Dynamic Game

Reddit is opening up a new revenue stream by testing dynamic product ads on its popular social media platform. Launched about a month ago, the new initiative automatically places ads into active customer discussions about a potential product purchase. Their initial tests showed that the dynamic ads could almost double an advertiser’s return on advertising spend.

It will be interesting to see not only the financial impact of the new initiative but also how it alters the behavior of Reddit users.

BCG’s latest research finds an untapped opportunity for brands who think they have exhausted their markets: the nearly 1 billion consumers between the ages of 50 and 70, who are more resilient, more online, and more influential than most businesses realize. “Don’t Overlook Your Mature Consumers” explains the power of this group and the multi-trillion dollar opportunity they present for the brands that win their trust and loyalty.

There is a big gap between what most customers say about sustainability and whether they actually purchase sustainable products—much less pay a premium for them. But if companies are to achieve their sustainability goals, they must drive green choices into the mainstream. We have identified eight key barriers to sustainable choices that span industries and markets.

Overcoming these impediments requires a deep understanding of customer needs that drive choices—and the degree to which customers perceive sustainable products as delivering emotional and functional needs. Although overcoming engrained habits is hard and social conformity works to preserve old patterns of conduct, we have defined a four-part framework that companies can use to nudge customer behavior toward sustainable choices and attract mainstream adoption of green options.

Overcoming the Eight Barriers to Making Green Mainstream

We will need to capture CO2 in order to minimize the impact of climate change. I found this video summarizes very well the various options both technology-based (CCUS, DAC) and nature based (biochar, enhanced weathering their advantages and costs. The range of prices shows that a single price power ton of CO2 is not enough to incentivize all these technologies. Companies and Individuals should spend and invest to offset their Carbon footprint. There is a bit of controversy on whether Carbon Capture is a solution or an excuse to keep burning fossil fuels. My take is that at the stage we are in, we need to all potential means we can mobilize to minimize the CO2 in our atmosphere. Spending or committing to spend 100 or 200 $/t i proportion to your emissions provides an incentives to spot emitting. So there is a way to align incentives. I am not a deep specialist of this so please share what you think.

Taylor Swift fans in North America may seem irrational to some people for paying thousands of dollars for tickets to her concerts. But the recent behavior of thousands of North American fans exhibits a rational streak after all. Some fans have discovered that it is less expensive to fly to Europe, see Swift perform in a place such as Stockholm, and thus have a mini-vacation in a foreign country than to pay the ticket prices here at home. Much greater utility at a lower overall price is a tradeoff that classical economists can respect.

ans are following Taylor Swift to Europe after finding Eras Tour tickets less costly there

As companies increasingly adopt dynamic pricing, the balance between profitability and customer perception of fairness becomes crucial. My colleague and co-author Arnab Sinha reveals what executives should keep in mind as they think about whether they should be changing their prices more frequently.

🎢 A theme park charging more when the sun is shining?  🍔 A burger costing less at the quietest part of the day?    Frequent price changes risk creating unhappy customers. So how should companies approach dynamic pricing?  How Companies Can Make Dynamic Pricing Fairer for Customers

My colleague John Pineda spoke to Fortune last week on how businesses are grappling with a more practical dilemma around artificial intelligence—how to put a price on it.     John encourages leaders to understand if their AI applications are augmenting humans or fully replacing tasks. He also emphasizes that “Experimentation drives value. Get people using it, trying it, and testing it, [to] come up with their own ideas of what they can do with the technology.” 

The price of AI is tricky to determine

I recently had the pleasure of discussing the future of restaurant pricing and tipping with Roger Beaudoin on the Restaurant Rockstars podcast. As we navigate through challenging economic times, understanding and innovating pricing strategies becomes essential in the restaurant industry.   🎧 Listen in for strategies on how restaurant owners can thrive in today’s competitive market.  

Episode #388 The Future of Restaurant Pricing Strategies and Tipping

Diageo, a world leader in branded alcoholic beverages, has started to look beyond conventional market research to identify what consumers want. By drawing inferences from the stories consumers are already telling – on social media and other platforms – they have identified several strong trends that have implications for building consumer brands.

My quick interpretation: the analyses show that Generation Z and Millennials have no middle ground. Both want intensive immersive experiences, enhanced, if possible, by virtual or augmented reality. But at the other extreme, they also want complete, rejuvenating, and healthy disconnects. Brands that strengthen a sense of community and purpose will have an advantage in either case. One still-untapped opportunity is sustainability, which consumers seem to prioritize more in their conversations than in their actual purchase behavior. “Brands must focus on closing this say-do gap by giving consumers the ability to make sustainable choices, removing physical barriers and making this trend the social norm,” the report said.

From conscious wellbeing to betterment brands: Diageo outlines 5 top trends shaping consumer behavior

Is the “Introvert Economy” so pervasive that it will reshape many business models? The term refers to a large swath of the US population that interacts less than previous generations, indulges less, and spends more time at home and online. The pandemic reinforced many of these behaviors by serving as a multiyear trial run of how many things outside the home people could do with less of or do away with entirely. Businesses that rely on physical engagement – such as brick-and-mortar retail and restaurants – will need to figure out how to replicate their experience online or create an in-real-life experience that is so irresistible that it draws out the introverts.

The Introverts Have Taken Over the US Economy

Epic Games, the developer of Fortnite, exemplifies how companies can use different pricing models – rather than different price points – to differentiate themselves across customer segments. Developers that use Epic’s tools to create games for sale to end-customers pay Epic a 5% royalty on all game revenues above $1 million. But what about companies that don’t sell games and benefit from using Epic’s Unreal Engine and other tools to create animations, graphics, and immersive content (such as film studios, graphic artists, architects, and theme parks)? To tap that potential revenue stream outside of game development, Epic will introduce a seat-based enterprise pricing model at $1,850 per seat per year, effective next month. Its traditional royalty model will still apply to game developers. Students, educators, hobbyists, and companies with annual gross revenue of less than $1 million can continue to use the tools for free. Epic has said that the new complementary pricing model will help them “make long-term Unreal Engine development sustainable, so that we can continue to provide the very best, most advanced creator tools to all industries—big companies, small studios, individuals, and everyone in between.” By aligning its pricing models with the ways that its customers create and derive value from its tools, Epic shows a high level of pricing maturity.

New Unreal Engine pricing model

Electric vehicles (EVs) are getting less expensive as more manufacturers introduce vehicles in lower price tiers. China’s BYD overtook Tesla last year as the largest manufacturer of EVs by selling lower-priced vehicles. And now Rivian has followed suit.   It seems that EV manufacturers are recalibrating the price-value relationship by offering vehicles designed for lower-price segments. This is an important distinction from merely cutting prices to boost sales or to offset quality issues. As I wrote in Game Changer, pricing cannot solve non-pricing problems. If the predominant problem is perceived quality – perhaps because lifelong ICE (internal combustion engine) owners are apprehensive about vehicle range and access to charging stations – the manufacturers may be better off improving the perception than cutting prices.

Rivian Unveils Two Lower-Priced EVs as It Seeks to Jump-Start Sales

Aligning your company’s offers with the unique demands of different customers is key in the Choice Game. The game is particularly relevant to those who offer tiered subscription services. BCG pricing expert Matthew Kropp dissects the details. Learn more about strategic pricing and the new book from BCG’s pricing practice.

My colleague Matthew Kropp discusses the Choice Game in the most recent edition of the Game Changer Expert Interview Series. Learn how players can maintain a competitive advantage by emphasizing differentiated offerings in his interview below. 

I recently sat down with Mark Stiving, host of the Impact Pricing Podcast, where we discussed the transformative power of pricing strategies for enduring business success. Discover the significance of sharing value with the market, the impact of pricing models over prices, and the potential for strategic pricing to foster long-term customer loyalty and business growth.  

Game-Changing Pricing Strategies for Long-Term Success with Jean-Manuel Izaret

“Green” buildings should be ubiquitous, considering the decisive role they can play in mitigating the effects of climate change. UN General Secretary Antonio Guterres has said that “how we design power generation, transport and buildings in cities – how we design the cities themselves – will be decisive in getting on track to achieve the Paris Agreement.” So why aren’t there many more green buildings? The problem apparently lies on the demand side, according to the research in this newly published paper. Affordability, however, is only one part of the challenge to spur more consumer demand. One of the most fascinating insights in this research is that consumers are still unclear about why they should buy or live in a green building. The researchers found that “after more than 20 years of promotion, the public is still very vague about what private benefits the green building houses can offer. More effective and creative strategies for green building education are needed.” This conclusion fits with the points we made in our chapter on green premiums in the Game Changer book, when we stressed that companies need to do a better job of underscoring the value and benefits of the product beyond the general “it’s for the good environment” claim. In short: for many green products, the problem with igniting stronger growth is the messaging, not the price.

Raising the demand for residential green buildings: A general consumer behavior model, the evidence, and the strategies

Players of the Dynamic Game need to develop unique skills to constantly adjust prices in real-time, adapting to context, competition, and ever-shifting market conditions. Pricing expert Fabian Uhrich lays out the rules.    To learn more about strategic pricing and the new book from BCG’s pricing practice.

Be sure to watch Fabian Uhrich’s expert interview, “The Dynamic Game: Pricing That Adapts to Demand.” Here Fabian discusses the Dynamic Game, the challenges players face, and strategies you can take to win.