One of the remedies proposed, tying product reviews to the manufacturer instead of the storefront is a very difficult thing to implement.
Manufacturers are in a fundamental conflict with Amazon precisely because they desire to fully control the retail channels and set their own promotions, online discounts etc. and capture most of the surplus themselves while still segmenting the market and, for example, selling at different prices through certain local distributors.
Amazon has the exact opposite incentives, they want distributors of the same brand to compete amongst themselves so they can offer the lowest global prices, and that it's Amazon and its users that capture most of the surplus.
This is the root of the forgery problem Amazon can't solve, manufacturers aren't willing to vouch for their products when sold in secondary channels they do not fully control. So this means they will not collaborate on the "global rating" scheme either.
The cited research that buyers use price as an indicator of quality was from 1985. Does that hold true these days?
My gut suspects not?
Perhaps in the early and mid 80s you could still buy quality products, but now is seems 99% of things are just mass-produced where ever it is cheapest. People are conditioned on Amazon to find the same product from a jumble-of-letter manufacturer who is selling the exact same thing at the lowest price. I do not trust that if I buy a "known brand" for a product that it is going to be any different from a similar same no-name thing that is 20-30% of the price (...and very possibly built in the same factory). If it's all low quality crap (which a lot of the time it is) then you may as well get the cheapest one
Sadly you need to rely on things like YouTube videos to actually get any kind of idea on if the item is trash or not, and even then there is the risk of paid-reviews so you need to take multiple sources into account, who they are, trust levels etc. it's sad. Either that or - and I know this is madness - go to a physical store and inspect the goods before you buy it.
I would argue that the article is correct that quality is often secondary to speed of delivery and cheapness though. Amazon has totally won there.
If I buy a $100 projector vs a $1,000 one, or a $20 curling iron vs a $200 one, the order of magnitude difference does make for a better product, I find.
Maybe. But what about the Audi vs. Volkswagen? A Ninja blender vs. a KitchenAid? A memory card from SanDisk vs. a no-name brand? A shirt from Fred Perry vs. H&M? And these were brands you probably know. What about the products in niches, where you don’t have experience, or products are sufficiently similar? Do you always know whether a product is more expensive because of the brand, or because it’s objectively better?
because car brands belong to very few auto makers, a lot of cars with different names use the same chassis across brands, the same engine, and probably the same electronics as well. so you end up with most of the difference being esthetics these days, at least for cars within roughly the same price range.
Regarding the Oatly ad at the top (Another ad for our oat drink providing no reason at all why you should try it), this ad does have a signal. It's a humblebrag. It's saying, our product is so well known, and the reasons for using it so obvious, that we don't need to say anything. It's cementing Oatly brand in the minds of anyone who already thinks that they should be switching to non-dairy milk for any reason (health, environment, etc).
The ad is basically saying "You consumers don't know how to use your brains and will buy our brand just because we showed a picture of it". Terrible.
Nope. It builds on prior exposure to Oatly marketing in other channels, which they famously are good at.
The market for oat milk consumers mostly consists of people that had actively made a choice about drinking oat milk already.
Not really, it’s more of a brag about how oatly has fully solidified itself as _the_ choice for so many, basically like Nutella
It's I think what we used to call "brand advertising".
Just like random "coca-cola" billboards at the side of a road or a sports stadium
I once read an article that said basically that some ads were targeted at people who had already bought the product, to prevent regret for paying a premium price. The example given was TV commercials for BMW cars but I can see that applying with the oat milk drink.
Also that it is the drink of nonconformists and creatives. Many of their other ads cross way over into tryhard cringe for how "random" they are.
Tryhard cringe for us, but likely very funny and edgy to, say, 5-10 year olds. It wouldn’t surprise me if there wasn’t an attempt to center Oatly for coming generations as an investment.
I wish someone did an analysis of their marketing. I really hope it was a huge flop because it’s just awful.
I despise their horrible advertising and marketing copy in general and I sometimes just have to tell myself, “it’s just oat milk no need to boycott it because some edgy marketing consultant forces you to read their nonsense”.
It's in your head. Someone did something right.
agree..
Those formulas have to be comedy but it seems like it’s trying to be serious.
agree. they seem hasty but didn't notice anything obviously wrong but may be i missed something ...
appears the math was updated
Yes. Comedy is suboptimally optimal
Since the article doesn’t mention it, CPA stands for cost per action.
Cost Per Acquisition (of a new customer).
How do they know if the customer is new or not?
tracking via cookies (that expire after X days) or some kind of identifier in the CRM
That explains the success of platforms like Temu: every search generates many identical products that are all dirt cheap, which makes my search much easier. I find myself buying a lot faster because there is not a lot of variety and relatively little trickery/ads
Are we talking about the same Temu that pops up a spinning roulette wheel telling you have 100% off and to install the app to get the offer? (Catch is... it isn't 100% off and it's BS)
This has little to do with equilibrium analysis, it is just the market for lemons story but for the ad space. You need to investigate the buyers and what they believe about brand quality.
How can consumers respond to get useful information and enable themselves to make better decisions when exchanging their resources for goods?
- use other information channels like review media (fashion sites)?
- trust secondary sites like brand retailers (IE. John Lewis in the UK?)
????
CPA pricing removes the burn
Its similar to SEO. Nobody says "Oh my god, advertising via SEO is free, what a blessing!". It's still a competition. It's still a zero sum game.
He's not saying advertisers don't compete. He's saying it changes from advertising being a massive risk as well as a cost, to just a cost. So the auction is won by the company with the biggest instantaneous profit margin on a SKU, instead of the one with the biggest war chest that can afford to risk on that massive prime time slot. This change in incentive favours shitty products.
Oof