No1 Online Retailer in Australia Kogan – Is Kogan business model their penetration pricing strategy

Ruslan Kogan in his parents garage started selling LCD televisions by direct shipping from manufacturer to consumers by which unnecessary costs is bypassed and the savings were passed to customers then this revolution business model of Kogan was born.

Because of this new model Kogan has grown at surprising speed with different products across the world and operating in 15 countries including their Home brand Kogan. No1 online retailer in Australia

Kogan is the most recognisable face of the online retailing revolution in Australia.”

Inside Retail Magazine

Kogan.com prides itself on offering the products we want, at the best prices. As an independent online store, they are able to go straight to the manufacturers, and bypass the agents, importers, wholesalers, distributors and retailers that are usually part of the retail process. By cutting out these expensive middlemen, Savings is passed to us.

KOgan1

Kogan’s Mission is “to provide the best products for the most affordable prices”.

Kogan has 99.8% customer satisfaction and 98% on-time dispatch record

Kogan3                 Kogan

Kogan2

New York Times had reviewed for Kogan Agora 4G as the best cheapest smartphones in Australia and with same features, powerful smartphone that runs with Android and is under 200$ .For example if anyone who have branded phone that costed above $500 few years back and if  the damaged screen replacement costs $100 now.Instaed of screen replacement they can put few more dollars to get this new Kogan Phone .Is this good decision .

lhttp://http://www.nytimes.com/video/technology/personaltech/100000003533757/smartphones-on-a-budget.html

What matters most to you Brand/Price of a product? And Why?

What matters most to you Brand/Price of a product? And Why?

Is this model the penetration pricing strategy of Kogan .As they have started their own range of electronics such as TVs, tablets and phones and other categories?

What you feel about other online retailers who are Kogan competitors?

Have you used Kogan products or heard anything from your friends & family. If yes is it worth buying this cheap Kogan products compared with branded products of same features ?

< https://www.kogan.com/au/about/ >

< http://www.nytimes.com/2015/02/26/technology/personaltech/video-feature-high-quality-smartphones-for-less-money.html?_r=2 >

Advertisements

30 thoughts on “No1 Online Retailer in Australia Kogan – Is Kogan business model their penetration pricing strategy

  1. This was a good blog to read and one that I can relate too. Kogan offers very good pricing options because it is not compounded by other issues that face most shop-front retailers. Kogan as a online store has eliminated many issues for walk-in customers. The issues for me though are yes brand and back-up service and to a point even some cheaper offerings that I myself are not too fond of. Kogan has had a reputation around selling cheaper TV’s which is it’s mainstream product offering. My perception is that the other products it sells is just to make an extra penny but is not so in love with those offerings (core focus). Brand is also a little of a concern as you tend to think about the Samsung’s / Sony’s of the world before Kogan but at the price Kogan is selling their TV’s at, can you really complain? Then there is the issue of backup warranty. I was looking at purchasing a phone through Kogan recently which they had for $100 less than most stores but what concerned me is after a few emails to Kogan support is that if the phone became damaged, I would need to fit the bill to get it back to them and with technology, electronics they way they are, what is the chances of this happening? Quite a possibility. The point is a return like that is a a cost that add’s to the overall risk associated with this type of purchase and it’s not always plain to see. There are hidden costs associated with internet shopping.

    Liked by 2 people

    • Thanks for your Reply Raymond . i agree with your opininon . Kogan although being number 1 in online retailing ,they pay freight costs for when product under warranty ( https://www.kogan.com/au/help/if-my-kogancom-product-needs-to-be-repaired-who-will-cover/ ) . My concern in this blog is to study about if the Kogan model is a Penetration pricing strategy they are following to gain market share . As first they started selling other brands now they have their own brand .And it depends on budget and requirement while we buy any product.For some of them they give more importance to brand . In every shopping there will be hidden costs not just in internet shopping ..

      Liked by 1 person

    • I think on-line retailing is great for certain products such as technology. Where you know exactly what you are looking for. Where trying it on or holding it, is not required. But to your point Raymond, after sales support and warranty is anther down side to on-line shopping. I like to deal with a person when I have a problem with a product. I don’t know if its related to my location, but what I am now finding is that the shop-front retailer is directing me to the agent service centre to have repairs….. Therefore for technology items, I am finding that on-line versus shop front, in my experience is becoming one and the same.

      Like

  2. Good Topic To choose…
    Efficacy is a fancy word to express quality. As in, how well something works (or doesn’t).
    Prior to a business can stress over marking, estimating, and being advantageous… it must stress over the nature of its offerings.
    In today’s commercial center, low-quality items/administrations won’t survive.
    The expense of being in the round of business today is to offer items and administrations that work.
    Winning organizations present quality items/benefits first. After that, triumphant organizations must adjust systems based after marking, evaluating, and being advantageous to maintain achievement.

    Liked by 2 people

    • Thanks Kdhawan2015 . I can summarise your point as Kogan is following Penetration pricing strategy . Yes its not easy to gain the market with low quality items . Kogan’s product are not low quality but low price only and they have a best quality that matchs with branded one’s . As Kogan are number one in online retail ,their products are also getting good review from industry and customers . Because kogan products can be returned in 14 days if you are not satisfied and also they pay for return freight costs under warranty . All the top brands were unknown and it takes some time get that .

      Liked by 1 person

  3. Hmm, you had me googling Kogan to check out their prices. I have found that with electronics, cheaper models is usually false economy. One day, not too long after you have had them,they simply stop working. There are a lot of people who would need positive word of mouth feedback to purchase Kogan goods. I will be following this to see if anyone has experience with their products.

    Liked by 2 people

    • Thanks enorton328 for your opinion .. Not all the low price products have that issue. But kogan dont display the individual review of cutomers . But industry wide they have got good review from media and newspapers . If they had review page of each products from customers it would have been easy for us to decide when comparing .. As we just cant relay on media review .. But my concern here was starting this Kogan business model was their penetration pricing strategy as they have their own brand .

      Liked by 1 person

      • Ahh, sorry. I think penetration is probably still a good idea as people (like me) will be untrusting of a new brand on the market. They can’t go premium price to build brand image unless they are premium and they are not. They are getting a better and better reputation so they can probably start to put their prices up soon. I can see that penetration pricing may effect their brand image. Is that what you were worried about?

        Liked by 1 person

      • Yes that’s what my opinion for penetration strategy of Kogan. . Initially they started selling Branded products after successful in that , few years back started their Own products. .Although they are new in market but they carried their experiences and knowledge of products, so only they have adopted penetration strategy in reaching customers .. If any customer who is not happy with quality of Kogan products they will get full refund within 14 days of purchase . People know what kogan used to offer earlier becoming number one in online retailing is not easy . All their achievements and experience have led to start their own products ..

        Like

  4. interesting blog

    Before a business can stretch over checking, evaluating, and being worthwhile… it must push over the way of its offerings.

    In today’s business focus, low-quality things/organizations won’t survive in todays competitive world.

    The cost of being in the round of business today is to offer things and organizations that work.

    Like

    • Yes true so only Kogan are using penetration strategy in their business. And Kogan has wide range of products from different brands .

      Like

  5. Interesting topic to read. It is true that Kogan is able to offer products at cheaper price than some of the other online stores. Quality of the goods sold is more important to me than the cheaper price. Question that comes to my mind is are they able to provide you good after sales services ? back up warranty?

    Liked by 1 person

    • I am that person that purchased things based on quality. I still have a great quality sub woofer (all grown up now and the woofer actually hurts my ears) and a great quality 250 CD changer (spent hours programing the name of each CD into that thing!)……

      Now when I buy something, I am seeing it more temporary – the next model will be out before I take home my new purchase.

      That being said, completely agree with you tjosep – no point paying for something that will break after a dozen uses. As a consumer today, I tend to want to hear other consumers views before I buy something. Then I go to various on-line retailers to see who will give me the best price. So an element of consumer diligence?

      Like

  6. The whole aftersales service aspect is a big issue but common to many other areas of online retailing. Often is just simpler to get another one. With technology brand is important to me – particularly in the smaller times in terms of compatibility. If I want a phone cover or charger or some other peripheral I know I can get these for major brands easily, cheaply and almost anywhere and often I want it or need it now. I don’t want the bother of having to buy it online and waiting for it to arrive. Happy to look at the TVs though.

    Like

    • Thanks sharpym for your sharing your thoughts. .. Yes After sales is one of the issues under warranty we won’t have that much problem but if out of it will cost us more not just online purchase but even from retailers too.. So in case of technology as they will be upgrading or launch new products at least twice a year .. It’s difficult to choose .. And after sales of Kogan as have shared in some comments here they only pay for freight cost and if you are not happy can return the kogan product products within 14 days .. So all this shows there penetration strategy in the market to reach more customers ..

      Like

  7. Interesting blog. I too had to google Kogan to check it out – they do seem to offer good deals, but if they don’t have an equally good reputation of after sales service then I guess that must be where the company also saves a few dollars. I hadn’t heard about Kogan before this blog so have no real knowledge of their after sales service and it probably would take a bit of “word of mouth” advertising to convince me to give it a try on anything expensive. Maybe part of the “quality” we pay for is the after sales service – or at least the comfort of thinking good after sales service is available. Price isn’t the only thing influencing our purchasing decisions.

    Liked by 1 person

  8. hi nice blog, and you’ve arouse my interest about Kogan that i never know it before. and after i read your blog and google for it, i found that the website is convenient and the price is much lower than other retailers, and goods are well categorized that easy to find. price will not be the only factor to influence customers, if the superior qualities are well incorporate with the cheap price, that will catch more customers to purchase on it. good prices definitely can attract customers’ interest, but without high quality of goods or services, they will not have one loyal customers.

    Liked by 2 people

    • You are right .. so only after your purchase if you don’t like the Kogan products they refund full money if you return within product in 14 days and most of the returns freight cost is paid by Kogan itself ..

      Like

  9. Kogan offers competitive price for electronics indeed especially with mobile phones. I have had good experience with them. I bought a mobile phone from them and the price was the cheapest among other retailers. Only kogan sold the specific color that I wanted too. I don’t think the product quality that Kogan sells are different with the other retailers. I have not found any issue with my phone. The only different was they provided me an extra charger that suited to Australian power plug because the original one is not for Australian, it worked out well too. When you can get the same quality product with cheaper price, why not? As you said, they use the advantage of eliminating the middle man to bring the price down. Kogan is very clever doing this. For online retailers, they need to be competitive. People do not get the service that they can get in the retail store thus Kogan have to provide something different that retail store cannot give which is the low price. This is what makes people come back and prefer to buy with Kogan than in retail store.

    Like

    • Thanks for sharing your experience stjang..what you have told here is right..but service wise all the Online retailers its almost same .. If they give the same as of retail stores then it’s not easy for them to sell in that price .. By improving the current services with speedy repairs customers will be happy and buy from them again .. For long goal of an company even after sales service matters , so Kogan must spend some dollars in improvisation of it .. I feel tieups with small service centres all over Australia would help them in this ..

      Like

  10. as a big fan of technology and consistently looking for whats new , it really doesn’t matter whether its a known brand or not . I try different technologies and gadgets and apply them to my Business (Security systems). yes for ordinary consumers it might matter the brand but there is a big considerable segment of the markets who care more about the functionality . Commercial users , low income , and system developers like me . I purchase non brand small tv’s kogan being one of them to add screen to my security system and sell it as a package . its smart functional and affordable. the only problem is its not well marketed or known so its hard to see customers buying it as main Tv. but yes I would go for functionality and price then brand

    Liked by 1 person

    • Thanks Mohamedh . Your comments clear answers to some questions of few bloggers here regarding Kogan .. i agree that Kogan is not marketing their own brands ,If they do so they cant offer in that price .. People feel buying a branded as luxuary . For me its same yours i like to keep trying new brands. Although there are high risk in buying unknown brands .But after some research by reading about them will not just make your buying behaviour easy,it also improves the knowledge of new technology and brands offerings .

      By this i came to conclusion Kogan’s Penetration pricing strategy they must atleast invest some small amount in marketing ,so they can reach and get more customers . Although some customers dont like new brands but people like you and me are the one’s Kogan need to market for . Then Kogan products will have small hike in the pricing ..

      Liked by 1 person

  11. I am from Germany and I have never come across Kogan – nor am I aware that we have a company with a similar business model operating.
    In general, I am not a brand addict, but when it comes to smartphone, TVs or technology I stick with Apple or Sony. Maybe because I am not a tech expert, I feel a lot more comfortable with buying a brand that I know and with which I made good experiences in the past. Therefore, I probably wouldn’t become a Kogan customer but I could be interesting for people who know exactly what they are looking for and who a familiar with the special product attributes.

    Like

    • Thanks Kat for sharing your experinece . I agree with your thoughts like buying branded products . As i have explianed Kogan are number 1 online retailers in Australia and are doing business in 15 more countries as well . you can check this link to know more about them . why i strarted this because of their strategy in online retailing of goods. Now they are following Peneration pricing strategy by launching their own products with same features as of branded ones like Apple,Samsung etc .

      Some new offerings like Kogan makes you think to buy them .As they refund full money within 14 days of purchase if you are not satisfied with their product including freight cost . Let me know your opinion ..

      Like

  12. Interesting post!
    Penetration pricing pursues the objective of quantity maximization by means of a low price. It is most appropriate when:

    Demand is expected to be highly elastic; that is, customers are price sensitive and the quantity demanded will increase significantly as price declines.

    Large decreases in cost are expected as cumulative volume increases.

    The product is of the nature of something that can gain mass appeal fairly quickly.

    There is a threat of impending competition.

    As the product lifecycle progresses, there likely will be changes in the demand curve and costs. As such, the pricing policy should be reevaluated over time.

    The pricing objective depends on many factors including production cost, existence of economies of scale, barriers to entry, product differentiation, rate of product diffusion, the firm’s resources, and the product’s anticipated price elasticity of demand.

    Like

    • Thanks Ce732 your thoughts about penetration pricing is simple and straight forward . Although looks brief you have covered everything in a clear way ..

      Like

  13. I also shopping at Kogan two or three times and had some experience. I only buy small things like computing mouse, usb and ipad cover. Never buy any smart phone or laptop in there because it takes time to return if product got error or damage. I never expect the error however i got two product which got error after 2-3 month used from Kogan. They are cheap that why I don’t want to spend my time to return and require refund. However, Kogan is successful website when they set price of product lower than other Websites. They got high security and quick delivery.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s