Ruslan Kogan loves stirring the pot. He loves getting under Gerry Harvey’s skin. He loves poking holes in JB Hi-Fi’s business model. He loves slamming his dinosaur competitors.
He even loves stirring consumers.
And that is exactly what he did yesterday when he announced that his creatively named online electronics retailer Kogan would levy a “tax” against customers who use the Internet Explorer 7 browser.
Users of IE7 will find the prices they pay for goods will be increased by 0.1% for every month since IE7 was released – right now, that’s a 6.8% tax.
Kogan says supporting the continued use of IE7 is a crime of sorts against the internet.
“Anyone who is involved with the internet and web technology would know the amount of time that is wasted to support all these antiquated browsers. You have to make all these work-arounds all the time to make sure the site works properly on it,” Ruslan told us yesterday.
“We have not done the exact maths, but it is [costing us] a significant amount. The front end of every screen has to get redeveloped every time in order to render properly in IE7.
“It’s not only costing us a huge amount, it’s affecting any business with an online presence, and costing the internet economy millions of dollars.”
The comments came thick and fast on our website, with plenty of web developers and IT people throwing their support behind Kogan for striking a blow against IE7.
But not everyone was impressed.
“How dare these arrogant propeller-heads demand that 1000s of their customers give up their stable, familiar software in order to access a supplier’s site for the supplier’s profit?” asked one.
“What happened to ‘the customer is always right’ and ‘service is king’?”
I think Kogan does believe the customer is always right – but he’s got a very clear idea of who his customer is, and he probably knows he’ll get more kudos than curses from his consumers.
But what impresses me about this is the fact that Kogan is so willing to experiment with his pricing.
In some ways, charging customers extra if they want to use different transaction methods is nothing new. Many restaurants add a surcharge for customers who use certain credit cards to pay. Taxis and airlines do the same.
These charges are about directly passing on a cost to the consumer. Kogan is doing something similar. Customers have the option to avoid the extra cost if they want, or they can cop it for the sake of convenience – it’s their choice.
This isn’t the first time Kogan has played with his pricing models.
Back in early 2011, he created a feature called LivePrice, which works by offering customers cheaper prices the earlier they buy in the manufacturing process. For example, a customer could by a TV at the start of its product cycle for $330, and wait until March to get the product. Or they could buy the product in March and get it immediately – although the price will have increased to $399.
The customer gets the opportunity to get a hefty discount while Kogan gets working capital up front to meet his manufacturing costs.
Now, the model hasn’t exactly caught on across the retail world, but Kogan is persevering and full marks to him.
How many other retailers – indeed, companies – are trying new pricing models and bringing this level of transparency to their pricing?
The coming carbon tax should have led many businesses to examine their prices and their pricing policies. I’m not sure how many SMEs have actually been through this process, but perhaps Kogan’s cheeky move should provide another spur.
What new pricing model could work for you? How could you change customer behaviour with your pricing?
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
