Description
Students in Principles of Marketing often have little appreciation for the importance of pricing strategies. Given
the emphasis on promotion in the marketing mix, students at this level often view marketing as advertising or selling
and consider pricing as an afterthought. Instruction on pricing perpetuates this lack of awareness when pricing
strategies are presented as mutually exclusive. The Comcast case as detailed in this paper provides a comprehensive
yet concise overview of several key concepts in pricing. Its main value to marketing educators is in demonstrating how
a company can use an integrated pricing strategy to increase revenue and customer satisfaction.
TEACHING INTEGRATED PRICING STRATEGY:
COMCAST AS A CASE IN POINT
Brian A. Vander Schee, Aurora University
Timothy Aurand, Northern Illinois University
Sylvia Suszek, Northern Illinois University
Air Bastarrica, Northern Illinois University
Chidi Asiegbu, Northern Illinois University
Brian Butler, Northern Illinois University
ABSTRACT
Students in Principles of Marketing often have little appreciation for the importance of pricing strategies. Given
the emphasis on promotion in the marketing mix, students at this level often view marketing as advertising or selling
and consider pricing as an afterthought. Instruction on pricing perpetuates this lack of awareness when pricing
strategies are presented as mutually exclusive. The Comcast case as detailed in this paper provides a comprehensive
yet concise overview of several key concepts in pricing. Its main value to marketing educators is in demonstrating how
a company can use an integrated pricing strategy to increase revenue and customer satisfaction.
INTRODUCTION
Students have a rather cursory knowledge of market-
ing concepts as they begin their first course in the disci-
pline (LaBarbera and Simonoff 1999). Their knowledge
regarding pricing in particular is almost non-existent
(Ferrell and Gonzalez 2004). This represents a significant
challenge for marketing educators seeking to provide a
balanced perspective on the marketing profession and
each element of the marketing mix.
Studies have focused on the assimilation of direct and
interactive marketing, integrated marketing communica-
tions, and marketing research in the collegiate marketing
curriculum (Ayers and Underwood 2007; Spiller and
Scovotti 2008). Integrated marketing communications in
particular has advanced in terms of integrating concepts
(Everett, Siegel, and Marchant 1999); however marketing
education has not kept pace with advances in industry
(Kerr, Schultz, Patti, and Kim 2008). This is much the
same situation for pricing except that pricing strategies are
still presented as discrete entities having little alignment
with an integrated pricing strategy commonly found in
professional practice.
One way to overcome this situation is to help students
gain a better understanding of concepts by highlighting
practical relevance. This is frequently done via the case
method (Weber and Kirk 2000). Using a case as part of an
active learning approach is effective in communicating
concepts (Drea, Tripp, and Stuenkel 2005), developing
critical thinking skills (Hernandez 2002), and in integrat-
ing a variety of marketing theories and strategies (Elam
and Spotts 2004). Cases also provide students with a way
to extend their knowledge base by considering other
business setting applications and making suggestions for
future actions.
Some business areas, such as pricing considerations
are underrepresented in case analysis (Heady and Smith
2000). This is particularly true when it comes to utilizing
an integrated pricing strategy to increase revenue and
customer satisfaction. A commodity service provider
such as Comcast, where much of the differentiation in the
marketing mix comes down to price is an ideal case to
highlight how to effectively implement an integrated
pricing strategy.
THE COMCAST CASE
Company Overview
Comcast Corporation is best known for its cable
service; however, it also provides a variety of Internet and
television services. Comcast offers its own TV program-
ming, such as Versus, E!Entertainment, and The Golf
Channel, along with partial ownership in several profes-
sional sports teams such as the Philadelphia Flyers and the
Philadelphia 76ers. Comcast derives the majority of its
revenue from its Internet, cable, and digital phone servic-
es. The company’s core cable division has approximately
24 million subscribers and is the largest provider in the
United States (ahead of #2 Time Warner Cable). Com-
cast has over 15 million subscribers to its broadband
Internet service and Comcast Digital Voice has over 6.5
Journal for Advancement of Marketing Education – Volume 16, Summer 2010 36
million customers (hoovers.com, accessed J anuary 25,
2010). Table 1 displays Comcast’s leadership position
from a sales and margin perspective.
Comcast’s acquisition of a majority share in NBC
Universal in December 2009 raises questions about
whether the integrated pricing strategy holds the same
power as a differentiating factor in the marketing mix
(wired.com, accessed J anuary 25, 2010). For example,
Comcast can now offer greater variety and flexibility in
media and online programming services. In fact, Comcast
plans on using the acquisition to extend programming for
children and minority groups (nytimes.com, accessed
J anuary 25, 2010). However, these modifications are
unlikely to transform an industry reliant on pricing as a
competitive advantage.
Comcast and Integrated Pricing Strategy
A product or service’s final price is the result of
countless considerations. Before deciding on which aspects
to incorporate into the integrated pricing strategy a
company must first understand its marketing mix, estimate
the demand curve, understand the costs associated with its
product or service, and determine pricing objectives to
arrive at a final price. Comcast has high fixed costs,
formidable competitors and little opportunity for service
differentiation. Therefore, Comcast’s well-integrated
pricing strategy is a key element of its marketing strategy
and the company’s overall success.
Comcast acquires new customers and retains current
subscribers through its pricing value. New customers
benefit from Comcast’s low introductory penetration pric-
ing strategy. The company then uses this approach in
concert with line pricing to cater to various market seg-
ments based on consumer spending. It secures value via
bundle pricing by offering customers consolidated servic-
es, convenience, and an overall low price. Each pricing
strategy on its own has merit, however, it is the integration
of all three pricing approaches that has fostered sustained
growth in the marketplace.
Penetration Pricing Strategy
Penetration pricing is defined as a strategy adopted
for quickly achieving a high volume of sales for a product
or service. To achieve quantity maximization, penetration
pricing uses a low introductory price. This approach is
most appropriate when (a) demand is expected to be
highly elastic; that is, customers are price sensitive and the
quantity demanded will increase significantly as price
declines, (b) large decreases in cost are expected as
cumulative volumes increase, (c) the product is of the
nature of something that can gain mass appeal fairly
quickly, and (d) there is a threat of impending competition
(Armstrong and Kotler 2010). Under this approach, a
product or service is widely promoted and its introductory
price is kept comparatively lower than competitors. The
market also has to be highly price-sensitive for the low
price to stimulate rapid market growth (Baker and Hart
2007).
Comcast’s Use of the Penetration Pricing Strategy
Comcast is the number one cable provider in the
United States, as well as one of the largest Internet and
telephone companies. Therefore, Comcast’s current prod-
ucts are not necessarily new to the market, but penetration
pricing is still implemented to reach new customers,
increase market share and thus generate economies of
scale.
Comcast utilizes the penetration pricing strategy in
most of its TV cable, Internet, and telephone services.
Comcast offers special prices for new TV cable customers
for $39.99 (for the first 6 months) which is 46.7 percent
TABLE 1
GROWTH SUMMARY STATISTICS FOR COMCAST AND ITS COMPETITORS
DISH Time Warner
Measure Comcast DIRECTV Network Cable
2008 Annual Sales ($ mil) 34,256.0 19,693.0 11,617.2 17,200.0
2008 Net Profit Margin 8.76% 6.25% 5.79% (41.8%)
36–Month Revenue Growth 15.5% 14.4% 11.3% 25.0%
36–Month Net Income Growth 40.0% 65.4% (15.8)
– (hoovers.com accessed J anuary 25, 2010)
Journal for Advancement of Marketing Education – Volume 16, Summer 2010 37
lower than the regular price (comcast.com, accessed J an-
uary 25, 2010). This introductory price is kept lower than
the regular price usually for a period of 6 or 12 months as
a tactic to gain new consumers. As a result, the hard part
for Comcast is getting customers on board with the service
initially. Once they actually become customers, they will
typically remain so for the long term because psycho-
logically they find it difficult to switch providers after
installation.
A penetration policy is even more attractive if selling
larger quantities results in lower costs because of econo-
mies of scale (Armstrong and Kotler 2010). This includes
spreading out the high fixed costs associated with adver-
tising, human resources, and capital structures to a greater
number of customers thus lowering the cost per customer
serviced. Given its position as the market leader in the
industry, Comcast already takes advantage of economies
of scale which allows the company to offer more attractive
introductory prices compared to its competitors.
Penetration pricing can also be beneficial when mar-
keters suspect that other competitors could enter the
market easily. If penetration pricing allows the marketer
to gain a large market share quickly, competitors may be
discouraged from entering the market. Clearly, Comcast,
Time Warner Cable, and DirecTV dominate the TV cable,
Internet, and telephone markets. Consequently competi-
tors are discouraged from entering the market already
dominated by Comcast and its rivals. In areas where
Comcast is the only cable provider with services available
to the general public, penetration pricing still encourages
consumers to subscribe and likely be retained should
other cable providers, who would then be deterred from
even trying, gain access in the future.
Line Pricing Strategy
Line pricing occurs when the company sells different
configurations of a product within the same product line.
Line pricing is also referred to as versioning when it is
applied to services or technical products (Linde 2009). A
trial or very basic version may be offered at a low price or for
free, for example, with upgrades or more services available
at a higher price. This caters to customers in various market
segments based on income or willingness to pay for the
services offered. Line pricing is considered a pricing strat-
egy in this case because different versions or configurations
of the product are just variations of that product.
Comcast’s Use of the Line Pricing Strategy
In TV cable, for example, which is Comcast’s main
product, the company currently offers five different con-
figurations. Each of these configurations offers a different
number of channels and features that are priced according
to the number of available options. Table 2 displays the
major differences between products and how they are
priced to the consumer.
The more channels or features a specific version of a
product offers, the more expensive the version. It is
strategically important for companies like Comcast to
understand how much its customers are willing to spend
by product, how the consumers will react when some
versions of the same product are made available and most
importantly, to determine the most effective pricing strat-
egies for the future. Line pricing is important to Comcast
because the pricing levels allow penetration into many
markets.
TABLE 2
COMCAST’S PRODUCTS AND PRICING
Product Versions Features or Options Regular Price
TV Cable Basic Cable Only Local Channels
Digital Starter Over 80 Digital Channels $56.98
Digital Preferred Over 100 Digital Channels $74.98
Digital Preferred Plus Over 150 Digital Channels $99.99
Digital Premier Over 200 Digital Channels $115.99
$9.45
Internet Economy U: 1Mbps D: 348k bps
Performance U: 15Mbps D: 3M bps $42.95
Blast! U: 20Mbps D: 4M bps $52.95
Ultra U: 30Mbps D: 7M bps $62.95
$24.95
Phone Local with More $0.05 per minute
Comcast Unlimited Unlimited $39.95
$24.95
(comcast.com, accessed J anuary 25, 2010)
Journal for Advancement of Marketing Education – Volume 16, Summer 2010 38
Bundle Pricing Strategy
A bundle is any grouping of products or services sold
together as a single unit. The strategy behind bundling lies
in having combined products or services priced less than
each of the components purchased separately. The benefit
with bundling is found not only in reduced prices but also
in building awareness for new products that are bundled
with well established items (Kyle 2002). Customers may
value the convenience of having to deal with only one
provider for different products or services if an issue were
to arise. Having one company as a point of contact
translates into saving time for the customer. One provider
also means one bill providing benefits for customers and
vendors alike.
Bundling can be a competitive advantage if more
items or services are offered compared to just one item or
service for the same price. A company that offers this
value added option attracts more customers and increases
the average revenue per customer (Lee and Lee 2008). As
an added benefit, offering additional products or services
allows customers to explore products they had not previ-
ously considered. Exposing customers to additional ser-
vices perceived to be beneficial can lead to greater cus-
tomer satisfaction. The greater customers are satisfied
with a provider, the less likely they are to switch to a
competitor.
Bundling is usually a win-win situation. Companies
offering products or services in a more convenient manner
for a lower price will retain long-term consumers and
create brand loyalty. Each company should determine
which method of bundling is most in alignment with its
goals. There are various types of bundling options, such
as: pure, unbundled, or mixed, found across many indus-
tries (Olderog and Skiera 2000). In pure bundling the
products are available only in the bundled form and
cannot be purchased separately (Kim, Bojanic and War-
nick 2009). Purchasing an individual item is referred to as
unbundling. When customers can decide whether to pur-
chase several item together (bundling), or an individual
item (unbundling), the company is operating under a
mixed-bundling strategy (Olderog and Skiera 2000).
However, many customers do not like bundling
because they believe that they could design the best value
by choosing their own package of desired products and
services (Ferrell and Hartline 2010). Pure bundling in
particular can be viewed as disadvantageous when
consumers feel as though they are being forced to purchase
additional items that they do not need. Thus companies
should implement bundling strategies that help achieve
company goals, increase revenue, and increase customer
satisfaction.
Comcast’s Use of the Bundle Pricing Strategy
The bundle pricing strategy is not unique to the
Internet service provider industry: its use in selling
automobiles or books and services including resort
packages is common (Clay, Krishnan, and Wolff 2001;
J ohnson, Herrmann, and Bauer 1999; Naylor and Frank
2001). Comcast offers customers the option to bundle its
three main services; Internet, television, and telephone
into one package. To aid in bundling, Comcast allows
customers to customize orders depending on their needs.
The ability to customize orders promotes bundling. Given
the commodity-type service environment, bundling helps
Comcast stay competitive.
High switching costs (i.e., monetary, search time, and
psychological) make it more difficult for customers to
walk away from Comcast. This is especially true if cus-
tomers get used to their new found Internet speed or new
exciting channels; they will be more reluctant to give them
up. Marketers might wish to encourage bundle purchases
to extend brand preference or to encourage consumers to
spend more (Harris and Blair 2006). The added entertain-
ment not only makes it harder for Comcast customers to
leave, but in their minds it also helps justify the price for
services.
Currently, the most aggressive bundle pricing strate-
gy used by Comcast is its integrated pricing approach
including penetration pricing. Although customers can
choose Double Play, which includes two combined ser-
vices, the most common bundle in this market is known as
Triple Play which is composed of TV cable, Internet, and
telephone services. Although there are different versions
of the products, Comcast offers starter packages 29.8
percent less expensive than the starter package from the
second largest provider, Time Warner Cable
(timewarnercable.com, accessed J anuary 25, 2010). Bun-
dling and penetration pricing used together makes sense
because bundling results in lower prices which is the basis
of penetration pricing designed to capture a larger market
share.
At first glance, it appears that bundling services
offers significant saving to consumers compared to pur-
chasing each component separately. However, the sav-
ings are not as great as initially perceived with the Comcast
Digital Double Play bundling as an example. The Digital
Double Play consists of Comcast High Speed Internet
with Powerboost plus the Comcast Digital Starter Pack-
age. The price is $69.99 for the temporarily discounted
bundle, however after six months the price jumps to
$109.90 per month (comcast.com, accessed J anuary 25,
2010).
If each component is separated from the bundle, the
end price is $19.99 per month for high speed Internet plus
Powerboost for six months; afterwards it becomes $42.95
per month. As a separate component the Comcast Digital
Starter Package is offered as a promotion for $29.99 per
month after six months the price is elevated to $59.90.
Each package could be ordered separately for $49.99 per
month for six months and $102.90 after six months. The
price for the bundle is $69.99 per month and $109.90 after
Journal for Advancement of Marketing Education – Volume 16, Summer 2010 39
six months. This does not end up being the bargain
promoted by the bundled price.
As demonstrated with Comcast, the main purpose of
bundling is to have customers perceive that there is an
exaggerated cost savings whether or not this is actually the
case. By bundling services, Comcast stresses savings for
consumers on its website, but also the convenience of
having one bill and one provider.
Comcast could do well with just using any one of
penetration pricing, line pricing, and bundle pricing. How-
ever, the cumulative benefits of utilizing all three as an
integrated pricing strategy in terms of revenue and cus-
tomer satisfaction make the coordinating efforts worth-
while. In the same way that integrated marketing commu-
nications brings a consistent and connected message to a
brand proposition, the integrated pricing strategy fosters
brand value. This approach appeals to consumers encour-
aging service trial and continued subscription.
FURTHER INTEGRATION
Students could also be challenged on how they could
improve on Comcast’s already sound integrated pricing
strategy. The decoy effect (Ariely 2008), is a good example.
The Decoy Effect
In marketing, the decoy effect occurs when consum-
ers tend to have a specific change in preference between
two options when also presented with a third option that
is asymmetrically dominated (Huber, Payne, and Puto
1982). For example, a consumer is presented with two
items: Item A appears better in quality while Item B is
offered at a lower price. The choice is made easier when
a third item, Item C, similar to Item A but offered at a
higher price is introduced. Consumers will tend to pur-
chase Item A because it now appears much better than
Items B and C even though there is no change in the
relative benefits between Items A and B.
Comcast’s Use of the Decoy Effect
Comcast, through a combination of pricing strate-
gies, can offer customers a different version of a product
to stimulate sales of another version. For example, if TV
cable customers can decide between options (a) Digital
Preferred or (b) Digital Preferred Plus which have 100 and
150 channels, and cost $74.98 and $99.99, respectively,
around half of the customers will choose option (a), and
around half of the customers will choose option (b). The
first option is better in terms of price, and the second one
is better in terms of number channels. However, if Com-
cast wants to stimulate sales of the Digital Preferred Plus
version (option b), the company can create an option (c)
with 125 channels for $110.00, for example. As a result,
the Digital Preferred Plus version will be perceived as the
dominating option and will be chosen more often than
before, since option (c) is just a decoy to increase sales of
option (b).
CLASS DISCUSSION QUESTIONS
1. How would introducing each of the following into
Comcast’s integrated pricing strategy increase reve-
nue and customer satisfaction?
(a) offering no contracts on new service,
(b) providing customers with a limited-time free
trial,
(c) introducing a rewards program,
2. What obstacles might Comcast face with each of
these approaches?
CLASS DISCUSSION QUESTION
POTENTIAL RESPONSES
1. (a) No Contracts – Customers that use Comcast
services are currently put into a binding contract.
Depending on the services used, the length of the
contract can range from twelve to twenty-four months.
Any addition to service could also result in an elon-
gated contract. Early release from the contract results
in fines. To stay in line with competition Comcast
should offer services without a contract to its custom-
ers. This will entice consumers that are hesitant of
being trapped in a long term contract to use Comcast
services.
1. (b) Free Trials - For customers, there is always an
element of risk in purchasing from a new provider.
Will I find a better deal or a more appealing offer with
another provider? Buyers often ask this type of ques-
tion and fear they may experience cognitive disso-
nance or buyer’s remorse. Comcast could eliminate
one barrier of entry by offering free service time-
limited trials.
1. (c) Rewards Program - Rewards can be an excellent
way to recognize loyalty and significantly boost
engagement and aid retention. This is particularly
true when customers can tailor the rewards program
to fit their interests. Creating a rewards program can
greatly enhance Comcast’s integrated pricing strate-
gy as it will make customers feel their contributions
are noted and valued.
2. Comcast must consider the flaws accompanied with
the three preceding suggestions. Not all households
are wired for cable, and the investment to wire homes
for free trials may not be financially viable. There-
fore, these and other pricing considerations may
conceivably be limited to cable ready homes only.
CONCLUSION AND FUTURE RESEARCH
Students often graduate without an appreciation for
the interrelatedness of marketing concepts taken among
Journal for Advancement of Marketing Education – Volume 16, Summer 2010 40
various courses or even within particular courses (Bob-
bitt, Inks, Kemp, and Mayo 2000). The Comcast case
introduces basic concepts in pricing and then demon-
strates how one company developed an integrated pricing
strategy. It goes on to challenge students with points of
discussion regarding an even more advanced integrated
pricing strategy. Using the Comcast case raises student
awareness regarding marketing concept connections and
the benefits of using an integrated pricing strategy to
increase revenue and customer satisfaction. The case can
also be useful in upper level undergraduate marketing
courses where students with more content knowledge and
potentially professional experience can relate the inte-
grated pricing strategy to other elements of the marketing
mix.
Future research regarding the Comcast case can focus
on the assessment of student learning. Soliciting student
feedback regarding the clarity of concepts presented can
assist in determining level of understanding related to
pricing strategies and utilizing an integrated pricing strategy
in particular. Asking students to develop an integrated
pricing strategy for another commodity-service provider
may also demonstrate whether students can make
appropriate application of the integrated pricing strategy
approach.
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doc_494952151.pdf
Students in Principles of Marketing often have little appreciation for the importance of pricing strategies. Given
the emphasis on promotion in the marketing mix, students at this level often view marketing as advertising or selling
and consider pricing as an afterthought. Instruction on pricing perpetuates this lack of awareness when pricing
strategies are presented as mutually exclusive. The Comcast case as detailed in this paper provides a comprehensive
yet concise overview of several key concepts in pricing. Its main value to marketing educators is in demonstrating how
a company can use an integrated pricing strategy to increase revenue and customer satisfaction.
TEACHING INTEGRATED PRICING STRATEGY:
COMCAST AS A CASE IN POINT
Brian A. Vander Schee, Aurora University
Timothy Aurand, Northern Illinois University
Sylvia Suszek, Northern Illinois University
Air Bastarrica, Northern Illinois University
Chidi Asiegbu, Northern Illinois University
Brian Butler, Northern Illinois University
ABSTRACT
Students in Principles of Marketing often have little appreciation for the importance of pricing strategies. Given
the emphasis on promotion in the marketing mix, students at this level often view marketing as advertising or selling
and consider pricing as an afterthought. Instruction on pricing perpetuates this lack of awareness when pricing
strategies are presented as mutually exclusive. The Comcast case as detailed in this paper provides a comprehensive
yet concise overview of several key concepts in pricing. Its main value to marketing educators is in demonstrating how
a company can use an integrated pricing strategy to increase revenue and customer satisfaction.
INTRODUCTION
Students have a rather cursory knowledge of market-
ing concepts as they begin their first course in the disci-
pline (LaBarbera and Simonoff 1999). Their knowledge
regarding pricing in particular is almost non-existent
(Ferrell and Gonzalez 2004). This represents a significant
challenge for marketing educators seeking to provide a
balanced perspective on the marketing profession and
each element of the marketing mix.
Studies have focused on the assimilation of direct and
interactive marketing, integrated marketing communica-
tions, and marketing research in the collegiate marketing
curriculum (Ayers and Underwood 2007; Spiller and
Scovotti 2008). Integrated marketing communications in
particular has advanced in terms of integrating concepts
(Everett, Siegel, and Marchant 1999); however marketing
education has not kept pace with advances in industry
(Kerr, Schultz, Patti, and Kim 2008). This is much the
same situation for pricing except that pricing strategies are
still presented as discrete entities having little alignment
with an integrated pricing strategy commonly found in
professional practice.
One way to overcome this situation is to help students
gain a better understanding of concepts by highlighting
practical relevance. This is frequently done via the case
method (Weber and Kirk 2000). Using a case as part of an
active learning approach is effective in communicating
concepts (Drea, Tripp, and Stuenkel 2005), developing
critical thinking skills (Hernandez 2002), and in integrat-
ing a variety of marketing theories and strategies (Elam
and Spotts 2004). Cases also provide students with a way
to extend their knowledge base by considering other
business setting applications and making suggestions for
future actions.
Some business areas, such as pricing considerations
are underrepresented in case analysis (Heady and Smith
2000). This is particularly true when it comes to utilizing
an integrated pricing strategy to increase revenue and
customer satisfaction. A commodity service provider
such as Comcast, where much of the differentiation in the
marketing mix comes down to price is an ideal case to
highlight how to effectively implement an integrated
pricing strategy.
THE COMCAST CASE
Company Overview
Comcast Corporation is best known for its cable
service; however, it also provides a variety of Internet and
television services. Comcast offers its own TV program-
ming, such as Versus, E!Entertainment, and The Golf
Channel, along with partial ownership in several profes-
sional sports teams such as the Philadelphia Flyers and the
Philadelphia 76ers. Comcast derives the majority of its
revenue from its Internet, cable, and digital phone servic-
es. The company’s core cable division has approximately
24 million subscribers and is the largest provider in the
United States (ahead of #2 Time Warner Cable). Com-
cast has over 15 million subscribers to its broadband
Internet service and Comcast Digital Voice has over 6.5
Journal for Advancement of Marketing Education – Volume 16, Summer 2010 36
million customers (hoovers.com, accessed J anuary 25,
2010). Table 1 displays Comcast’s leadership position
from a sales and margin perspective.
Comcast’s acquisition of a majority share in NBC
Universal in December 2009 raises questions about
whether the integrated pricing strategy holds the same
power as a differentiating factor in the marketing mix
(wired.com, accessed J anuary 25, 2010). For example,
Comcast can now offer greater variety and flexibility in
media and online programming services. In fact, Comcast
plans on using the acquisition to extend programming for
children and minority groups (nytimes.com, accessed
J anuary 25, 2010). However, these modifications are
unlikely to transform an industry reliant on pricing as a
competitive advantage.
Comcast and Integrated Pricing Strategy
A product or service’s final price is the result of
countless considerations. Before deciding on which aspects
to incorporate into the integrated pricing strategy a
company must first understand its marketing mix, estimate
the demand curve, understand the costs associated with its
product or service, and determine pricing objectives to
arrive at a final price. Comcast has high fixed costs,
formidable competitors and little opportunity for service
differentiation. Therefore, Comcast’s well-integrated
pricing strategy is a key element of its marketing strategy
and the company’s overall success.
Comcast acquires new customers and retains current
subscribers through its pricing value. New customers
benefit from Comcast’s low introductory penetration pric-
ing strategy. The company then uses this approach in
concert with line pricing to cater to various market seg-
ments based on consumer spending. It secures value via
bundle pricing by offering customers consolidated servic-
es, convenience, and an overall low price. Each pricing
strategy on its own has merit, however, it is the integration
of all three pricing approaches that has fostered sustained
growth in the marketplace.
Penetration Pricing Strategy
Penetration pricing is defined as a strategy adopted
for quickly achieving a high volume of sales for a product
or service. To achieve quantity maximization, penetration
pricing uses a low introductory price. This approach is
most appropriate when (a) demand is expected to be
highly elastic; that is, customers are price sensitive and the
quantity demanded will increase significantly as price
declines, (b) large decreases in cost are expected as
cumulative volumes increase, (c) the product is of the
nature of something that can gain mass appeal fairly
quickly, and (d) there is a threat of impending competition
(Armstrong and Kotler 2010). Under this approach, a
product or service is widely promoted and its introductory
price is kept comparatively lower than competitors. The
market also has to be highly price-sensitive for the low
price to stimulate rapid market growth (Baker and Hart
2007).
Comcast’s Use of the Penetration Pricing Strategy
Comcast is the number one cable provider in the
United States, as well as one of the largest Internet and
telephone companies. Therefore, Comcast’s current prod-
ucts are not necessarily new to the market, but penetration
pricing is still implemented to reach new customers,
increase market share and thus generate economies of
scale.
Comcast utilizes the penetration pricing strategy in
most of its TV cable, Internet, and telephone services.
Comcast offers special prices for new TV cable customers
for $39.99 (for the first 6 months) which is 46.7 percent
TABLE 1
GROWTH SUMMARY STATISTICS FOR COMCAST AND ITS COMPETITORS
DISH Time Warner
Measure Comcast DIRECTV Network Cable
2008 Annual Sales ($ mil) 34,256.0 19,693.0 11,617.2 17,200.0
2008 Net Profit Margin 8.76% 6.25% 5.79% (41.8%)
36–Month Revenue Growth 15.5% 14.4% 11.3% 25.0%
36–Month Net Income Growth 40.0% 65.4% (15.8)
– (hoovers.com accessed J anuary 25, 2010)
Journal for Advancement of Marketing Education – Volume 16, Summer 2010 37
lower than the regular price (comcast.com, accessed J an-
uary 25, 2010). This introductory price is kept lower than
the regular price usually for a period of 6 or 12 months as
a tactic to gain new consumers. As a result, the hard part
for Comcast is getting customers on board with the service
initially. Once they actually become customers, they will
typically remain so for the long term because psycho-
logically they find it difficult to switch providers after
installation.
A penetration policy is even more attractive if selling
larger quantities results in lower costs because of econo-
mies of scale (Armstrong and Kotler 2010). This includes
spreading out the high fixed costs associated with adver-
tising, human resources, and capital structures to a greater
number of customers thus lowering the cost per customer
serviced. Given its position as the market leader in the
industry, Comcast already takes advantage of economies
of scale which allows the company to offer more attractive
introductory prices compared to its competitors.
Penetration pricing can also be beneficial when mar-
keters suspect that other competitors could enter the
market easily. If penetration pricing allows the marketer
to gain a large market share quickly, competitors may be
discouraged from entering the market. Clearly, Comcast,
Time Warner Cable, and DirecTV dominate the TV cable,
Internet, and telephone markets. Consequently competi-
tors are discouraged from entering the market already
dominated by Comcast and its rivals. In areas where
Comcast is the only cable provider with services available
to the general public, penetration pricing still encourages
consumers to subscribe and likely be retained should
other cable providers, who would then be deterred from
even trying, gain access in the future.
Line Pricing Strategy
Line pricing occurs when the company sells different
configurations of a product within the same product line.
Line pricing is also referred to as versioning when it is
applied to services or technical products (Linde 2009). A
trial or very basic version may be offered at a low price or for
free, for example, with upgrades or more services available
at a higher price. This caters to customers in various market
segments based on income or willingness to pay for the
services offered. Line pricing is considered a pricing strat-
egy in this case because different versions or configurations
of the product are just variations of that product.
Comcast’s Use of the Line Pricing Strategy
In TV cable, for example, which is Comcast’s main
product, the company currently offers five different con-
figurations. Each of these configurations offers a different
number of channels and features that are priced according
to the number of available options. Table 2 displays the
major differences between products and how they are
priced to the consumer.
The more channels or features a specific version of a
product offers, the more expensive the version. It is
strategically important for companies like Comcast to
understand how much its customers are willing to spend
by product, how the consumers will react when some
versions of the same product are made available and most
importantly, to determine the most effective pricing strat-
egies for the future. Line pricing is important to Comcast
because the pricing levels allow penetration into many
markets.
TABLE 2
COMCAST’S PRODUCTS AND PRICING
Product Versions Features or Options Regular Price
TV Cable Basic Cable Only Local Channels
Digital Starter Over 80 Digital Channels $56.98
Digital Preferred Over 100 Digital Channels $74.98
Digital Preferred Plus Over 150 Digital Channels $99.99
Digital Premier Over 200 Digital Channels $115.99
$9.45
Internet Economy U: 1Mbps D: 348k bps
Performance U: 15Mbps D: 3M bps $42.95
Blast! U: 20Mbps D: 4M bps $52.95
Ultra U: 30Mbps D: 7M bps $62.95
$24.95
Phone Local with More $0.05 per minute
Comcast Unlimited Unlimited $39.95
$24.95
(comcast.com, accessed J anuary 25, 2010)
Journal for Advancement of Marketing Education – Volume 16, Summer 2010 38
Bundle Pricing Strategy
A bundle is any grouping of products or services sold
together as a single unit. The strategy behind bundling lies
in having combined products or services priced less than
each of the components purchased separately. The benefit
with bundling is found not only in reduced prices but also
in building awareness for new products that are bundled
with well established items (Kyle 2002). Customers may
value the convenience of having to deal with only one
provider for different products or services if an issue were
to arise. Having one company as a point of contact
translates into saving time for the customer. One provider
also means one bill providing benefits for customers and
vendors alike.
Bundling can be a competitive advantage if more
items or services are offered compared to just one item or
service for the same price. A company that offers this
value added option attracts more customers and increases
the average revenue per customer (Lee and Lee 2008). As
an added benefit, offering additional products or services
allows customers to explore products they had not previ-
ously considered. Exposing customers to additional ser-
vices perceived to be beneficial can lead to greater cus-
tomer satisfaction. The greater customers are satisfied
with a provider, the less likely they are to switch to a
competitor.
Bundling is usually a win-win situation. Companies
offering products or services in a more convenient manner
for a lower price will retain long-term consumers and
create brand loyalty. Each company should determine
which method of bundling is most in alignment with its
goals. There are various types of bundling options, such
as: pure, unbundled, or mixed, found across many indus-
tries (Olderog and Skiera 2000). In pure bundling the
products are available only in the bundled form and
cannot be purchased separately (Kim, Bojanic and War-
nick 2009). Purchasing an individual item is referred to as
unbundling. When customers can decide whether to pur-
chase several item together (bundling), or an individual
item (unbundling), the company is operating under a
mixed-bundling strategy (Olderog and Skiera 2000).
However, many customers do not like bundling
because they believe that they could design the best value
by choosing their own package of desired products and
services (Ferrell and Hartline 2010). Pure bundling in
particular can be viewed as disadvantageous when
consumers feel as though they are being forced to purchase
additional items that they do not need. Thus companies
should implement bundling strategies that help achieve
company goals, increase revenue, and increase customer
satisfaction.
Comcast’s Use of the Bundle Pricing Strategy
The bundle pricing strategy is not unique to the
Internet service provider industry: its use in selling
automobiles or books and services including resort
packages is common (Clay, Krishnan, and Wolff 2001;
J ohnson, Herrmann, and Bauer 1999; Naylor and Frank
2001). Comcast offers customers the option to bundle its
three main services; Internet, television, and telephone
into one package. To aid in bundling, Comcast allows
customers to customize orders depending on their needs.
The ability to customize orders promotes bundling. Given
the commodity-type service environment, bundling helps
Comcast stay competitive.
High switching costs (i.e., monetary, search time, and
psychological) make it more difficult for customers to
walk away from Comcast. This is especially true if cus-
tomers get used to their new found Internet speed or new
exciting channels; they will be more reluctant to give them
up. Marketers might wish to encourage bundle purchases
to extend brand preference or to encourage consumers to
spend more (Harris and Blair 2006). The added entertain-
ment not only makes it harder for Comcast customers to
leave, but in their minds it also helps justify the price for
services.
Currently, the most aggressive bundle pricing strate-
gy used by Comcast is its integrated pricing approach
including penetration pricing. Although customers can
choose Double Play, which includes two combined ser-
vices, the most common bundle in this market is known as
Triple Play which is composed of TV cable, Internet, and
telephone services. Although there are different versions
of the products, Comcast offers starter packages 29.8
percent less expensive than the starter package from the
second largest provider, Time Warner Cable
(timewarnercable.com, accessed J anuary 25, 2010). Bun-
dling and penetration pricing used together makes sense
because bundling results in lower prices which is the basis
of penetration pricing designed to capture a larger market
share.
At first glance, it appears that bundling services
offers significant saving to consumers compared to pur-
chasing each component separately. However, the sav-
ings are not as great as initially perceived with the Comcast
Digital Double Play bundling as an example. The Digital
Double Play consists of Comcast High Speed Internet
with Powerboost plus the Comcast Digital Starter Pack-
age. The price is $69.99 for the temporarily discounted
bundle, however after six months the price jumps to
$109.90 per month (comcast.com, accessed J anuary 25,
2010).
If each component is separated from the bundle, the
end price is $19.99 per month for high speed Internet plus
Powerboost for six months; afterwards it becomes $42.95
per month. As a separate component the Comcast Digital
Starter Package is offered as a promotion for $29.99 per
month after six months the price is elevated to $59.90.
Each package could be ordered separately for $49.99 per
month for six months and $102.90 after six months. The
price for the bundle is $69.99 per month and $109.90 after
Journal for Advancement of Marketing Education – Volume 16, Summer 2010 39
six months. This does not end up being the bargain
promoted by the bundled price.
As demonstrated with Comcast, the main purpose of
bundling is to have customers perceive that there is an
exaggerated cost savings whether or not this is actually the
case. By bundling services, Comcast stresses savings for
consumers on its website, but also the convenience of
having one bill and one provider.
Comcast could do well with just using any one of
penetration pricing, line pricing, and bundle pricing. How-
ever, the cumulative benefits of utilizing all three as an
integrated pricing strategy in terms of revenue and cus-
tomer satisfaction make the coordinating efforts worth-
while. In the same way that integrated marketing commu-
nications brings a consistent and connected message to a
brand proposition, the integrated pricing strategy fosters
brand value. This approach appeals to consumers encour-
aging service trial and continued subscription.
FURTHER INTEGRATION
Students could also be challenged on how they could
improve on Comcast’s already sound integrated pricing
strategy. The decoy effect (Ariely 2008), is a good example.
The Decoy Effect
In marketing, the decoy effect occurs when consum-
ers tend to have a specific change in preference between
two options when also presented with a third option that
is asymmetrically dominated (Huber, Payne, and Puto
1982). For example, a consumer is presented with two
items: Item A appears better in quality while Item B is
offered at a lower price. The choice is made easier when
a third item, Item C, similar to Item A but offered at a
higher price is introduced. Consumers will tend to pur-
chase Item A because it now appears much better than
Items B and C even though there is no change in the
relative benefits between Items A and B.
Comcast’s Use of the Decoy Effect
Comcast, through a combination of pricing strate-
gies, can offer customers a different version of a product
to stimulate sales of another version. For example, if TV
cable customers can decide between options (a) Digital
Preferred or (b) Digital Preferred Plus which have 100 and
150 channels, and cost $74.98 and $99.99, respectively,
around half of the customers will choose option (a), and
around half of the customers will choose option (b). The
first option is better in terms of price, and the second one
is better in terms of number channels. However, if Com-
cast wants to stimulate sales of the Digital Preferred Plus
version (option b), the company can create an option (c)
with 125 channels for $110.00, for example. As a result,
the Digital Preferred Plus version will be perceived as the
dominating option and will be chosen more often than
before, since option (c) is just a decoy to increase sales of
option (b).
CLASS DISCUSSION QUESTIONS
1. How would introducing each of the following into
Comcast’s integrated pricing strategy increase reve-
nue and customer satisfaction?
(a) offering no contracts on new service,
(b) providing customers with a limited-time free
trial,
(c) introducing a rewards program,
2. What obstacles might Comcast face with each of
these approaches?
CLASS DISCUSSION QUESTION
POTENTIAL RESPONSES
1. (a) No Contracts – Customers that use Comcast
services are currently put into a binding contract.
Depending on the services used, the length of the
contract can range from twelve to twenty-four months.
Any addition to service could also result in an elon-
gated contract. Early release from the contract results
in fines. To stay in line with competition Comcast
should offer services without a contract to its custom-
ers. This will entice consumers that are hesitant of
being trapped in a long term contract to use Comcast
services.
1. (b) Free Trials - For customers, there is always an
element of risk in purchasing from a new provider.
Will I find a better deal or a more appealing offer with
another provider? Buyers often ask this type of ques-
tion and fear they may experience cognitive disso-
nance or buyer’s remorse. Comcast could eliminate
one barrier of entry by offering free service time-
limited trials.
1. (c) Rewards Program - Rewards can be an excellent
way to recognize loyalty and significantly boost
engagement and aid retention. This is particularly
true when customers can tailor the rewards program
to fit their interests. Creating a rewards program can
greatly enhance Comcast’s integrated pricing strate-
gy as it will make customers feel their contributions
are noted and valued.
2. Comcast must consider the flaws accompanied with
the three preceding suggestions. Not all households
are wired for cable, and the investment to wire homes
for free trials may not be financially viable. There-
fore, these and other pricing considerations may
conceivably be limited to cable ready homes only.
CONCLUSION AND FUTURE RESEARCH
Students often graduate without an appreciation for
the interrelatedness of marketing concepts taken among
Journal for Advancement of Marketing Education – Volume 16, Summer 2010 40
various courses or even within particular courses (Bob-
bitt, Inks, Kemp, and Mayo 2000). The Comcast case
introduces basic concepts in pricing and then demon-
strates how one company developed an integrated pricing
strategy. It goes on to challenge students with points of
discussion regarding an even more advanced integrated
pricing strategy. Using the Comcast case raises student
awareness regarding marketing concept connections and
the benefits of using an integrated pricing strategy to
increase revenue and customer satisfaction. The case can
also be useful in upper level undergraduate marketing
courses where students with more content knowledge and
potentially professional experience can relate the inte-
grated pricing strategy to other elements of the marketing
mix.
Future research regarding the Comcast case can focus
on the assessment of student learning. Soliciting student
feedback regarding the clarity of concepts presented can
assist in determining level of understanding related to
pricing strategies and utilizing an integrated pricing strategy
in particular. Asking students to develop an integrated
pricing strategy for another commodity-service provider
may also demonstrate whether students can make
appropriate application of the integrated pricing strategy
approach.
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