Hotter Weather = Cheaper Beer?

Remember Coke’s attempt to charge higher prices on hotter days?  It failed miserably.  Now Budweiser is taking a shot at pricing based on weather, but quite differently from Coke.

Kathryn Koegel reported in Ad Age: “Budweiser took on a huge challenge selling its brand in the suds-soaked Irish culture using the Bud Ice “Cold Index” campaign. Taking advantage of global warming and the fact that people with smartphones check weather insanely often, they built a dynamic pricing engine tied to a heat index. So the price of beer went down as the temperature went up. Every time someone checked their Bud Ice app in places like Galway, it told them what kind of discount they would get. If the temperature went above 18 degrees centigrade, they could show their phone to the nearest pubkeep, and the pour was on Bud. Game elements. Fundamental mobile functionality. Free stuff. User engagement. Bud iced the competition.”

This Ad Age video shows screen shots of the app and described how Budweiser was pleased with the outcome.  Why did this work when Coke’s attempt didn’t?

First and most importantly, Budweiser couched everything in terms of a discount off of the normal price.  Bud offered a lower price on hotter days. Coke would have been more successful if they had offered lower prices on colder days (which was their intent).  Instead, Coke offered higher prices on hotter days.

Second, Bud wasn’t attempting price segmentation (Coke was).  Bud’s objective was to generate trial and hopefully loyalty.  The low prices were on days when demand for beer is likely at its highest, hot days.  Also, beer seems to taste so much better on hot days, so this discount generated trial on days that put Budweiser in its best circumstance.

Third, the novelty of the program and the weather app for the iPhone generated attention.  Well executed.

What are the lessons you can learn from Budweiser’s success with this program?

1. Always position price segmentation as discounts from normal prices.  Never as price increases.

2. You can use price segmentation to generate trial as well.  It doesn’t always have to be about steady state sales.

3. You still have to break through the clutter to grab your customers’ attention.

 

Mark Stiving, Ph.D. – Pricing expert, speaker, author

Photo by Thomas Hawk