Most customers like adverts provided those adverts are used to subsidize the price of products or to make them free: “Roughly one million people are subscribed to Netflix’s ad-supported tier after its second month, based on data seen by Bloomberg, and anonymous sources say it has made good on its forecasted deliveries to advertisers.” 

At the same time, removing adverts while marginally increasing price can also work (that is what Disney is doing and it is also working). The key thing here is VALUE. Subsidizing a product through adverts or eliminating adverts by jacking up product  price will just be fine, if you can create value for the specific user base.

Yahoo advertised its Yahoo premium which does not offer adverts; it was not that lucky. But Google signed millions of paying customers on Gmail. Gmail is not just an email; it is a gate pass to the modern internet; I pay for my personal Gmail!

Look at your market from the lens of value and stop being fixated on price. If customers see value, the purses will open. But if there is no value, no mission. That is why I hate cost-based pricing; I prefer value-based pricing which focuses on the value created, and based on that, one can arrive at an optimal price point which is typically more superior than a cost-based mindset, for innovative products.

At the end, check the value you are delivering.

Roughly one million people are subscribed to Netflix’s ad-supported tier after its second month, based on data seen by Bloomberg, and anonymous sources say it has made good on its forecasted deliveries to advertisers. Adding to the encouraging news for Netflix, existing customers largely stayed put, and the lower-priced ad tier attracted new and lapsed users. By contrast, Disney successfully used ads to justify a price increase: Disney+ without ads now costs $3 more a month, and existing subscribers “didn’t care.” CEO Bob Iger has already signaled more price hikes are coming.

Comment on Feed

Comment 1: But, in a place like Nigeria where price of things is a heavy weight decision factor for most customers, how does this still hold?

My Response: It comes down to value. While we can be more sensitive to price in Nigeria, everyone will still look for value. More parents choose private schools over the FREE public schools these days. Check your village, the private primary school is possibly outperforming the free public ones on relative enrollments.

Comment 2: Very interesting submission. However, in my opinion, I believe that appropriate pricing models should be determined by a few factors howbeit non-exhaustive:
1. Cost of manufacture to market (distribution channels inclusive, adverts etc.)
2. Competing goods/services – alternatives usually, when looked at in a broad sense
3. Value of goods/services -pedestrian or innovative
4. Customer perception – branding, micro/macro environmental influences etc.
5. Term goals – short/medium/long.

When products or services are looked at within a melting pot of these factors, the right compromises would determine the best pricing model to adopt.

My Response: Sure – value based pricing does not mean you do not have your cost in view. It is saying that you are not tethered to cost and margin to arrive at what you ask customers to pay.

Comment 3: For those who like summaries:

The Central Bank of Nigeria (CBN) has once again raised the interest rate in a push to contain the pressure rising inflation has put on the naira.

The benchmark lending rate was raised to 18 percent on Tuesday following the apex bank’s Monetary Policy Committee (MPC) meeting, which was held in Abuja, beginning on Monday.

The CBN governor Godwin Emefiele said after the meeting that the committee voted to keep the asymmetric corridor at +100 and -500 basis points around the Monetary Policy Rate (MPR). In addition, the MPC voted to keep the Cash Reserve Ratio (CRR) at 32.5 percent, as well as the Liquidity Ratio at 30 percent.

The CRR is the share of a bank’s total customer deposit that must be kept with the central bank, while the bank’s liquidity ratio is the proportion of deposits and other assets that must be maintained to enable the banks to meet their short-term obligations.

This marks the sixth consecutive time the CBN is raising the MPR, a decision it said has significantly helped to tame inflation. The MPC raised its benchmark lending rate from 16.5 percent to 17.5 in January.

The 18 percent raise comes amidst biting effects of the naira redesign policy, introduced by the CBN in October last year.

The policy implementation resulted in a cash crunch that stifled economic activities across the country, accelerating inflation. A February report by the Nigerian Bureau of Statistics (NBS) said that inflation rose by 0.09 percent to reach 21.91 percent from 21.82 in January.

Emefiele said Tuesday the measures taken by the CBN is paying off, and would be sustained to keep inflationary pressure down.

“We believe that as we continue this process that inflation will eventually begin to trend downwards.

“Whether we like it or not, between now and May, or the end of the administration, we will expect that subsidy will disappear. Subsidy removal has its own implication on prices which is inflation, so we are not optimistic that prices will continue to come down because of these measures but we feel we need to continue to tighten,” he said.

The CBN governor said the financial soundness indicators show that Nigerian banks remain resilient, adding that the Prudential Guidelines of the CBN have insulated Nigerian banks from the current financial crisis.

He assured customers of improved online banking services; says eNaira has emerged as the electronic channel of choice with an upsurge in wallets creation.

However, economists have expressed worry that raising interest rates will further hurt the economy that is still grappling with the negative effects of other economic policies made by the CBN. Small and Medium Enterprises (SMEs) are said to be the most vulnerable.

We studied how mega consumer-based AI startups are launching into the markets; we identified three paths, and drawing on them to answer the learner:

• Partner with a company with a large user base. OpenAI’s ChatGPT partnered with Microsoft which has millions of users. Microsoft is providing the feedstuff (yes, the data) to advance ChatGPT at scale.
• Spend a huge amount of money via promos and advertisements to get data which will improve your AI models as quickly as possible. This is the Temu path; Temu uses AI to power shopping in its ecosystem. It spent $5 million for a 30-second advert during America’s Superbowl game. Without the data, it has no mission.
• Bake AI into existing in-house data. If you are lucky, and you have the data as Google does, you can launch your Bard equivalent once your code is ready.

And note this: any consumer AI pitch deck that does not address how that data acquisition will be done is not complete! Indeed, without the data, your mission has limited value. In the consumer AI age, controlling or influencing demand is even more important than providing supply if the goal is to generate alpha!

From Hamlet’s “Words, words, words” to ChatGPT’s “data, data, data”, you can see why we have moved well past Shakespeare’s era.