Zero Marginal Cost: Why Goods & Services Will Fall From $1T/year to $500B/year

As digitalization proceeds at unprecedented speed and scale, the marginal cost of delivering a whole range of goods and services will plummet. This opens up a huge opportunity to create affordable solutions to huge, previously overlooked market needs.

To be clear, I believe that a combination of new technologies and the availability of cheap manufacturing, coupled with a massive increase in access to capital and skills, will accelerate growth and create a new paradigm in supply chain management. The cost reductions can be achieved within the span of a few years while the business model can be easily and efficiently reconfigured to support a new ecosystem.

The value chain between companies and individuals is likely to be transformed radically as new technologies enable more efficient distribution, which drives down the cost of product and services. This will lead to significant and rapid employment opportunities in a broad range of jobs that support consumption and provide for social participation.

Future Job Creation At Stake

It is not clear just how many jobs will be created. However, it is clear that the job creation outlook that the industry is driving – an economy with a new, more flexible labor market – will create opportunities as firms are able to find the right talent without having to look any further and with a lower barrier to entry.

The shift of employment from the traditional, rigid capital/labor relationship to a more flexible labor marketplace is a good thing. In fact, it is an enormous opportunity for economies and markets to emerge, to make new products, services and markets.

However, a transition in this direction is also bound to bring significant challenges. And this is where the opportunities open for innovation firms and organizations - to innovate and to create a new, faster-growing economy.

The transition is likely to happen in a way that we are still developing, but I believe this new economy will have at its heart an underlying set of technologies and an ecosystem of smart technology-enabled practices.

So while we recognize the need to innovate and create new products in terms of quality and price and to be in a position to deliver them to people and retailers, in the digital world, we are seeing opportunities to do this in a way that is less disruptive and more consistent with the core tenets of innovation.

And in a world where supply chains – the link between individual supply chains and global supply chains – can run more efficiently and more transparently, there is an increasing opportunity in the supply chain to create and manage a new product and service ecosystem.

Loss Aversion and Optimism Bias in Marketing

loss aversion optimism bias

Possibly, the most optimal illustration of the loss aversion concept can be seen in casinos around all the world. There, hardcore gamblers and fun-seekers alike follow the same pattern: The initial round they play the slots in order to win. The 2nd round? It’s to recoup any losses.

The loss aversion theory teaches us that individuals would avoid a reduction in value rather than reap a reward. 

In advertising, it's a strong tool that may inspire purchases for the right demographic. By alerting customers of what they may lose from an action not taken by them now versus completing a buy is far more powerful than offering benefits. 

Make loss aversion work for you by working on your campaign with one of these tactics.

If you create ownership your audience become more prone to hang onto it. Think about the tag line for the traditional, clichéd infomercial: Try it for 1 month and send it back if you don't like it. This has been around forever because when the trial period's month is up, sending the product back feels like losing, and customers are more inclined to hang on an item. Loss aversion in its best form is when someone scrambles to buy a product just because he or she cannot be left out.

Retailers are adept by showing how many items are left in order to develop a sense of lack. You may be shopping for a brand new pair of shoes and once you select a size and color, you see the text pop up:

Hurry. Only two left.

This makes you feel anxious and you are more prone to purchase to avoid missing out on the pair of shoes you need.

Imagine you are at the drugstore and you are purchasing a bottle of shampoo. You see that your favorite brand has a promotion: One bottle is 20 percent off, but one bottle is all the regular price, however it comes along with a free travel conditioner. 

Loss aversion theory tells us that you are more prone to opt for the bottle with the free present, even when the value of the present is less than that of all the discount. That's because you do not want to miss out on the opportunity to receive a free present, no matter the value is.

What's more, a free present feels more concrete than a discount, making consumers seem just like they scored a deal with their decisions.

Lastly, probably the most efficient loss aversion advertising strategies simply outline the sense of loss a consumer may feel if she or he does not make the purchase. Frequently, this strategy focuses on not offering only the item in question but offering it beside two inferior products.

optimism bias in marketing

Optimism Bias in Marketing

Say that confidence bias may be a mere artifact, a product of the test paradigms utilized to appraise it. People say rational, impartial individuals would appear optimistic. The work by Adam J.L. Harris and Ulrike Hahn on a 2010 research paper criticized the claim that optimism bias is shown by people by rating. The paper claimed that optimism emerges as a result of a belief upgrading with neural correlates in the mind.

On a behavioral level, these studies suggest that, for adverse events, desired info is integrated into private risk estimates to a greater level than undesirable info. Nevertheless, using job analyses, simulations and experiments it has been shown that this pattern of outcomes is a statistical artifact.

To conclude, these results clarify the difficulties involved with studying human bias and cast further doubts on the status of optimism as a basic characteristic of healthful cognition. Since all risk estimates have to fit to a scale between 0% and 100%; this final quote from Thomas Friedman fits perfectly:

Pessimists are usually right and optimists are usually wrong, but all the great changes have been accomplished by optimists.


How GDPR Damaged Ecommerce

Ever since the European Union’s General Data Protection Regulation, or GDPR, came into force 14 months ago, ecommerce websites in Europe have recorded lower page views, site visits and revenue.

The General Data Protection Regulation was adopted on 14 April 2016, and became enforceable beginning 25 May 2018. It’s a regulation on data protection and privacy, designed to protect citizens of the European Union.

Revenue decreased by 8.3% due to GDPR

But since the regulation came into force, page views fell by 9.7 percent, while website visits decreased by 9.9 percent, a study called ‘Regulating Privacy Online: The Early Impact of GDPR on European Web Traffic and E-commerce’ shows. For ecommerce websites in Europe the results are less damaging: recorded site visits fell 5.6 percent, while recorded revenue decreased by 8.3 percent.

Impact of GDPR on page views, site visit and revenue

The researchers used data from Adobe Analytics to quantify the impact of GDPR on important economic outcomes for a diverse set of firms. According to them, it’s one of the first of its kind to study the GDPR, whose scale and scope has cost many companies millions of euros in compliance costs.

Email and online display advertising affected by GDPR

One of the possible reasons that ecommerce websites in Europe have seen a decline in traffic and revenue is because the GDPR increased the risk that comes with email and online display advertising. “The higher costs of using personal information can affect personalized marketing channels that drive online traffic”, the researchers write in the pdf. “Both email and online display advertising rely on personal data in the form of cookies or the email lists. As such, the quality and quantity of advertising through these channels may fall.”

The researchers point to other studies that suggests that email and display ads precede 7 and 3 percent respectively of visits to ecommerce websites, and that the previous EU privacy legislation reduced ad effectiveness by 65 percent.

Users become aware of how information is used

The academics also note that overall website traffic may change, because users become aware of how their information is used. “GDPR enforcement brought ubiquitous privacy notices on websites that serve EU users. By increasing the salience of privacy concerns, these notices may have changed user preferences for how much time users spend online and which sites they frequent.

Why Consumers Will Adjust to The Ever-Increasing Cost of Streaming

The promise of streaming from the get-go was a no-brainer: streaming TV would free us from expensive, outdated cable subscriptions. But with the television streaming war getting hotter than ever, consumers are expected to make some tough choices.

With a bunch of new services that’ll join Netflix, Hulu and Amazon Prime Video on the scene, it looks like the price of keeping up with TV could soon be comparable to—or maybe even more expensive than—a cable-TV subscription.

These new platforms include WarnerMedia, Disney +, NBCUniversal and Apple, which are all hoping to grab a slice out of the lucrative streaming pie via their exclusive content.

But how much are customers willing to pay for all of their favorite services?

Unlikely Consumers Will Get Their Wishful Monthly Rate

So, how much are you willing to pay to watch your favorite shows? If you subscribe to more than one streaming service, you’ve probably picked them up gradually, which might make you less aware of how they all add up. And it’s not an incidental amount.

According to a new Hollywood Reporter/Morning Consult poll, about $21, or somewhere between $17 and $27 is the amount most people are comfortable with. Given that even a modest bundle would exceed that ceiling—it’s unlikely consumers will get their wishful monthly rate. Also: I’m not going to get into the pricing specifics, as this changes all the time and would also put a timestamp on this video. 

But in the face of this ever-escalating viewing budget, some TV fans are going back to basics. According to the Los Angeles Times, an increasing number of Americans are seeking out that old-school staple: the TV cable subscription.

But if most Americans pay $80 to $100 per month today for low quality, ad-supported, linear cable programming, it’s not a stretch to ask them to move to bundled streaming for about the same rate.

The Rise To The Top

But while convincing non-wire cutters to pay more than $21 isn’t the issue, it’s up to the streaming services to appeal to specific audiences to get them to open their wallets.

It’s clear that players with the best new “must-see content” will rise to the top and attract the most customers. Their services won’t cost $21, though - it’ll likely be less than $80 per month, but more than $30.

The reason for that is that everyone is underpricing their services right now, thanks to investor-backed roll-outs, in order to scale globally in the winner-take-all markets.

When everyone has moved over and the streaming services need to pay off their debt, prices will start to go up. This is when we can expect to see different premium subscriber tiers emerging, in which some customers will choose to pay for better content and better service.

For TV addicts like myself, the future offers an avalanche of choices, both in terms of what to watch and where to put your money. And for the media companies, it will be an all-bets-are-off struggle to guarantee its streamer is indispensable to viewers.

One way or another consumers will end up spending more on entertainment than they ever used to, and they’ll be OK with that, just like people have gradually accepted paying over a 1,000 bucks for an iPhone.

Why Nostalgia Marketing Works Every Time

In a world that seems to be evolving at break-neck speed, immersing yourself in nostalgia is like wrapping yourself in a comfortable blanket of “the good ol’ days” when things were so much simpler. 

Studies suggest that nostalgia inspires consumers to spend their money because it promises an immediate return in the form of happy memories and comfort. This is why nostalgia marketing campaigns have grown increasingly popular in recent years, as brands begin to discover the value of connecting with their customers on a more in-depth, emotional level.

Politicians have also embraced this technique. Trump promised to “make America great again”, effectively implying a return to how things used to be. In the UK, the Brexit campaigners touted a way back to how the country was before the European Union ever existed.

In any case, the public eats it up. It seems that a growing group of consumers are looking backwards and wishing things were the way they used to be.

And when it comes to marketing, that offers up a ripe opportunity.


The Power Of Emotion

Any marketer is well aware of how powerful an effect emotion can have on a campaign.

Make your audience happy, or make them sad. Pull on their heartstrings, or scare them to death. It doesn’t matter what they feel, only that they do.

Neuro-imaging studies have found that when consumers evaluate a brand, they rely more on emotion than on information.

As much as we like to think we’re rational machines, the truth is that we’re wildly irrational when it comes to making decisions. That includes purchase decisions.

This means that rather than consider the facts, we focus more on how the product makes us feel.

Facts play a part, and you need to ensure you inform your audience. If you want to seal the deal, however, you need to engage them on an emotional level.

And it just so happens that nostalgia is an extremely powerful way of doing exactly that.

Now, let me take you back. Remember when you were a child? Everything was new. Each day brought with it a new experience or situation for you to deal with. New experiences catch us off-guard, and when we’re young we’re often overwhelmed with emotions that we’ve never even felt before.

Over time, these raw emotions lessen in intensity and once we’re adults, we’re fully in control. That means it’s pretty hard for marketing to actually affect us emotionally.

Research tells us that nostalgia counteracts things like boredom. 

It also makes people more tolerant of outsiders, and more generous to strangers. In fact, nostalgia can literally make people feel warmer on a cold day. 

So in today’s highly competitive marketplace, nostalgia in advertising can allow both new, and old brands to connect with their audience on a powerful emotional level. Already, some of the most significant companies in the world have begun to show us just how useful this tactic can be.

Brands like Nike and Pepsi are already using retired designs and logos from the past, announcing them as “throwback” options or “retro” products. Shows and movies are tapping into old design features and strategies to tickle the nostalgic nerves of their watchers.

The question is, how can you create your own nostalgia marketing campaigns?

As always, the best way to learn is through examples. So I’ve handpicked some great campaigns that use nostalgia to great effect.

Spotify — Never Ending Story

Personally I don’t have a strong connection with The Neverending Story, but it’s obvious that a lot of people do. The use of the crappy CGI, the iconic soundtrack, and the use of that flying dragon-dog thing original voice actor all conspire to return viewers to their younger selves.

It’s as if we’re watching our beloved childhood movie all over again, and so we open up emotionally.

How do Spotify stop it from going too far and making it cheesy? They inject a little bit of humor into the ad.

Atreyu is now roughly 40 years old, sporting a large, bushy beard, and jokes:

“I can’t believe after all these years people are still listening to this song.”

It’s a little joke at the viewer’s suspense. Yeah, we’re taking you back to your childhood, but you regularly go back there anyway, so what’s the issue?

It’s a smart way of letting you in on the joke. The ad is no longer aimed at you, it’s for you.

Adobe

After Netflix added the classic Bob Ross TV show to their lineup “The Joy of Painting”, the beloved 80s artist saw a huge resurgence in popularity during 2016. In a matter of weeks, Bob Ross became a meme, a source of cult appreciation, and a trending topic on Instagram. Technology brand Adobe took notice of this trend and decided to use it in their nostalgia marketing strategy, creating a series of tutorial videos to promote their “Adobe Photoshop Sketch” application for the iPad Pro.

The joy of sketching campaign was fantastic because it not only accessed the benefits of nostalgia in advertising, but also took advantage of the trends of the time. The company even worked alongside Bob Ross Inc to make sure every detail in the “Joy of Sketching” series was accurate.

Pepsi

Pepsi has also used nostalgia marketing strategy as a way of capturing their audience and strengthening emotional connections. Like Cola, Pepsi also brought back a discontinued drink from the 90s, “Crystal Pepsi”, as part of a limited-time run in 2016. The brand promoted their upcoming revival of the drink with a range of incredible advertising campaigns that built upon their existing nostalgic strategy.

One of the most appealing parts of the campaign was a game called the “Crystal Pepsi Trail”, which drew inspiration from the “Oregon Trail” game of the 70s, updated with a range of 90s call-backs like Tamagotchis and Furbies.

Conclusion

In an age that’s plagued by impersonal digital connections, nostalgia allows brands to leverage the optimistic feelings that come with a walk down memory lane. References to the past help to humanise brands, creating that sense of alignment that we all feel when we think about our past.

As always, successful campaigns – nostalgic or otherwise – will take work and authenticity. The key is figuring out how to identify the most important moments in your customer’s timeline and use those memories to enhance the identity of your company. Nostalgic marketing works best when companies understand their audience, keep their finger on the pulse of the existing culture, and listen to what people crave the most.

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Hi, my name is Fernando, and I run this site.

Thanks for visiting. If you’re interested - or even better: invested - in the intersection of marketing, emerging tech, and futurology then this blog is for you. Welcome!

The Psychology of Color in Marketing

A brand’s choice of color is a fundamental element that reinforces both its personality and the qualities of the products and/or services it offers. Some brands are so iconic that it is possible to identify them from just a single Pantone color without an accompanying logo. Others, including Cadbury, Barbie, and UPS, have even gone so far as to trademark their defining shades. So why do brands place such importance on color and what impact does it have on the way consumers perceive them? Let’s look at some research and then some famous examples.

How Gucci Won Over Gen Z Using Technology

Gucci, as you may have heard, is crushing it with millennials. In 2018, 62% of Gucci’s more than $8 billion in sales came from the under-35 set, a demographic that is generally harder for luxury brands to capture, given the high price points of their products.

But what you might not know is that Gucci’s fastest-growing segment is now generation Z, the oldest of whom is only 24. This bodes well for Gucci’s future.

How Machine Learning Plays a Role in Multi Touch Attribution

Machine Learning Multi Touch Attribution

In a fast-moving, ever-changing consumer market, companies that want to stay ahead need to be quick to adapt. On the other hand, those that don't take advantage of innovation can be quick to fail.

The rise of artificial intelligence in digital marketing has led to machine learning multi touch attribution, a new form of analysis that can revolutionize the way you strategically plan campaigns.

Increase Efficiency with Machine Learning

Machine learning is a form of artificial intelligence which elevates the application of basic statistical techniques. With a machine learning model, you have a computer system that has the intrinsic ability to learn and improve its performance as more data is inputted and analyzed.

The quick and efficient processing capabilities of machine learning models are effective even without being explicitly programmed to analyze one campaign or another. It is especially more efficient when you compare it with traditional methods.

Getting analyses in the old method – through econometric models – requires intensive human labor and a less dynamic lens. For example, marketing analysts need to perform logistic regression on existing data, to get the input needed to apply a particular model. The traditional method has several constraints, as analysts need to make assumptions on which model to use, to correctly convert data into its relevant form, and to do all adjustments in analysis within a short period of time.

Instead, you can invest in artificial intelligence. Machine learning systems can measure and account for different situational variables on the fly, and adjust for them accordingly. Instead of taking the time to make assumptions, machine learning models can quickly run through different models to successfully pinpoint which marketing interactions matter. It's the shortest path to success.

Any marketing campaign planned with the analyses from machine learning models automatically become faster and more responsive.

Multi Touch Attribution for Effective Marketing Analysis

Machine learning models, like man-made analyses, can generate many kinds of analyses and graphs. The key difference is in speed and precision. With machine learning models, you can expect true attribution aside from increased efficiency.

True attribution means you can pinpoint which marketing activity is responsible for a particular outcome. In most cases, marketing analysts try to save time by looking only at proximal factors. For example, a successful sale is seen as a direct consequence of a marketing advertisement that was flashed right before the transaction.

However, sales and transactions are rarely that simple. Success needs to be attributed to its proper causes, which can involve a long-term and non-immediate marketing activity. Often, determining the correct attribution requires more processing power than what traditional methods can offer.

Machine learning multi touch attribution can answer the real questions for you. Which marketing activity or activities have the greatest impact? Which ones have the lowest return?

These are the kinds of ratios that can turn sale activities into data points for strategic planning. Aside from being as close as possible to the truth, machine learning accounts for multiple touchpoints. Success can be due to any number of marketing activities; a series of touchpoints may have been integral to the conversion of a sale.

With multi touch attribution, you can speedily recognize multiple marketing touchpoints that you may have otherwise missed.

Improve your Business with Machine Learning Multi Touch Attribution

Machine learning multi touch attribution already promises faster analyses that can precisely pinpoint multiple marketing touchpoints behind an actual sale. This is the kind of analyses that can improve your company's strategy. With this information, you can cut losses by re-evaluating underperforming campaigns and gain more by promoting successful ones.

Machine learning can also lead to better "what-if" analyses. Instead of predicting and assuming trends based on cluster analyses, which is heavily based on correctly identifying and grouping prospects and customers, a system can run through different conditions for you. If a particular situational element has changed, or if you redirect efforts to a certain marketing campaign, what is the impact to your bottom-line?

With machine learning multi touch attribution, you can raise your bottom-line and remain a cut above the rest. Innovation is the key to creating a more competitive foundation for your overall business strategy.