The Price Is Right? Algorithmic Pricing, Cultivated Meat Setbacks, and the EU-China EV Tariff Tango
Pricing is getting really sneaky, cultivated meat is still too expensive and Europe's not sure if it likes cheap Chinese EVs or not
This month we’re flipping out over the emergent world of algorithmic pricing. Did you know users of a fast food app could be seeing a lower price for exactly the same food items as you? Based on social graph data that reveals when you’re most vulnerable to high prices – the timing of your usual lunch break, payday, when the fridge is low before a food delivery - you could be paying more. When we can’t all consult a standard published price, how do we know we’re paying the same amount as the person standing next to us?
We breakdown this phenomenon – because it has big implications for brands and customer’s relationships to them – and speculate on how this troubling phenomenon might be turned on its head in a more sustainable consumer marketplace.
Meanwhile, one of our favourite climate solutions is in trouble. US cultivated meat start-up, SciFi Foods, is calling it a day in the face of funding challenges. And Germany, having been alarmed by the rise of Chinese EVs, is now worried about EU tariffs on their imports.
Is my price the same as your price?
It feels like there’s a disparity between what the papers tell us is going on with prices (falling, mostly, since their peak in late 2022) and how we experience prices in the real world. There have been accusations of ‘price gouging’ and, clearly, once price gets on a steep upward trajectory it takes a lot of (interest rate) coercion to turn that around. But what if it feels this way to us for a more opaque, somewhat sinister reason?
The MacDonalds’ app knows when you’re most vulnerable to a quarter pounder based on the data in your social graph. Uber ups its fare if your battery is low. Expedia changes a price dependent on the level of intent shown by your browsing (known as 'personalised pricing'), and you can't book even a basic service without discovering two or three additional charges that crop up at checkout (this one's called 'dip pricing').
We’ve long known each of us inhabits completely different digital advertising worlds, dependent on our income, demographics, purchase history and preferences but what if this is where price is headed too? One price for you, one for me.
The American Prospect this month writes about just this phenomenon, in which corporations are embracing a new frontier for profit - from surge pricing and algorithmic pricing to ‘junk fees’ (the euphemistic ‘dip pricing’). They see concentration of market power, data and technology being unleashed on pricing when pandemic supply restrictions got us all used to more volatile prices. Prices were going up everywhere, so why not?!
Aside from the likelihood that all this is contributing to the stubbornness of inflation, what does it mean for brand perception? If it's properly telegraphed and there are benefits as well as penalties, we might be okay with it. But if we can't see it – like the MacDonald's example in which consumers are isolated from each other by an app so no one knows what the other is paying… Well, uggh.
We can imagine a rather dystopian future where the brand proposition promising fair, transparent pricing stands apart. Or we can find creative ways to turn the technology to more meaningful forms of value? Here’s a few ideas:
Dynamic pricing for groceries: use real-time data to dynamically adjust prices based on stock levels and expiry dates, reducing food waste.
Carbon footprint pricing: Based on consumer’s purchase history, energy usage and lifestyle, offer personalised prices that reward a lower carbon footprint.
Fashion ‘dip-pricing’: Advertise a lower base price for a garment, with additional costs for eco-friendly features - recycled materials etc – imparted in a transparent UX highlighting the environmental impact of choices
The Age of Recoupment, The American Prospect
How Companies Can Make Dynamic Pricing Fairer for Customers, BCG
Odd Lots Podcast: How Companies Got Smarter About Price Hikes, Bloomberg
Consumer sentiment hits lowest level in 7 months, Yahoo! Finance
Where next for cultivated meat as SciFi Foods calls it quits?
One of our favorite climate solutions is in trouble. US cultivated meat start-up, SciFi Foods, is calling it a day in the face of funding challenges. CEO Joshua March cites the shift in the alt-protein zeitgeist from boom to bust as a key factor in the company's struggles.
SciFi was pursuing a hybrid solution to commercial viability, focusing production on a plant-based product with cultivated cell biomass as an ingredient for more authentic flavor in its burgers and sausages. So, its fortunes were already tied-up with the consumer's declining appetite for alt-proteins. Then, with funding in the sector reportedly dropping by 78% in 2023, it all became too much.
We believe the future fortunes of the nascent category will be decided by its success or failure in navigating popular cultural perception better than its predecessors in the plant-based protein world. Cultivated meat is and should be received as an exciting product. It is an essential solution to an otherwise inescapable challenge. Let's hope someone survives the funding drought long enough to bring it to market in the way it deserves.
Cultivated meat co SCiFi Foods closes up shop, appoints firm to run sales process, Agfunder News
Germany's EV Dilemma: Balancing Protectionism and Progress
Germany, having been alarmed by the rise of Chinese EVs, is now worried about the tariffs the EU has agreed. The European Commission will impose up to 25% tariffs on imported Chinese EVs from next month.
Germany has been anxious to protect its historic automotive sector while watching China make rapid advances in EV technology and drive prices down (with a little help from the Chinese state by way of financial subsidies and R&D funding). But it's not just about comparative advantage – Germany fears Chinese retribution too.
As Chancellor Olaf Scholz warns against isolation and illegal customs barriers, the implications for Europe's electrification targets are dramatic. Thom Groot, CEO of The Electric Car Scheme, says meeting EV goals without the help of Chinese manufacturers is unlikely.
Why is Germany opposed to EU tariffs on Chinese electric vehicles? Euro News
About 33_Zero
33_Zero offers low commitment strategic workshops designed to help contextualise your brand against the backdrop of ‘net zero culture’. Uncover the opportunities that will emerge in your category as these forces shape new ideas about value, change shopping behaviours and as whole new sub-categories emerge in the growing sustainable economy. We work with both the new brands redefining categories - like cultivated meat startup Ivy Farm - and established brands like Nike, who are raising awareness of their initiatives in this space.
Workshops are led by our Strategy Partner, James Poletti, who has years of experience steering brand strategy projects in technology, finance, fashion, automotive and other categories for clients like Hyundai, Samsung and Adobe.
Email jamesp@33seconds.co to find out more.