how to manage it to bring an excellent customer service. Companies must be  aware of having expertise workers who know the information flow and how to transmit it in a timely and effective manner. For that, companies will integrate technology and knowledge. the use of marketing applications help to make the process smooth, and it is complemented with the human agents support. In the chapter 13, the mortgage process sample, shows us how the bank builds loyal customer giving their customer  customer satisfaction. The couple were glad. the processwas smooth through the different mortgage applicationusing multichannel. The convenience of online applications and the support of the human agent make the process easier and efficient. That is the way. how companies should manage information system. However, they will  some challenges such as lack of customer knowledge about how to fill applications and the use of technology. for that reason, Marketing applications should be designed in a simple form to be filed.

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Notes for Final

The 2Is: WHy the web is Unique at creating Customer Relationships

1.Interactivity
Defined as the extent to which a two-way flow if communication occurs between the firm and the customer.
2.Individualization
Reflects the degree to which firm-customer interactions are tailored or customized to the individual user.
Stages of a Relationship
1.Awareness
2.Exploration and Expansion
1.Attraction
2.Relationship Norms
3.Trust
4.Power Relations
5.Satisfaction
3.Commitment
4.Dissolution

Two basic reasons why customer relationships increase profitability:

1.Costs of serving existing customers are lower.
2.Existing customers are willing to pay  higher prices.
Pricing – +++++++++++++++++++++++++++++++++++++++

Key variables  of basic demand-curve pricing:

Price
Substitute Offerings/ Prices
Complementary Offerings/ Prices
Income
Market Size
Taste
Marginal Revenue
Marginal Cost
Basic Pricing Strategies
Cost Plus
Target Profit Growth
Target-Return Pricing
Prestige Pricing
Price as a Sign of Quality
Cyclical Promotional Pricing (Hi-Lo)
Everyday Low Pricing
Fairness in Pricing
Promotional Low-Cost Pricing

Auction Types
English Auctions
Reverse-Price English Auction
Dutch Auctions
First Price Sealed-Bid Auctions
Reverse First Price Sealed-Bid Auctions
Group Buying
Exchanges
Product – +++++++++++++++++++++++++++++++++++++++++
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Cass 21, 11/24

Power Point and use the note section to explain powerpoint 20-30 Slides

 

Which Lever should be used?

  • Choose levers to Effect a change
  • Determine which levers Have the most leverage
  • Consider barriers to advancement
  • Consider the medium’s effect on desired behavior
  • Level of involvement matters
  • Understand consumer learning trends
  • Credibility of the channel matters
  • The choice of levers must be consistent with positioning choice
  • The medium can be the message – or the product
  • Matrix design must be adaptive

 

 

 

 

 

eBay’s Application of the Marketspace Matrix (1998-99)

 

  • Once eBay had advanced a significant number of users into the exploration/ expansion phase, the firm needed to focus on sustaining commitment.
  • As the firm’s needs changed, so did its Marketspace Matrix

 

 

 

Awareness

 

  • Began first major advertising campaign in late 1998
  • Radio and print campaign with “You might not just find it on eBay” slogan
  • Strategic alliances with  AOL.com and the now defunct Go.com
  • Sponsored auction of famous memorability for free media exposure

 

Exploration/ Expansion

 

  • Added new attributes and features
  • Offered complementary services
  • Improved existing services
  • Improved ecxisting services
  • Unbalanced community offerings
  • Forums where verteran

 

Commitment

  • Community enabling remains a constant product lever to advance user to and sustain commitment
  • Loyalty program where seller can earn “Power Seller”

 

Dissolution

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Class 20, 11/17

  1. Post articles in the three different categories of Prof. W blog’s

 

Nike distribution channels

 

 

Indirect

 

Direct

 

Direct Niva niketown in major metropolitan areas

 

Indirect via offline retailer

 

 

 

 

 

Customers

 

Nike

 

What is a brand?

 
According to the American marketing association, a brand is a “name, term, sign, symbol, or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of the competition.”

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Class 19 – 11/12

Class 19: Designing a Marketspace Matrix – 11/12

Lecture (Notes posted on web)

Session Overview: This lecture ties all of the marketing levers (product, pricing, communication, community and distribution) into the Marketspace Matrix, and shows how students can use the Marketspace Matrix to design a marketing plan.

 

Class Preparation Questions:

 

  1. What is a buyer-seller relationship? How can it vary?
  2. Why is integrated lever selection important in a marketing plan?
  3. How did eBay’s application of the Marketspace Matrix change over time?
  4. What are the four categories of principles for lever selection?

What the key principles for lever selection within the Marketspace Matrix?

 

 

  1. Interactive TV. It could open doors for marketers to sell tv certain products.
  2.  

     

     

    Movie revenue sources

     

  3. Tickets
  4. Advertising
  5. Video (DVDs)
  6. If the technology to sell on movie is made available, this could also be an additional source of revenue.
  7.  

     

     

    What do you need for a community online?

     

  8. Volume
  9. Interactivity
    • You need topics that interest people
    • Create some sort of passion (motivation)
  10.  

     

     

    The Community Application Model

     

     

 

 

 

Purpose

Community

Creation

 

Consumer Attributes

 

Product Attributes

 

Consumer attributes are behavioral

 

Product attributes are emotional

 

Interactivity makes internet different than traditional marketing media.

 

In an online community the user is the one that creates the content.  The more things that the user do, the less thing that a company has to do.

 

 

 

_____________________________________________________________________________________

 

    Distribution

     

     

    The internet and distribution

     

    How has it changed the world?

     

    Coordination costs has been reduced tremendously

     

     

    Historically information flowed from the company to the customer. Today information can flow easily both ways.

     

    What is distribution?

     

    Getting products to consumers

     

     

     

  1. Flows of goods
  2.  

  3. Flows of funds
  4.  

  5. Flows of information
  6.  

     

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Class 18, 11/10

Session Overview: This lecture focuses on how the 2is and the Internet have influenced distribution. The lecture concludes by showing how various distribution levers fit into the Marketspace Matrix.

 

Class Preparation Questions:

 

  1. Is the Internet a distribution channel?
  2. What are the functions of channel intermediaries?
  3. What is disintermediation and what are its implications for channel intermediaries and customers?
  4. What are the distribution levers and how do they affect relationships between intermediaries and buyers and sellers?

 

    Group Project

     

    Options

     

  1. Pick a particular product
    1. Product
    2. Price
    3. Awareness
    4. Commitment
  2.  

  3. Take an exiting case
    1. Google.com
    2. Toyota
    3. Yahoo
    4. Mercadolibre.com
  4.  

     

     

     

     

     

     

     

    Blog posting

     

     

    I need a total of three – choose diferent catagories

     

     

 

    Marketspace Matrix

     

     

    0 Awareness Exploration Commitment Dissolution
    Product        
    Price        
    Communication        
    Community        
             

 

What is community?

 

A set of interwoven relationships built on shared interests, which satisfies members’ needs otherwise unattainable individuality.

 

Community Criteria

 

 

People Criteria > Process Criteria > Culture criteria > Technology

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Class 17 – 11/05

  1.  
    1. What is the definition of community?
    2. What are the criteria that define successful community?
    3. What are the different types of interests that form the foundations of community?
    4. What are the different ways in which communities function?
    5. What are the three primary ways in which value is created within a community?
    6. What are the benefits that community can generate for a parent firm?
    7. What are the different levels of community?
  2. Class 17: Community 11/5

    Lecture (Notes posted on web)

    Session Overview: This lecture focuses on how firms can encourage and profit from community, and how various community levers fit into the Marketspace Matrix.

     

    Class Preparation Questions:

     

     

     

    Google – Comparison Chart           Public Service

     

     

    Facebook

     

    Youtube Hits – Sara Palin (Saturday night) – 50 million hits

     

    Ultimately you want two things from people (for Political ads)

  3. Donations
  4. Votes
  5.  

    Anytime you have interaction you have communication

     

     

    Banner ads generate awareness

     

    If you click on it you enter into Exploration

     

    Commitment – No commitment

     

     

    Who controls the communication flow on the internet?

     

    The user

     

    What do user wants?

     

    They want relevant and targeted communication

     

    Importance of integrated communication

     

  6. Goal of marketing and communication is to convey relevant messages to the right consumers at the right time.
  7. Synergy between messages is integrated communications
  8. Traditional and interactive marketing methods are converging
  9.  

     

    Communication Process

     

  10. Identifying the target audience
  11. Determining the communication objective
  12. Developing the media plan
  13. Creating the message
  14. Executing the campaign
  15. Evaluating the effectiveness of the campaign
  16.  

     

    Augmented Product

    Development Levers

     

    8 Customer Service Programs

    Postsales support, customer care, & customer relationship management.

    8 Loyalty programs and privileges

    8 Availability of complementary products

    8 Upgrades

    8 Enabling community

    8 Additional functionality

    8 Fulfillment capabilities

     

     

     

     

     

     

     

     

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Class 16 11/03

 

  • Relationships – a bond between two parties
  • Pricing
  • Communication

 

Why do firms want relationships with customers?

 

  • Word of mouth
  • Trust

 

 

Pricing type open up by the internet

 

Auction -> Dynamic pricing

 <a href=”http://Mysimon.com” title=”http://Mysimon.
” target=”_blank”>Mysimon.com

 

 

Pricing Types

  • Cost plus
  • Comptetitive pricing
  • Demand pricing
  • Lost leader
  • EDLP (everyday low prices) – i.e Wallmart
  • Luxury pricing
  • Frenzy pricing

 

Stub-hut

E-bay

 

 

Dynamic Pricing Strategies

*decreased menu costs

  • Interactivity

 

Auction Types (important)

 

  • English auction
    • Reverse-price English auction
  • Dutch Auctions
  • First price sealed – Bid auctions
  • Reverse First Price Sealed – Bid Auctions
  • Group buying
  • Exchange
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2008_12_08 ‘ EM&EWMP’



Chapter 11 – Roberts

·      Describe the similarities and differences between server log, coded page and panel data.  Which do you think is most useful?

 

Servel Log Files : are created by the server that houses the web site.  Each time a browser requests a file in order to build a web[age, it generates an entry. A hit is counted for each file on the page, no matter how many or how few (each graphic on a page is a separate file)  Server registers the IP address.
IP addresses can be Permanent, or Dynamic.

IP address of the requesting computer.

Date & time

Code indicating whether success or no

# of bytes transferred

Referring site

Type & version of web browser making request.

OS of PC making request.

Coded Web Page : a technique in which a small image, usually a 1 pixel GIF is placed on a webpage. Used in conjunction with a cookie. The image return data about user activity on the webpage.
Data may be more accurate,
Data collected by web bugs has smaller storage requirements, only stores relevant data.
Real time processing i s permited when data is collected this way, but server log data must be transferred to a separate anayltics system for batch processing. Cant be in reallity.  To collect detailed info about visitor activity tags must be used in conjunction with cookies.
PANEL DATA:
Recruit a statistically representative panel of internet users.
SIce is determined by traditional criteria.
Specialized software is downloaded onto participants computer to record clickstream data.
Software polls at regular intervals to upload data.
Benefites: source of data is unambiguous (which is often not with server logs)

A person who uses the internet from home and work are two separate people according to the server logs, carefully maintained data can overcome this issues.
The measuerment form can collect demographic and behavbioral data from panel househilds that can be very useful in reporting and analytics.
Primary job is to select metrics that can accurately evaluate the effectiveness of the web site.
I believe coded web pages are more useful, they require less data, and are of course much easier to use. 

 

  • What are some of the specific metrics that measure Internet traffic, audiences and campaigns.  Which ones do you think are most important?

 

Traffic measuer simply document site activity:

Hits = # of files requested
Impressions= # of X an ad banner is requested by a browser

Page views/deliveries: # of X a Wpage is Requested.
Sessions = Ammount of activity on a site during a specified period.
Click throughs: # of times visitors visit the site by clicking on an ad.
AUDIENCE: Measuere provide data about the people who visite the site
Visitors: # of people who visit a site
total includes multiple visits, unique is different people during a specified time.
Unindentified (anonymous) Identified: registered.

behaviour on the site: # of page views, sessions time, path through the site, shopping cart abandonment. entry page (many dont enter through the home page)

 

Campaign measueres provide data about the effectiveness of marketing efforts, by communications channel: email, mail , online, banners, and so forth
BY OFFER free shipping versus 25& off, search effectiveness by keyword.

COMMON METRICS FOLLOW: To be meaningful, all these measures must be taken during a specified period. That leads to an almost endless set of metrics that can be produced, depending on the needs of the marketer.
avareage # of visits per day. # of page views per month.  Average visitor session length last month.  Number of hits for each hour of the day.  Paid search results for the most recent 7 day period.

  • What kinds of variables are needed to measure the effectiveness of branding efforts on the Internet?  Where are these measures obtained?

    Marketers focus on traffic, audience, and campaign metrics in order to provide information about the site visitors and to measure marketing campaign effectiveness.  These metrics are obtained from server reqest logs, coded pages, or from internet consumer panels.

    When there are branding objectives, marketing research is required to measure the attutudinal variables that are used to assess the effectiveness of branding efforts. both offline and online.

     

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A $2,000 Motorola Phone (Sapphire Crystal Display Included)

nbsp;http://bits.blogs.nytimes.com/2008/12/16…

According to the article, Motorola is releasing a $2,000 phone that does little more than the currently available models (including an unimpressive 2.0 mexapixel camera).  Relying on unique (adn expensive) aesthetic choices might not work out in the long run.

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Rumor has Android G2 in the works

nbsp;http://news.cnet.com/8301-1035_3-1012773…

Boy Genius Report confirms rumors of the next Google phone, the G2.  Being released in April, the phone will have a 5-megapixel autofocus camera, VGA camera for video calls, a full touch screen, and Wi-Fi connectivity, according to the blog.  Unlike its predecessor, the G2 will not be a T-Moble exclusive.

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Google reveals upcoming Android features

nbsp;http://news.cnet.com/8300-1035_3-94.html…

This article details the new features and updates to the Android operating system.  Also of note in the article is the reference to Andoird becoming open source.

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2008_11_26 ‘We are coexisting with DoCoMo’


Explain the nature of the consumer adoption process.  How is it different from the concept of diffusion of innovations?
Customer adoption process – contant with a new product is
Awareness (interest is developed & evaluation with other products occurs)-interest-evaluation-trial-adoption-internalization.

The consumer primarily must become aware of the product then become interested.
Then perform some prepurchase evaluation, then try the product, either a s a consequence of a porchase or of a marketer sponsored promotion or incentive.
Two stages follow Trial, 1st consumer must decide to purchase/continue purchasing the product(identified as adoption. internalization is a hard2 discern stage, in which the product has become part of the user’s life style.

 -Product with a techonoly component often require a substantial learning process. if it occurs then it can be internalized. It explains the customer’s behavior & how they will adapt to the product.
Diffusion Process:  consisted of innovation, comm channels, time, social system within which the innovation is spreading.
the life of a product over time.
Innovators, early adaptors, early majority, late majority, laggards.

Relative advantage: product benefits perceived as superior than existing products
Compatibility: consistency between new product & consumer’s perception.
Complexity: difficult to learn/use. TRiability: new prod can be tried.

Observability/communicability: new product’s benefits are evident.
the degree to which an innovative product or service possesses these characteristics determines the ease with which is adopted and diffused throughout the population. COMPLEXITY CAN RETARD THE DIFFUSION OF AN INNOVATION!!!!!
automobile & phone were slower to diffuse through the pop, unlike newer ones like Interweb & cells, or as the brits call ‘em Mobiles/

 

·      Define “pervasive computing” in your own words.  What changes is it likely to bring about in the way marketers approach the Internet?
Pervasive computing to me is when I can use devices in order to facilitate some task in order for me to function in a more faster and proper way.  according to the text it is the result of computing embedded in a variety of devices.
Ive been practicing pervasive computing since I first got my Handspring Prism that a friend gave to me in my teens, I would use it to store data like notes & contact information, as well as maps that i could retrieve when i mostly needed it, today my iphone is the central station and my connection to the world, it has completely internalized itself into my life, & i couldn’t survive without it.
implies that a single person has access to myriad computing devices to assist in performing all sorts of daily tasks. Pervasive computing aims to enable people to increase personal and professional transactions with new intelligent and portable devices. It gives people convenient access to relevant information stored on powerful networks anywhere, anytime. “Smart devices” are embedded with micro-processors that allow users to plug into intelligent networks and gain direct, simple and secure access to both relevant information and services.
Speedpass(rfid based payment system) British airways – mobile services such as flight schedules. Vegas – cell phone payment at parking meter.

·       

·      Be prepared to describe the strategic drivers of wireless adoption and to give an example of each.

context: providing necessary information when and where the customer needs or wants it. (dimensions= localization & Personalization)
localization: the location of the user can be identified and information specific to that location can be provided (beaming of info about atrractions in an area)
personalization: the customer can select not only the type of information desired but also the frequency of information provision. (consumer may want to be notified when certain stocks hit a specific price level)
T
ime sensitive: information must be provided at the time appropriate to the customer.
When the customer is about to pay they can be contacted at time& place of purchase. coupon)
high value:
coupon will have to have reasonable value in order to make it welcome in the wireless context.
voice activation
: good for driving, no use of hands.
one-click payment mechanisms:
a system is which payment is easily and securely authorized and billed to a single account will be necessary to enable frequent use of m-commerce services (cons will not want to enter data on mobile keyboards, specially for micropaymentss)
security:
users must be assured that data transmissions are secure, and authentication services must be provided in a way that is suitable for the devices
privacy:
protect personal data( like smart cards)
expanded permission marketing:
what kind of information is consumers willing to receive, how often they are willing to receive transmissions, and where they are willing to receive it. Accurate customer database required that is updated in real time.
Remember wireless advertising may be more intrusive, marketers must be vigilant in trying to stop mobile spam!

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