Monday Memo
A Byte of Knowledge
A successful marketing campaign may bankrupt your business. Here's how...
Let's say you're acquiring new customers through paid traffic. You've struck gold with a message that's deeply resonating with the market. It's bringing on new customers left and right. So you up ad spend big time. If you're not scaling, you're dying!
But what if these new customers only make that single, low-value purchase? What if they never buy another product from you again?
As you dive into the numbers, a sobering reality comes to light. The cost of acquiring these one-time customers far exceeds the meager revenue they generated. Your customer acquisition costs (CAC) have skyrocketed, while the lifetime value (LTV) of these customers remains pitifully low.
You've essentially poured money into a leaky bucket, with no hope of recouping your investment. If left unchecked, this "successful" marketing campaign will bleed you dry.
This is why it's crucial to align your front-end marketing efforts with the rest of your business. You want customers who will buy more and different products/services you offer.
Obvious, right? But many Goliaths have fallen because they couldn't resist the ego-stroke of a "successful" cold traffic campaign.
The goal isn't more customers - it's more of the right customers.
Something to Ponder
Entrepreneur Shaan Puri said, "Cynics get to be right. Optimists get to be rich." He was talking about start-up founders, but this rings especially true for AI.
Because you face a choice: succumb to the fear, uncertainty, and doubt around artificial intelligence...or embrace its transformative potential.
The cynics will focus on the risks and dangers, from job displacement to privacy concerns. They'll sit on the sidelines with their tails between their legs. And society WILL face challenges adapting to AI. It has with every groundbreaking technological advancement in history. The cynics will feel vindicated by every bump in the road. But by remaining on the sidelines, they've already lost.
The optimists, those who embrace AI, have the chance to win. They'll harness the power of AI to build innovative products, streamline processes and drive unprecedented growth. Yes, they could fail. But they're actually in the arena fighting - the only place where success is possible.
The cynics may get to be right along the way...here and there. But only optimists will reap the rewards of AI.
🚀 Legally Steal these 27 PROVEN A.I. “Growth Codes”
"They’re able to get REALLY damn good copy… that requires minimal editing… right out of the gate. It's pretty amazing”
Access All 27 A.I. "Growth Codes" Now
We Asked – AI Answered
Our Question:
“It’s a well-established phenomenon that when we buy a new product at a particular price, we get anchored to that price. The anchor price sets a mental benchmark, and we compare any price afterwards to it.
How can businesses successfully increase their prices despite the price anchoring effect? Are there any strategies, examples, or case studies that show how to overcome this psychological barrier?"
ChatGPT's Answer:
Below are several strategies, along with examples and case studies, that highlight how some businesses have effectively overcome price anchoring.
Gradual Price Increase
One common strategy is to gradually increase prices over time, which can help customers adjust to the new price points without experiencing sticker shock.
Example: Netflix
Netflix has employed a strategy of incremental price increases over the years, effectively managing customer expectations and anchoring perceptions. Starting from a base price of $7.99 for its standard streaming plan when it first separated the streaming and DVD rental services in 2011, Netflix has methodically increased its prices.
The standard plan went to $8.99 in 2014, then to $9.99 in 2016, $10.99 in 2017, $12.99 in 2019, and most recently to $15.49 in 2021. With each price increase, Netflix communicated the added value to customers, emphasizing their investment in a growing catalogue of original content and improved service features
Repositioning the Product
Companies may also reposition a product to target a different market segment, which can allow for a new pricing strategy free from previous anchors.
Case Study: Old Spice
Old Spice repositioned its brand from one that was seen as outdated and your "grandfather's brand" to a hip, edgy brand targeting younger consumers. Through a successful marketing campaign that went viral, they managed to change the perception of their products, allowing them to update their pricing structure without being tied down by the old price anchors.
Creating New Product Lines to Establish Separate Price Anchors
Launching new products or lines can establish a separate price anchor, avoiding direct comparisons with existing products.
Example: Apple's iPhone Pricing Strategy
Apple has a history of introducing new iPhone models with incremental technological advances and, often, higher prices. A prominent example occurred with the release of the iPhone X in 2017.
Prior to the iPhone X, consumers were accustomed to the price anchor set by the previous models, like the iPhone 6, 6s, 7, and 8, which followed a pricing model that typically started around $649 for the base model. The iPhone 8, introduced alongside the iPhone X, also adhered to this pricing structure, with a starting price of $699 for the base model.
However, the iPhone X marked a significant shift in Apple's pricing strategy. It was introduced with a starting price of $999, which was a substantial increase from the traditional pricing anchor that consumers were used to for the base model of new iPhones.
Market Conditioning
Companies can use market conditioning to gradually prepare customers for price changes through communication strategies.
Detailed Strategy: Tesla's Price Adjustment Tactics
Tesla, facing the need to increase the price of its Model S by $5,000 due to increased raw material costs and changes in the electric vehicle subsidy landscape, decides to condition the market before the hike.
Six months prior to the change, Tesla's CEO might mention in interviews and shareholder meetings the possibility of upcoming price adjustments due to the subsidy phase-out and rising costs of lithium.
Three months before the increase, Tesla sends out a newsletter outlining the challenges in the supply chain with a graph showing lithium prices have gone up by 40% in the past year. One month before the new pricing, Tesla announces that current prices will be honored for all orders placed in the next 30 days, creating a sense of urgency.
GOT 15 SECONDS?
Thanks for reading the Monday Memo.
Until next time!
The AI Marketers
P.S. Want to automate your marketing with AI? Let us know what problems you want us to solve with AI and we’ll put our dedicated team to solving it. If we make the code, we’ll share it with you.
Just fill out this form here: https://bit.ly/3Smsvcy
