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Microcap & Penny Stocks : Bid.com International (BIDS) -- Ignore unavailable to you. Want to Upgrade?

To: Alastair McIntosh who wrote (28808)	4/30/1999 10:47:00 AM
From: Cameron	Read Replies (1) \| Respond to of 37507

Godin has expressed the viewpoint that selling below cost on limited items (NOT ALL THE ITEMS) was used tactically to drive interest in the site and they now feel that the firm has reached a sufficient mass that they believe they are in a position to cut back on price promotion. Let's clarify what we a referring to here specifically. When you go to their site (at least in Canada) there are usually 1 or 2 items with the caption "STARTING AT $1.00". (A very small number relative to the total number of items they offer.) This is obviously below the wholesale cost. Bid.com is doing this to grab attention... sure... why wouldn't I start bidding on a AMD-K62 330MH machine if I could get it for a steal.... it draws people in... gets them involved. Bid.com is probably hoping that the bidding will go over the wholesale cost so that they can at least breakeven on these items but recognizes that this means of promotion is a sound marketing tool. They are prepared to make the investment in building traffic if the price doesn't make it over their wholesale cost. I have seen some of these particular items go for prices higher than I thought they were worth (I was only following them because I got sucked in and have bid on a few myself). In some instances however, the bid price may not go over the wholesale cost in which case bid.com loses money. As I've said before, this is no different than a grocery store selling bread and milk below cost (loss leaders) to build store traffic. They do this to attract new consumers to their store because they know that the lifetime value of a consumer, if they can develop them into a loyal shopper, is worth much more than what they lose on the milk. Consumer research indicates that approximately 1/3 of consumers (in Canada at least) are cherry pickers... they exhibit relatively little loyalty and shop where the prices are best on a flyer by flyer basis. The remaining 2/3, the majority, however don't do this. If you get them into the store on several occasions and develop a relationship with them they are likely to stick. It is for this reason that investing in potential consumers make sense. The longer term value of a customer can be significant. (Of course, you'll also need to provide good service and undertake other activities to solidify the relationship - such a e-mail flyers, rewards programs, exclusive member auction events, etc.) If Godin says they are going to cut back on doing this, I would suspect that they have determined that there are now more cost effective marketing tools available - they've achieved a sufficiently high profile that many of their marketing objectives can be achieved through cross promotions with suppliers (Chapters), PR (CNBC coverage) and contra deals on web site billboards. They have a database of one year's worth of prime prospects and the dutch auction registrations whish will greatly expand their number of hits. They can now use this for regular e-flyers - similar to the one we all got about the Dutch Auction this week. None of these types of marketing will cost them a cent. This was not the case when they started up... they had to achieve a certain mass before they could work deals like this and price promotion was probably a good way to hit the road running. Having said all that, I agree that as they get larger they will need and want to increase the number of consumer exposures. I guess the question is, are they now in a position to do this in a much more cost effective manner? I would think they are. They might spend the same or more but the impact will be significantly greater per dollar spent. This is all great news in my mind and everyday there is a new press release with a new strategic partnership, consumer initiative or broader product offerings. Still watching and waiting....