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Do not talk about pricing

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Re: Do not talk about pricing

#31

Post by lucaspiller »

nitwit005 wrote: post #27

If you try to buy things, it's sometimes desperately frustrating that no one will just quote you a simple price. They have different pricing tiers, and want a salesperson to talk to you so they can pretend to give you a "special" discount, and all sorts of BS. I'm sure these things work, but they also alienate customers sometimes. People have founded entire businesses on offering clearer pricing schemes.

They do alienate customers, and for a lot of companies this is on purpose. Try finding a price for one of Oracle's or IBM's enterprise products on their website - you won't - their products aren't designed for the casual browser, they are designed for directors who have budgets in the hundreds of thousands or millions of dollars range (where strangely the price ends up pretty similar to the budget). This is the type of person they want as a customer, and so all their marketing and sales process targets this type of person. It's not worth it for them to target the small fish, so they purposely push this type of customer away.

I do hate when small companies do it though. I'm looking for a new AC unit and so few dealers will just give me a price straight away. I just want to enter my credit card and have it delivered.

Re: Do not talk about pricing

#32

Post by lucaspiller »

dingo_bat wrote: post #17
wildmusings wrote: post #13

Earlier quoted context omitted.

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.

I'm the same and it doesn't really make any sense. Ok food is physical and tasty, but you enjoy it for maybe 15 minutes vs a game that could provide 100s of hours of entertainment?

Re: Do not talk about pricing

#33

Post by jakobegger »

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…

Yep. There's so much bullshit you hear about elasticity of demand and extracting the most amount of profit from your customers.

Yes, if I charge 3 times more, and lose less than two thirds of my customers, I'll make more profit in the short term.

But long term, network effects and the size of my customer base is very important for my ability to make money. Personal recommendations are a very important marketing factor, and having three times the number of customers is worth something even if you make the same profit.

Re: Do not talk about pricing

#34

Post by curun1r »

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)

You have to be very careful with discounts in some situations.

The case that we ran into involved a product that required a fairly large amount of time investment on the part of the user to be valuable. Our customers that were willing to devote a fair amount of up-front time and 30-60 min per day to our tool were getting a pretty massive ROI, both on the time they spent and the monthly subscription cost. Those that weren't putting in the time got very little benefit. But we also found that when salespeople gave discounts for the first few months, our cancelation rate was significantly higher. We were much better off losing potential customers during the sales process because the customers we did end up signing had higher LTV and Net Promoter scores.

The lesson learned was that high/full price increased the investment that customers felt in our product and triggered their impulse to get their money's worth. Discounts signaled customers to make a shallow evaluation of the product and ultimately sabotaged our value proposition.

Re: Do not talk about pricing

#35

Post by increment_i »

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.

Is it possible that you now (like most consumers) have been conditioned to expect apps to be free? Meanwhile, nobody expects anyone to give them a pizza or a beer for free.

Re: Do not talk about pricing

#36

Post by enraged_camel »

lucaspiller wrote: post #31
nitwit005 wrote: post #27

If you try to buy things, it's sometimes desperately frustrating that no one will just quote you a simple price. They have different pricing tiers, and want a salesperson to talk to you so they can pretend to give you a "special" discount, and all sorts of BS. I'm sure these things work, but they also alienate customers sometimes. People have founded entire businesses on offering clearer pricing schemes.

They do alienate customers, and for a lot of companies this is on purpose. Try finding a price for one of Oracle's or IBM's enterprise products on their website - you won't - their products aren't designed for the casual browser, they are designed for directors who have budgets in the hundreds of thousands or millions of dollars range (where strangely the price ends up pretty similar to the budget). This is the type…

You're right about the target audience, but wrong about the reason.

They don't quote a price because the cost of the product they sell makes up only a small percentage of the overall cost. The vast majority comes from consulting and product customization, which is billable by the hour. And since you don't know the prospect's exact need during the initial engagement, providing pricing would be silly.

Source: I work in that exact market. When a prospect asks for a price up front, they basically fail lead qualification. As the saying goes, if you have to ask how much it is, you ain't the target audience.

Re: Do not talk about pricing

#37

Post by FussyZeus »

How about instead of anchoring or negotiating or special discounts or sales or any of this nonsense, we have a simple agreement: I, a customer, will give you money for a product/service, and you deliver that product/service as described with no conditions, strings, or other such insulting attachments and we call it a freaking day?

When did commerce get so bloody hard?

Re: Do not talk about pricing

#38

Post by icelancer »

boulos wrote: post #22
tedmiston wrote: post #18

Just me or does anyone else only picture The New York Times when you hear "The Times"? Is that just me? Or just an American thing?

Don't feel bad, it's a regional thing. In San Francisco, if someone says "The Times" I also assume NYT. But, for example, folks nearer LA, think the LA Times. A lab mate and I joked about making a visualization along these lines (and the more common "Which city is 'The City'?"). Now I'm curious if the Seattle Times is a big enough deal to supplant NYT (presumably yes)...

Not really. Been out here 10 years and "The Times" tends to refer to NYT. Seattle Times is referred to in full generally; the only other competing paper (now dead) was referred to as the PI (post intelligencer). At least in the circles I ran in, which was mostly finance/tech.

Re: Do not talk about pricing

#39

Post by ChuckMcM »

This quote sums it up "When The Times introduced a paywall, the number of people looking at their digital service dropped by 98.7% (from 22m to around 300,000), yet the switch was a huge financial success."

Now that some of the crazyness of Internet Advertising has fallen by the wayside (lower CPCs == less crazyness), it becomes important to pay people who will research things, write eloquently about them, and convey the information you seek. I have really been enjoying Blendle[1] and their model. Happy to pay for decent content, not willing to pay for content I don't read. A good mix.

I hope more publications buy into that model.

[1] blendle.com

Re: Do not talk about pricing

#40

Post by MichaelGG »

Swizec wrote: post #8
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…

Ideally a user should get at least 10x the value than what they paid. When pricing, I try to go for a price that people pay, but with resistance from X% of leads. Then you can give some/many of them limited-time discounts, which nudges them over the edge. If you don't price high enough, you don't have room to do that. If you don't have resistance, you have no-one to do it for. And people are MUCH more likely to buy w…

Any source or reasoning for 10x? I've got some software that saves a certain type of business about 40-70% on tech support measured in time to resolution (and time spent). Plus it provides a large bonus in "can actually solve an issue invested of telling customer to keep trying to repro".

If a tech costs $5000 a month and a company can save on one tech, only price it at $500/month?

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