Does leaving Twitter because of Musk make any sense? You don’t denounce your British passport because the Tories are in office – you’re still very proud to be British just by your own, hopefully more open-minded, definition.
Similarly to the Tories, Musk is a microcosm for paradox. He is a guy famous for being anti-advertising yet now encouraging companies to see the value of ads on Twitter. Here is a guy that railed against the over-valuation of Twitter, now paying that price and trying, with no hope of success, to find $44bn of value. A guy who claimed that the Twitter user base was one third fake, now striving to prove its authenticity against his original claims. The guy seen as the only person that could fix Twitter, now portrayed as the one that will kill it. The guy who believed Twitter was an essential tool for free speech, who now asks users to pay to use it.
Trying to pinpoint and predict the future of Musk’s Twitter is like trying to find a needle in a haystack – near impossible. Yet one area where a slight bit more clarity lies is pricing. Twitter is such a hot, digital mess that good marketers can simply take a perfectly inverted approach to Twitter and probably plough the right course for their brands. So listen up!
Did you ever play ‘opposite day’ as a kid? Where you’d say ‘yes’ to mean ‘no’ and say ‘I hate you’ to tell your crush you fancied them without saying it outright? Well pricing techniques are playing that game right now – just do the opposite of whatever Musk does to succeed.
What Musk did: Ignore research, go straight to tactics
What you should do: Research is crucial, because it turns out running Van Westendorp analyses, or conjoint, or simply getting a handle on who your consumer is and what they think of the value they get from your brand, really helps when it comes to what price you want to set and how you want to set it.
What Musk did: Ignore strategy, go straight to tactics
What you should do: Where Elon took over a company and, within the first week, targeted blue-tick loyalists with a 400% price increase and asked notable influencers to pony up $240 a year for a verification mark that used to be free, we suggest that once you complete your research, you move to strategy. This takes a little more time but it means when you get to the pricing decisions you already have a solid grasp of who your target is, what they will pay, the source of your value and pricing power, and the objectives you need to achieve.
What Musk did: Create uncertainty around the price change – wobble a bit
What you should do: Having floated the $20 monthly price, Musk then more than halved it after King and others pushed back. The lesson? Don’t pull pricing out of thin air. When Pret a Manger added five quid to its monthly endless coffee deal earlier this year, the message was delivered with élan but also authority, certainty and plenty of advanced notice. It might have not been a universally popular move, but it was a non-negotiable one. And Pret’s brand, price point and endless coffee offer were all the better for it.
What Musk did: Price without framing
What you should do: Like Pret, you need to justify any changes in price. There is the phase in which a company does the research and decision-making to set the price. Then there is the resulting price. And finally, there is the communication of that price to the market.
In Dan Ariely’s famous example of pricing at The Economist, the magazine offered its online subscription for $59, a print subscription for $125 and a combined offer of both web and print subscription for $125. Ariely tested these options and 84% of his subjects opted for the third combined offer. But when he removed the print subscription and left students with a binary choice between web or combined print/web subscription, only 32% went for the combined offer.
The difference? The three alternatives that framed the value of the different prices.
Frame a price in the right way, with the right context and reference points, and most target consumers will buy. Try selling an ‘online course’ for £1,500 quid. Now do it framed against a £100,000 proper MBA. And see the difference.
What Musk did: Show that value is all about the company, not the customer.
What you should do: To understand and excel in pricing, you must stop looking at your costs or your competitors’ prices and master the concept of value. The word value is a very handy one because the V has two vertical prongs pointing in two very different directions. One points to the organisation and its need to generate a profit and a sufficient and healthy rate of return. But the other, equally important, prong points to the market, and the need to understand what and how they perceive the offer and what they ultimately make of it. Find the price that delivers to both demands and success can follow.
Prices must also make sense and prove attractive to target consumers. And so far, with only a week at the helm, all Elon Musk has done is made a mess of his pricing, undermined his reputation, underwhelmed investors, confused customers and demonstrated an abject inability to handle this most important of Ps. A Chief Twit indeed.