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Implementing Value Pricing: A Radical Business Model for Professional Firms by Ronald J. Baker

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CHAPTER 5

Four Ps and Five Cs

[S]elling concerns itself with the tricks and techniques of getting people to exchange their cash for your product. It is not concerned with the values that the exchange is all about. And it does not, as marketing invariably does, view the entire business process as consisting of a tightly integrated effort to discover, create, arouse, and satisfy customer needs.

—Theodore Levitt, Marketing Myopia, 1975

Shawn Fanning was a 19-year-old college dropout in 1999 when he created Napster. In the first three months of 2001, 2.5 billion files a month were being downloaded, validating the economist’s theory of demand, which states the that lower the price, the larger quantity demanded, especially a zero price. Nevertheless, from the music industry’s perspective, when you have millions of potential customers breaking the law, you do not have a crime wave; you have a marketing problem.

The point is not to argue the highly contentious legal issues of copyright and private property law, particularly as it relates to digitally downloaded music files. The more precise point is the lack of understanding of value by the music company executives. By keeping their focus on the inside of their companies, they completely ignored the external value potential of easily obtaining music files. It took Steve Jobs of Apple Computer to capitalize on this opportunity with iTunes—which at the time of this writing has a 70 percent market share on the legal downloadable music market—in ...

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