Strategic Movements July 2017

July 2017 Corporate, Pricing

Microsoft Trims and Restructures Sales – Should this Worry Investors?

Microsoft intends to trim and restructure its sales organization – a frightening concept for any manager held accountable for revenue generation.  Make more sales with fewer people?  What is Nadella thinking? Perhaps this: As Microsoft shifts from its emphasis from selling packaged software to selling cloud computing, it also needs to shift it’s the focus of the sales team. The shift may lead to larger sales and stronger account management, but fewer overall salespeople needed. Possibly true.

Nike Partners With Amazon?

Yep, that’s right. Why? Because around 25% of Nike’s sales are now online – and Amazon reaches the largest online market of them all. Footlocker and department stores might not like it, but the consumer really is moving online where possible. Which brings the big existential question for bricks and mortar stores: What experience do you deliver? What need do you fulfill in an in-store experience that can’t be fulfilled online?  How is that experience more informative and efficient, or more pleasurable and fun?  More or less, what do you do to justify your existence?

Gillette’s Price War Online Took a Major Turn

According to Euromonitor, Gillette’s U.S. market share fell from 70% in 2011 to 54% in 2016 with the encroachment of online Dollar Shave Club and Harry’s.  Now, Edgewell, maker of Schick, is offering razors at $1.78-$3.33 per replacement cartridge that fit in P&G’s Gillette handles, while Gillette sells comparable (and they are superior) razors at $2.60-$5.36 per replacement cartridge. It looks like the product engineered tying arrangement is failing. What will Gillette do? As a starter, they cut prices by 12%. Good for consumers (and society overall), bad for investors. Competition’s role is to drive prices down and quality up. This is part of the reason private capitalism is better than state-controlled enterprise.

About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

Tim J. Smith, PhD
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