Hi!
So X cut ad prices to win back advertisers!?
Lucky for you, I’m hosting a FREE session on setting better prices on August 15th, but today I’ll explain to you a few things about pricing that make this decision unwise.
Today’s riff is on pricing and X/Twitter.
Price doesn’t stimulate demand: In economics, you’ll hear the term “inelastic” in reference to prices. It means that if you drop the price, it won’t raise sales.
Economists use 1% as their marker.
In practice, it means that cutting prices doesn’t cause people to buy something.
Why?
If you don’t see the value in a product or service, in this case a platform, no price cut is going to make you buy it.
It is just junk and junk you don’t want or need.
X is facing a few issues right now:
- Eroding brand equity before the name change. Brands were moving away from Twitter due to lack of content moderation, a fall in active users, a less inviting user experience, and the erratic behavior of Elon Musk.
- Brand safety concerns: Brand Purpose is BS. But no ad buyer I know is going to buy something that is going to needlessly cause them a headache which is what all of the misinformation and hate speech that has come to Twitter/X since Elon Musk closed his sale with the business would likely cause them.
- Poor user experience: The crashing and technical glitches have made it easy for folks to pause or wait on buying ads because if you are an ad buyer, how do you really know you are getting what you paid for? You don’t. And, in a world where ad fraud is estimated to be more than 50% of impressions…why bother with a platform that seems like it is a mess?
What other pricing lessons can we learn here?
- Discounts destroy your brand equity because they undermine the perception of value in your brand. In this case, X has no brand equity. So, this could cut either way. It resets ad prices or, more likely, it signals weakness in the quality of the platform, the audience, and the value of a purchase.
- Prices do demand research. There are a lot of Elon Musk led “polls” that he labels “important”, but that’s not real market research. If there was real market research going on, the team at X would recognize the importance of cutting down on misinformation and hate speech and creating a less volatile user experience. Which would likely mean that they’d be able to set a more accurate set of prices for their ads.
- Prices don’t stimulate demand. Price = Value. If there isn’t a perception of value, no price will make people feel like your product/service is valuable. You might make sales, but it is because you are a commodity.
What’s your take on the X situation? I haven’t even started on the brand challenges.