Monthly Archives: June 2014

Why Social Networks are Cheap

 

mobile gameResearch in diffusion of innovations provides information about how social networks and mobile technologies are adopted. The data can be used by marketers to help determine the optimum social media tools in which to invest, the trajectory of consumer acceptance of networks and technologies and the usage patterns of customers over time.  However the old methods of charging high prices for new technologies may work for physical products, but it is much harder for marketers to charge high initial prices for social media or mobile applications.  Apple was able to choose a price skimming strategy, introducing the iPhone at a high price and reducing it over time because people really wanted the product and had few similar alternatives. Consumers are used to paying high prices for hardware design.

It is much more difficult for marketers to get away with high prices for software and media because consumers have grown accustomed to getting these items for free.  For example mobile app marketers use a strategy of price penetration, offering the product at a reduced price to attract consumers and raising the costs or fees later on. The app Temple Run is free, but to unlock new screens the consumer must pay more.

Below is the progression of price discounts for the iPhone over time.  Each stage represents a consumer adopter group and shows how the price skimming practice worked for the iPhone 8 gig model.

Table 4.6: Gotta have an iPhone

Adopter Date Price of iPhone
Innovators June 28, 2007 $599 8 gig
Early Adopters September 5th, 2007 $419 8 gig
Early Majority July 11, 2008 $199 8 gig 3G
Late Majority January 6, 2011 $49 3G

Some app designers are able to charge high prices because the consumer base has strong motivation to pay high prices and have the money to do so.  Apple limits the price of apps in the iTunes store to a max of $999.99.  One such app is called VIP Black, which offers special services to high income individuals who must prove their assets before buying.

Here is a link to an article from the UK Telegraph on the Most Expensive Apps.

 

 

 

 

 

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Bloglette: Soda Ban is Over

This is from the New York Times (June 26, 2014) on the outcome of the soda ban:

The Bloomberg big-soda ban is officially dead.

The state’s highest court on Thursday refused to reinstate New York City’s controversial limits on sales of jumbo sugary drinks, exhausting the city’s final appeal and dashing the hopes of health advocates who have urged state and local governments to curb the consumption of drinks and foods linked to obesity.

The Cola Wars

Today I was interviewed by Thomas Risch of Sunset Presse for a documentary titled “The Duel Between Coke and Pepsi. ”  The filmmaker asked me a number of questions about the New York City Soda Ban and social media activities of the two companies.

The soda ban is making news currently because Mayor DiBlasio would like to uphold the ban on large-sized soft drinks.  The ban approved by the New York City Board of Health would limit sales of soft drinks over 16 ounces in restaurant establishments.   Recently the mayor appealed a prior decision by a lower court to strike down the ban.  We are now waiting for the Albany court’s decision.

The question for consumers is whether there is a strong public interest in banning large sodas.  Mayor Bloomberg made clear that if someone wanted to drink more soda he or she could buy two.  The group New Yorkers for Beverage Choice argued that people have a right to decide which size soda to purchase.

Aside from this issue Coke and Pepsi are engaged in a cola war that has now extended to social media.  And, the fight can get intense with each side trying to steal share from the other in a saturated market here in the US.  The United States has a per capita consumption rate of 260.9 liters annually and the growth rate in carbonated beverages is expected to be .3% through 2018 according to Euromonitor.

Some examples of the head-to-head fighting in social media are:

1. Though Coke is sponsoring the World Cup, Pepsi is running ads with soccer stars.

2. Coke’s Ahhhh website features a video with Kina Grannis, the winner of the Doritos Crash the Superbowl campaign in 2008.  Doritos is a Pepsi product.

The war is likely to continue and move to the developing world where per capita consumption is lower.  People in India only consume 9.3 liters annually and in China 56.7 liters a year. In both countries growth rates are expected to be strong through 2018.

Positioning with Social Media

Positioning Executions in Social Media and Mobile

Positioning is when the marketer seeks to create an image for the brand in the minds of consumers relative to competitors. Though positioning is a cognitive perception held by consumers indicating brand meaning, marketers may manipulate the four p’s of the marketing mix to influence people. Social media and mobile marketing contribute to consumers’ perceptions of positioning and may reinforce certain beliefs and attitudes.

Some practitioners suggest that marketers can’t fully control social media so it’s risky to use Facebook or Twitter to build an initial position. Therefore, most brands use social media to enhance an existing positioning strategy. For example, Pepsi Max’s slogan in the carbonated beverage market is a “zero-calorie cola in disguise.” Tweeting at #UncleDrewstunt, Pepsi entertained viewers with an 80 year old basketball player who was really an NBA superstar in disguise. The fun gag played on the positioning and engaged the audience (http://www.adweek.com/news/advertising-branding/voice-hold-your-position-146629). 

uncle drew

Types of Positioning

Some brands go head to head, positioning themselves close to one another, targeting the same customers and appealing to them in similar ways. Stumble Upon and Digg are two social media bookmarking sites that offer users similar experiences and target the same customers. Other brands try to differentiate themselves providing customers reasons to consider the brand as distinctive and unique. Such brands seek different targets and use different strategies to reach them. Twitter and Facebook serve two different functions and even reach different audiences of users. From an advertising perspective Twitter and Facebook also differ, serving ads with different purposes. Advertisers use Twitter to send out information, while Facebook’s role is to engage customers.

In terms of positioning Facebook may not be a place to create a position as much as support an already existing positioning strategy. Just as commercials on television do not create a positioning, they act as a conduit for communicating the position. However, social media can support a brand position very well. For example, if a brand wishes to hold the position of connectedness within a community of consumers, one aspect of that connection would be a strong and active base of customers on Facebook. If a brand chooses to be known as customer focused, the company may monitor Twitter and intervene on issues of customer service. In these cases social media solidifies the positioning strategy.