(this is the Day 3 recap of my weeklong Marketing Academy training - a collaboration between Google and Wharton)
We heard from 3 professors today: John Zhang on how to correctly price products, Joe Simmons on how human biases affect our decision making, and Rom Schrift on how to achieve creativity…consistently
If you skipped over the Key Takeaways section, take ~20 seconds to seriously think about it. If you had all the resources in the world, how would you take down one of the world’s largest technology companies? Would you simply compete with money and hire all the engineers away? Would you try to get more regulations around the tech industry?
Professor John Zhang shares that Google’s initial strategy is very simple: Take advantage of a two-sided market. Give users a product for free (searches), and charge the advertisers a premium to reach those users. In this instance, he argues, Google has effectively priced their product at $0.
Now the question becomes how would you take away all those users who are enjoying Google’s free product? Because if you take them away, the advertisers will surely follow.
The answer: Verticalized search engines that do a better job than Google at finding you what you’re looking for
Think Amazon, Reddit, Quora. If you know there’s a physical item you’d like to buy, you may search on Google to compare prices sure, but it’s more likely you go to www.amazon.com directly
Interestingly enough, we already see this play out in the China market. Baidu is the Google equivalent in China yet the everyday citizen rarely start their searches on there. They go to Zhihu to ask questions, RED and Douyin to watch short-form videos, Bilibili to watch long-form videos, Taobao or JingDong to shop, and Elema for food deliveries
Professor Zhang argues it’s because Google had a great pricing strategy (i.e. pricing searches at $0), that they were able to achieve their current level of success, and there are 3 popular pricing models used today:
Essentially, consumer-based pricing focuses on the value of the product for the target customer, but you can’t find that value without having to do market research, customer interviews, and lots of analysis (aka it’s a lot of work). Why not just use information we already have (i.e. our costs, our competitor’s prices) to make a pricing decision?
According to Professor Zhang, the Final price should be equal to a reference value (a comparable project) + the positive differentiation value (the dollar value you assign to what makes your product unique) - the negative differentiation value (the dollar value you assign to the features you’re missing vs. the competition)
I’m a huge behavioral economics nerd so I was super excited about this lecture by Professor Joe Simmons. Here are the key takeaways (with some real life examples):
This is a concept Daniel Kahneman has talked about extensively in his book “Thinking Fast and Slow” (which I also believe won him a Nobel Prize).
If you didn’t do a double-take when reading the title “Standardized Creativity” you might already be half asleep because for most us, these two words are in conflict with each other. Isn’t creativity inherently NOT standardized? You can’t predict when a bolt of inspiration strikes!
Let’s take a look at some “creative” advertising examples:
I think most of us would agree that these advertisements are all “creative.” So Professor Shrift points out: if we could find the common denominator for all these ideas, couldn’t we replicate them again and again in new formats? This in turn begs the question, is there something all 3 of these ideas share in common?
If you’ve never had Dominos Pizza, all you need to know is that they’re famous for a slogan: 30 minutes delivery or you get the pizza for free! When they first introduced this concept, they “disrupted” the pizza delivery industry with this “creative” idea
Diving a little deeper, we see something interesting: Dominos Pizza, whether they meant to or not, created a dependency: the PRICE of the pizza would change depending on the DELIVERY TIME
So let’s take this 1 step further, what if the price of the pizza depended on the temperature? I.e. as the temperature of the pizza goes down, the price goes down. Would Dominos end up creating an “oven-car” in order to keep the temperature constant?
While this (obviously) didn’t happen, this example goes to show how we can consistently generate creative ideas through attribute dependency!
Fast forward to the key takeaway, Professor Schrift shares a forecasting matrix he created whereby you would put the attributes of an existing product or concept along the x and y axes, and you move through 1 cell at a time to see what “creative” idea that specific combination will yield!
See you in the next Debrief!
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