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Do not talk about pricing

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Re: Do not talk about pricing

#11

Post by hobs »

ipsin wrote: post #3
josephjrobison wrote: post #2

The most surprising thing I learned from this is that even juxtaposing two options will help you get higher pricing. When thinking of product and service pricing, for me it's difficult to invent three different options sometimes, so it's relieving to know that I could create just two and it will get me most of the way there. It is also crazy to think how relational it all is. I don't really need that extra $7 beer at…

For me, the thing is that you're buying one beer for $7 one time, not "beer in perpetuity, or until you remember to change your mind".

Yep, I distill this as "future annoyance."

How much future annoyance is your product worth? 8 dollars per year?

The mental overhead in case my card changes might not be worth it.

Re: Do not talk about pricing

#12

Post by clarkmoody »

The phenomenon is called anchoring[1], and it works like this: the first price we see anchors our thinking about additional information. This is why furniture stores have a perpetual sale.

"Oh look, this $2500 sofa is only $1899.99 right now. What a great deal!"

One experiment had respondents use the last two digits of their social security number as the initial price for a bottle of wine or other good. This completely-arbitrary price had a strong correlation with the price they were willing to pay for the item.

The effect is described in greater detail in Thinking, Fast and Slow[3]

[1] https://en.wikipedia.org/wiki/Anchoring

[2] http://www.inc.com/the-build-network/the-anchoring-effect.ht...

[3] http://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/...

Re: Do not talk about pricing

#13

Post by wildmusings »

ipsin wrote: post #3
josephjrobison wrote: post #2

The most surprising thing I learned from this is that even juxtaposing two options will help you get higher pricing. When thinking of product and service pricing, for me it's difficult to invent three different options sometimes, so it's relieving to know that I could create just two and it will get me most of the way there. It is also crazy to think how relational it all is. I don't really need that extra $7 beer at…

For me, the thing is that you're buying one beer for $7 one time, not "beer in perpetuity, or until you remember to change your mind".

You make a good point but I don't think this is the main dynamic at play. I'm much more hesitant to buy a $5 app, a one-time purchase, than a $7 beer.

Re: Do not talk about pricing

#14

Post by sjg007 »

wildmusings wrote: post #13
ipsin wrote: post #3

Earlier quoted context omitted.

For me, the thing is that you're buying one beer for $7 one time, not "beer in perpetuity, or until you remember to change your mind".

You make a good point but I don't think this is the main dynamic at play. I'm much more hesitant to buy a $5 app, a one-time purchase, than a $7 beer.

I think you know the value of the beer vs the unknown app.

Re: Do not talk about pricing

#15

Post by LoSboccacc »

mediumdeviation wrote: post #9
Spivak wrote: post #6

> “It is not your customer’s job to set pricing. An optimal price is one that is accepted but not without some initial resistance” says Ash Mauyra explains in this great piece. I can imagine this as general purpose advice but this is no way to build a loyal base. There are some services that I have that I begrudgingly pay for because they price so aggressively that they extract nearly all of the value from my subscri…

One of the first thing you learn in microeconomics 101 is that demand forms a curve - there will always be people who are extracting more value (and thus willing to pay more) for something, and people who don't (and thus don't buy it). Neither of those groups matter - the only ones that do are the people at the margin - if lose a less than proportional amount of customers by charging more, then you still come out on…

If anything peolpe are afraid to explore the curve to find maximum profit. Starting high and giving out discoubts at various level trough the year can help building a model and set the best price if it's not overdone (as in, customer expecting continual discounts)

Re: Do not talk about pricing

#16

Post by orangecat »

LoSboccacc wrote: post #15
mediumdeviation wrote: post #9

Earlier quoted context omitted.

One of the first thing you learn in microeconomics 101 is that demand forms a curve - there will always be people who are extracting more value (and thus willing to pay more) for something, and people who don't (and thus don't buy it). Neither of those groups matter - the only ones that do are the people at the margin - if lose a less than proportional amount of customers by charging more, then you still come out on…

If anything peolpe are afraid to explore the curve to find maximum profit. Starting high and giving out discoubts at various level trough the year can help building a model and set the best price if it's not overdone (as in, customer expecting continual discounts)

if it's not overdone (as in, customer expecting continual discounts)

I'm still surprised that Steam has so many discounts; they've basically trained me to never pay full price. But I feel no need to play new games right when they're released; maybe there are enough people that do.

Re: Do not talk about pricing

#17

Post by dingo_bat »

wildmusings wrote: post #13
ipsin wrote: post #3

Earlier quoted context omitted.

For me, the thing is that you're buying one beer for $7 one time, not "beer in perpetuity, or until you remember to change your mind".

You make a good point but I don't think this is the main dynamic at play. I'm much more hesitant to buy a $5 app, a one-time purchase, than a $7 beer.

I've noticed that I'm more open to spending money on food rather than things like apps/music etc. Buying a $2 app is a week-long decision for me. Whereas I regularly spend ~$10 on a pizza when I'm bored.

Re: Do not talk about pricing

#19

Post by msutherl »

hobs wrote: post #11
ipsin wrote: post #3

Earlier quoted context omitted.

For me, the thing is that you're buying one beer for $7 one time, not "beer in perpetuity, or until you remember to change your mind".

Yep, I distill this as "future annoyance." How much future annoyance is your product worth? 8 dollars per year? The mental overhead in case my card changes might not be worth it.

I think you meant "Yep, I brew this as 'future annoyance'"?

Re: Do not talk about pricing

#20

Post by newjersey »

orangecat wrote: post #16
LoSboccacc wrote: post #15

Earlier quoted context omitted.

If anything peolpe are afraid to explore the curve to find maximum profit. Starting high and giving out discoubts at various level trough the year can help building a model and set the best price if it's not overdone (as in, customer expecting continual discounts)

if it's not overdone (as in, customer expecting continual discounts) I'm still surprised that Steam has so many discounts; they've basically trained me to never pay full price. But I feel no need to play new games right when they're released; maybe there are enough people that do.

I wouldn't see myself as a game buyer at all. So, for me the $5 I paid for skyrim or however much I didn't on other several games I bought is money I wouldn't have spent.

Now the $10 I spent on limbo of different. I didn't wait for a sale. I just bought it. I think steam optimized the revenue from me pretty well. And it all started with them giving me portal (one) for free.

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