31–40 of 61 posts
Pro tip: Have at least three pricing levels with directly comparable features. It will increase the number of sales for the intermediary level.
We're debating trying this and I'd like a bit more evidence that it really works and why it does.
Earlier quoted context omitted.
I don't know if the other comment was edited, but he doesn't say anything about 'illegal'. People certainly found it distasteful though.
I think he wasn't referring to my comment but to my post where I write: "It’s illegal and can lead to huge potential lawsuit."
I think he's right though that there needs to be some linkage to "what you can and can't do, legally".
A major complication that you do not address is how to do confidence testing on the results of your pricing difference. There is an important difference between "A did better than B but who knows why" and "We're confident that there is a real difference." Figuring that out is not easy.
Earlier quoted context omitted.
It is not illegal to offer different prices. Case in point - a lowly 12 oz of Budweiser. If I buy it in a keg it costs me around 50 cents (USD)each. In the bottle it would be closer to $1. At a local bar that has good beer prices and good food it is $3.00 for draft normally, except on Thursdays it is $2 (Bisonwitches, Tucson AZ). If I go to a fancy restaurant it will likely be $4 or even as high as $6. In a free mark…
Ah so it's OK to charge people you don't like (wrong skin color say) more because it's a free market? There's a difference between giving bulk discounts and selling the same product for different prices to different customers.
And that is illegal anyway, as well it should be.
Selling the same product at different price points is done all the time (bulk discounts, account discounts and so on).
The issue here is not whether it is legal to sell the same product at different prices, the issue is whether or not it is legal to offer the same product to the same class of buyers at different prices at the same time.
And that is legal, even if not always in the best interest of the business:
http://en.wikipedia.org/wiki/Price_discrimination
I've done it, briefly, to test different price points and I made sure to refund those we tested at a higher level after the experiment was over.
"For example, if you are manufacturing staplers, all you need to do is to calculate cost of production and distribution, slam 20% margin on it and there you have the price you can sell your shiny stapler machines for."
That's called Cost Based Pricing and is one of many options. That's a decision that was made. You can argue that's the wrong way to price. If you make something in the US and charge 20% on top of costs and have a competitor making Staplers in China, you're out of business.
Boom. Roasted.
Pro tip: Have at least three pricing levels with directly comparable features. It will increase the number of sales for the intermediary level.
I've heard that one before and I've seen sites that do it but I have yet to find a place where there is actual evidence that it works, do you have a reference for that? We're debating trying this and I'd like a bit more evidence that it really works and why it does.
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1. Amos Tversky, "Features of Similarity," Psychological Review, Vol. 84 (1977).
2. Amos Tversky and Daniel Kahneman, "The Framing of Decisions and the Psychology of Choice," Science (1981).
3. Joel Huber, John Payne, and Chris Puto, "Adding Asymetrically Dominated Alternatives: Violations of Regularity and the Similarity Hypothesis," Journal of Consumer Research (1982).
4. Itamar Simonson, "Choice Based on Reasons: The Case of Attraction and Compromise Effects," Journal of Consumer Research (1993).
5. Amos Tversky and Itamar Simonson, "Context-Dependent Preferences," Management Science (1993).
6. Dan Ariely and Tom Wallsten, "Seeking Subjective Dominance in Multidimensional Space: An Explanation of the Asymmetric Dominance Effect," Organizational Behavior and Human Decision Processes (1995).
7. Constantine Sedikides, Dan Ariely, and Nils Olsen, "Contextual and Procedural Determinants of Partner Selection: On Asymmetric Dominance and Prominence," Social Cognition (1999).
Earlier quoted context omitted.
I've heard that one before and I've seen sites that do it but I have yet to find a place where there is actual evidence that it works, do you have a reference for that? We're debating trying this and I'd like a bit more evidence that it really works and why it does.
Here are a few citations, not all directly relevant, from Dan Ariely's _Predictably Irrational_ (itself a good read for any startup founder): ___________________________________ 1. Amos Tversky, "Features of Similarity," Psychological Review, Vol. 84 (1977). 2. Amos Tversky and Daniel Kahneman, "The Framing of Decisions and the Psychology of Choice," Science (1981). 3. Joel Huber, John Payne, and Chris Puto, "Adding…
In 2000, Amazon got caught doing price testing and the news was covered on all major blogs. Here is a link: http://news.cnet.com/2100-1017-245631.html
What's your source on a/b testing price on identical products being illegal? I've never heard that and none of the links provided in the comments so far justify your claim. It is a pretty extreme assertion and you provided no links justifying it either. I can see this rapidly turning into an urban myth, whispered wild eyed at 3am over ramen noodles as founders try and figure out a price for their product.
Why is it illegal to offer different prices for the same service (as this article says)?
It is not illegal to offer different prices. Case in point - a lowly 12 oz of Budweiser. If I buy it in a keg it costs me around 50 cents (USD)each. In the bottle it would be closer to $1. At a local bar that has good beer prices and good food it is $3.00 for draft normally, except on Thursdays it is $2 (Bisonwitches, Tucson AZ). If I go to a fancy restaurant it will likely be $4 or even as high as $6. In a free mark…
Earlier quoted context omitted.
What's your source on a/b testing price on identical products being illegal? I've never heard that and none of the links provided in the comments so far justify your claim. It is a pretty extreme assertion and you provided no links justifying it either. I can see this rapidly turning into an urban myth, whispered wild eyed at 3am over ramen noodles as founders try and figure out a price for their product.
The concept is called "price discrimination". There is a great discussion going in this thread and I may be wrong at this. Even if it may not be illegal, it would leave a bad taste in your potential customers' mouth especially since there are better alternatives.
Not quite - price discrimination is finding a way to take people with more money, and charge them more money. The challenge is, that prices people with less money out of the market - so price discrimination is about finding ways to justify cutting prices for some people while charging more to people who can afford more.
Examples: Student discounts, senior citizen discounts, kid's meals, and matinee prices at movie theaters are all price discrimation. A/B testing prices is... just A/B testing prices.
Though, the wise A/B price-tester does so by offering two different sales - one discounted product, and one more discounted product. This seems to minimize backlash - finding someone else got a better discount doesn't bother people as much as finding out they paid a higher price.