Value Comes In Different Forms: Advert or No Advert in your Business Model

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:

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