Game Changer: In-App Purchases

The Wall Street Journal: “In-app purchases are ‘dramatically changing the mobile-entertainment landscape,’ said Andrew Phelps, director of digital media at Rochester Institute of Technology. They ‘engage people in a longer financial discourse than you would have in an upfront sale’ … The secret sauce behind many in-app purchases is the countdown clock—a frustration tax that forces gamers to idle before they can perform duties such as farming crops or replenishing fuel, unless they pay for more turns or items to speed up the action.”

“Converting players into spenders without turning them off is key; gamers have derided free-to-play games as ‘free to play, pay to win’ for years. Developers, though, have gotten savvier about giving players more free things to do to keep them hooked until they start spending. In ‘Pokémon Go,’ players can go weeks capturing dozens of ‘pocket monsters’ without needing to spend money. After investing so much time, players might be more inclined to dole out cash to upgrade their gear so they can carry more items and creatures, for example.”

“Algorithms are playing an increasing part in nudging players to spend. Based on dozens of data points—how often gamers play, what model mobile device they use, location and gender—developers might raise a game’s difficulty level, making no two players’ experiences exactly alike … Data on players’ behavior also are used to strategically tweak prices for virtual goods in real time … Other tactics: tapping into players’ “fear of missing out” through limited-time events, and cultivating relationships between players.”

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Dollar Shave & The Digitally Native Vertical Brand

The New York Times: “The same forces that drove Dollar Shave’s rise are altering a wide variety of consumer product categories. Together, they add up to something huge — a new slate of companies that are exploring novel ways of making and marketing some of the most lucrative products we buy today. These firms have become so common that they have acquired a jargony label: the digitally native vertical brand.”

“By cutting out the inefficiencies of retail space and the marketing expense of TV, the new companies can offer better products at lower prices. We will get a wider range of products — if companies don’t have to market a single brand to everyone on TV, they can create a variety of items aimed at blocs of consumers who were previously left behind. And because these companies were born online, where reputations live and die on word of mouth, they are likely to offer friendlier, more responsive customer service than their faceless offline counterparts.”

“It’s striking how few of these online companies could have taken off in the presocial age. At the very least, they would have been sunk by the inability to target ads to the demographics they’re aiming to serve.”

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The Economic Value of ‘Cool’

Quartz: “Cool doesn’t just explain why people will pay $1,000 for the right sweatshirt. It’s also arguably a factor in why the right logo makes us view some people as more suitable for a job, or worthy of receiving money for charity … Cool is a target that’s constantly shifting. It’s an attitude, a term of approval, and today, as much as any of these things, it’s a game of superficially rebellious status-chasing, centered on consumerism.”

“Steven Quartz and Anette Asp, neuroscience researchers at the California Institute of Technology, have run fMRI studies on the brains of people looking at items that a separate group identified as ‘cool’ or ‘uncool.’ Just viewing these objects activated a part of the subjects’ brains called the medial prefrontal cortex (MPFC). It’s involved in social emotions, such as pride and embarrassment, that center on how we perceive ourselves and believe others perceive us, and it has strong ties to the brain’s reward and disgust circuits.”

They write: “Cool turns out to be a strange kind of economic value that our brains see in products that enhance our social image … This abstract good—social approval, reputation, esteem, or status—plays a central role in our motivation and behavior, and it is the currency that drives much of our economy and our consumption.”

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‘Stealth Social’ Makes Pokémon Go

The Wall Street Journal: “It’s important to understand why Pokémon Go is such a hit, because … it might be a harbinger of new types of mobile and social apps, which put the ‘social’ back in ‘social network’ … The stealth social element is that Pokémon Go, while not explicitly about bringing people together, is doing so anyway as people playing it meet and share tips in their hunt for virtual monsters that the game shows in real-life neighborhoods.”

“Those real-life encounters are, paradoxically, a consequence of the lack of social features in Pokémon Go … (It) has no chat function, no map showing the location of other players—in short, no way to connect with others aside from meeting them in person. Nor does Pokémon Go require players to interact—it’s entirely possible to play the game without having any contact with anyone. Even the one naturally social element of the game—battling against others’ Pokémon—can take place on a player’s own schedule, with no one else present.”

“Many game designers have derided the design of Pokémon Go, calling it simplistic and trite. But it’s apparent from the game’s success that, intentionally or not, its simplicity accounts for much of its success.”

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Hotels: All Hospitality Is Local

The New York Timess: “Westin … is finding, as many hotel chains are, that a local clientele can help even out the ups and downs of the lodging business. And locals can even help out-of-towners feel more at home.” The focus is “on getting repeat business from a local following. So the innkeepers are sponsoring running clubs or organizing other attractions like author readings, art shows or musical performances … The theory is that a vibrant group of local patrons can make the hotel more attractive to out-of-town lodgers.”

“To breathe new life into its public spaces, Marriott has experimented with various ways to attract an in-town clientele. Its Renaissance Hotels brand a few years ago created an online concierge service, supplemented by recommendations and insights from local ‘navigators’ … And the company recently completed a five-week test in the Baltimore-Washington area in which local Marriott Rewards members could earn points by drinking or dining at 21 of its hotels in the region.”

Hotel analyst David Loeb comments: “The best advertisement for a hotel is the local community. If you can get locals to have a good experience, however they spread that word, it’s a positive.”

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Direct Disruption: The Tide Wash Club

The Wall Street Journal: “Blindsided by the success of the upstart Dollar Shave Club, an online subscription service that chipped away at the dominance of Gillette razors, P&G executives say they are focusing not only on what consumers buy but on how they buy … P&G is experimenting with … the Tide Wash Club, an online subscription service for the dissolvable Tide Pods capsules that are the company’s highest-priced laundry detergent. The company offers free shipping at regular intervals.”

“Another new offering: Tide Spin, an undertaking P&G is calling the ‘uberization of laundry,’ in which customers in parts of Chicago can use a smartphone app to order laundry pickup and delivery from Tide-branded couriers. With the ventures, P&G is delving deeper into the business of connecting consumers directly with the products it makes, especially a new generation less loyal to the company’s big brands.”

“Privately, P&G executives acknowledge the company was caught off guard by the success of Dollar Shave Club, which started in 2011 and says it now has 3.2 million subscribers. ‘It was probably on the radar but we weren’t necessarily having the right conversation around what might disrupt us,’ said a person familiar with the company’s thinking.”

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Small Rivals Trip Big Brands

The Economist: “For a time, size gave CPG companies a staggering advantage. Centralising decisions and consolidating manufacturing helped firms expand margins. Deep pockets meant companies could spend millions on a flashy television advertisement, then see sales rise. Firms distributed goods to a vast network of stores, paying for prominent placement on shelves.”

“Yet these advantages are not what they once were. Consolidating factories has made companies more vulnerable to the swing of a particular currency … The impact of television adverts is fading … At the same time, barriers to entry are falling for small firms … Distribution is getting easier, too: a young brand may prove itself with online sales, then move into big stores.”

“Most troublesome, the lumbering giants are finding it hard to keep up with fast-changing consumer markets … As their economies grew, local players often proved more attuned to shoppers’ needs. In America and Europe” shoppers “can choose from cheap, store-brand goods … But if a customer wants to pay more for a product, it may not be for a traditional big brand. This may be because shoppers trust little brands more than established ones.”

“EY, a consultancy, recently surveyed CPG executives. Eight in ten doubted their company could adapt to customer demand.”

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Women, Men & Storytelling

The Wall Street Journal: “New research … shows that women find men who are good storytellers more appealing … Psychologists believe this is because the man is showing that he knows how to connect, to share emotions and, possibly, to be vulnerable. He also is indicating that he is interesting and articulate and can gain resources and provide support … The men didn’t care whether the women were good storytellers, the research showed.”

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Quote of the Day: Ralph Pini

Inside Blackberry: “Sometimes it can be very tough to let go. For BlackBerry, and more importantly for our customers, the hardest part in letting go is accepting that change makes way for new and better experiences.” – Ralph Pini, Chief Operating Officer and General Manager for Devices at BlackBerry, on the company’s decision to discontinue the Blackberry Classic and its tactile keyboard.

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