Why on line prices can mislead

Cars for sale

On line markets where people sell peer to peer – think eBay sellers, or used cars on line –  can trick our perception of the price of things. Here’s why:

This is the advertised price, not the price it sells for.

When we compare similar items on line, we are more likely to see the price of things that haven’t sold yet. The price people actually buy at, is often not advertised long enough for comparisons. This means the real value of something is often much less than we think. Especially when we are looking to sell something we own. We are weirdly programmed to think items we own are worth more than they are. 

You might notice a car like yours is advertised for $20,000. There may even be multiple advertised at this price.  Other sellers also see the most common price and follow the market. But we need to remember these are the cars which ‘haven’t sold’ – those that sold probably did so at $17,ooo and are no longer listed. It’s the overpriced stock that creates our price perception.

Why does this matter? Because it is counter intuitive, the opposite of what we’d expect. It’s the filter bubble in action. The more we see homogeneous products with price X on line, the more we should remember it’s the price people hope for.

You should totally read my book – The Great Fragmentation.

You’re too early for the market – so what

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So you’re a bit early… maybe you startup, or whatever project you have a deep need to undertake is far more important than that. Maybe it’s a gift to humanity.

When Gutenberg built his moveable type printing press around 1440 the market looked like this:

  •  7% of the population in Europe could read.
  • Reading glasses hadn’t been invented. (people didn’t know their eyes couldn’t focus that small!) 
  • There were no public libraries .
  • Schools for the public didn’t exist yet.
  • There were exactly zero bookshops.

Maybe he should’ve waited for Amazon to come along….. he did it anyway.

When Karl Benz built his first combustion engine car around 1882 the market looked like this:

  • No one knew how to drive an automobile
  • It was illegal to drive
  • There were no roads
  • It was slower than a horse
  • It was many thousands of times more expensive than a horse

Maybe he should have waited for the Autobahns to be built….. he did it anyway.

We can focus on what the market wants. Build them houses, sell them packaged food, and provide entertained where the good guy wins, or we can do a project for ourselves. When we do it for ourselves we only need to finish it to satisfy who it is for. And we might just make something the market really wants as well.

You should totally read my book – The Great Fragmentation.

The simplest brand building tool of all

black mercedes

Building a brand with meaning is a difficult thing to do. But there is one hack which tells us more than any other signal, and it takes less than a second to give that signal.

The price.

If it’s super cheap or outrageously expensive, it tells a stronger story than any other feature immediately.

It tells us where it sits in the scheme of things, the consideration set of where I could cast my dollar votes. It tells me if this is option is in my range or not for me. Sometimes the price is most important feature, we want people to know how much we paid. The story I tell myself has already began. I make a decision based on the price which tells me I’m being smart and frugal, or I deserve this most expensive option. In some categories like apps and software, these days there’s an expectation of no price at all.

If our price stands out, then even before our product or service has been trialled we have a brand perception. The only challenge of course, is making sure that after consumption the experience lives up to what was expected.

You should totally read my book – The Great Fragmentation.

Yes, we know Uber has no cars, but what do they really sell?

So by now everyone knows that Uber has exactly zero cars and Airbnb has zero hotel rooms. But this shouldn’t really be that surprising given it has been the playbook of the internet since like Altavista was a thing. So we can stop putting it in presentations as though it is a surprise. The web is a connection device, those who make the most useful connections win. It’s all about access, not ownership. While these two tech companies don’t own the assets they rely on, we ought remember some older examples from the ‘Connection Playbook’.

  • Apple have 800,000+ app developers they don’t pay.
  • Alibaba has 4.2 million factories they don’t own.
  • Facebook has 1.2 billion content creators.
  • Amazon sells almost every author in the world.
  • WordPress has 75 million journalists writing for them.
  • eBay doesn’t own any good it sells.

The web has always been about leveraging cognitive surplus and idle assets. Owning stuff and paying creators is so Industrial era.

Now let’s consider what people are really buying when they get an Uber: Certainty & Transparency.

Uber time to arrival

For me the thing that makes Uber valuable isn’t the nice black vomit-less cars, or the random risky strangers who drive them. It’s knowing the car will be at my house in 6 minutes. It’s far superior to whenever I order a taxi – they still to this very day have the gall to tell me they’ll send the ‘Next Available’ – which does not help me get to the airport in time. I’m also a fan of just leaving the car without having to waste like 7 seconds swiping a credit card to pay. Yes, human laziness knows no bounds. Interestingly, the key features that make it work could all have been done by the taxi industry. But heck, why would they do that in monopoly conditions?

As for Airbnb, I’d much rather stay in a hotel when travelling on business. Hotels are far more convenient and have a number of services that matter when travelling for work – like late night burgers and concierge. But whenever I hear someone talk about their Airbnb experience, it’s never about convenience and amenities. And it’s not always about price. Most often it is about the story of where they stayed and how authentic it was. Airbnb sell the story of accommodation. They localise the experience for strangers.

Yes, it’s quirky that many big businesses connect things rather than own them, but it’s more important we understand what their customer advantages really are.

You should totally read my book – The Great Fragmentation.

What startups can learn from Studio 54 and the velvet rope

Studio 54 opening night

As soon as we launch a startup we’re secretly desperate to get as many users as we can as quickly as possible. Even if we’ve hacked some kind of alpha test, or user MVP – or any other buzz mechanism to justify that this shit is gonna work. That aside we still want users, bodies, customers, people to come, use, share, evangelise as quickly as possible. It’s all about speed to market, so we move super quick to make this happen. Speed of customer acquisition is the key right?

Maybe not. Maybe what we should really be doing is the exact opposite. Maybe we should keep people out. Even those in our desired audience. Maybe we should be focused less on the quantity of users and instead focus on the quality and frequency of interactions with insiders. Those we let in. Just like a popular night club does, it creates desire by creating a space not everyone is allowed into. The line outside, is not a bug, it’s a major feature.

Look at anything valuable in life, and you’ll see a place where people had to earn their spot. People had to get invited, pass a test, earn recognition, or create value before they were allowed to be part of the thing in question. This process creates the human fear of missing out

When Facebook launched you had to have a Harvard email address to join.

When Gmail arrived, you needed an invite to get access.

When Uber came along it launched city by city.

The first Tesla cars went to high profile people.

Even the original Frequent Flyer programs were by invite only.

And Studio 54 turned exclusivity into an art form, literally.

While it is very hard to build a big business with a tiny audience, it is much harder to create a great product while trying to please everyone. We should instead create an isolated market so we can serve the faithful few. Make a product they love so much that they can’t help but talk about how great the thing is. we need to get them raving about it so others will want in on it. We need to put a velvet rope around what is on the inside. We need a door person who has the task of saying ‘Not in those shoes pal‘ or the classic ‘members only tonight.’ Of course, none of this is actually designed to exclude others, it’s more about making those on the inside know how special they are, that they are part of creating something valuable. It’s only then that they’ll help you make something which can grow beyond the group who started it.

You should totally read my book – The Great Fragmentation.

Learn why data matters with one simple photo

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If I was to ask you what the kids in the above picture were doing – beyond burying their faces in their smart phones, there is an almost infinite number of possible answers:

Messaging a friend, Face-timing their mum, Commenting on a blog, Snapchatting, Booking a flight, Submitting their homework, Buying a pair of sneakers, Updating their FB status, Getting directions, Sending a friend some money, Finding a cafe for lunch…. they might even be talking to directly to each other. The point is we don’t know. We can’t know by observing behaviour from the outside. Instead we need to get inside the data to find out what is actually going on.

This is a big shift in marketing and business in general. We can’t simply observe, we can’t just ask, we’ve got to mine. And while this movement might have started with the smart phone, we’re now entering an era of general purpose machinery and computing. End products which change their purpose based on who is using the technology. Malleable products like 3D printers and self drive cars will mean the only way to know what’s really going on is to match usage and observation with data. Increasingly this will need to involve collaboration, and the effective way to do that won’t be just taking the data without asking, or tricking people with hidden terms and conditions, but collaborating with it. In order to do this we need to develop a trusted relationship where we share the marketing process with our users just as if they are part of our internal team. If we do this, we can bake a bigger revenue pie where we all get a piece.

New Book – The Great Fragmentation – out now. 

The Uber attitude & surge pricing

Travis from Uber

Today the ride share service Uber, did more again of what it seems to be good at – acting like jerks. During the Sydney Siege they conducted a price surge and put prices up to reflect the demand for transport at a time of serious civil disturbance. But the most disturbing thing, isn’t the price, it’s really the attitude.

This is one time when industry disrupters can take an important lesson from their industrial era counterparts. Let’s take legacy airlines. Our national carrier Qantas has on many occasions diverted flights at no cost to pull people out of countries which present an immediate danger to Australian travellers.

While Uber later countered their original decision with a ‘Oh, and we’ll pay the fares’ tweet – below – it was clearly an afterthought when the rightfully astounded community reacted.

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It turns out our natural intentions are revealed by how we behave before we get feedback.

New book – The Great Fragmentation – out now!