Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Principles of Pricing

principlesofpricing.com

Post reply on HN
Print view View original

11–20 of 24 posts

Re: Principles of Pricing

#11

Post by schuke »

m0llusk wrote: post #7

> ... business ... purpose is ... to survive, and ... to maximise profit ... That is kind of like saying the purpose of human life is breathing. Yes, breathing is critical and fully integrated into existence, but there is so much more to living well. Similarly the purpose of business is to create value. Survival through flows of money comes as a result of that. Money dominated conversations can help, but often miss f…

While I agree a business should have something higher and valuable, business is usually so competitive that mere breathing is hard enough. Most die before even mastering that.

Re: Principles of Pricing

#13

Post by m0llusk »

SMAAART wrote: post #8
m0llusk wrote: post #7

> ... business ... purpose is ... to survive, and ... to maximise profit ... That is kind of like saying the purpose of human life is breathing. Yes, breathing is critical and fully integrated into existence, but there is so much more to living well. Similarly the purpose of business is to create value. Survival through flows of money comes as a result of that. Money dominated conversations can help, but often miss f…

I see your point and I agree. Alas, while not perfect, money is the closest proxy to measure value, not so much from the seller's POV, but the buyer's; how much money-value are they willing to part in order to acquire the goods/services being sold.

Another example might illustrate the difference better: When Steve Jobs returned to Apple he found extremely diverse product offerings intended to offer solutions optimized for features and cost to all segments of the small computer market. Unfortunately this resulted in a confusing mess that even he was unable to navigate. Which Mac should someone buy? Even Steve Jobs could not figure that out, and that is a sign of a serious problem.

The result was a mass consolidation of products. For a time there were high and low end versions of portable and desktop computers and that was it. Deciding between a Mac and a Mac Pro was not confusing or difficult, and this approach worked well with the core values of Apple. The goal of the company was to make computing highly available with systems that Just Worked in predictable and reliable ways. Structuring offerings and price options to make buying decisions easy for people who just wanted a computer caused an immediate boost to both sales and customer satisfaction.

So price optimization can mean very different things. In this case what seemed to be a straightforward targeting of market segments resulted in customer confusion that held back both sales and customer satisfaction. The solution involved a product packaging and pricing strategy that was more aligned with the goals of the company rather than tuning prices to reflect the diversity of the customer base. For best results pricing strategies must be integrated with company goals and messaging.

Re: Principles of Pricing

#14

Post by TeMPOraL »

m0llusk wrote: post #7

> ... business ... purpose is ... to survive, and ... to maximise profit ... That is kind of like saying the purpose of human life is breathing. Yes, breathing is critical and fully integrated into existence, but there is so much more to living well. Similarly the purpose of business is to create value. Survival through flows of money comes as a result of that. Money dominated conversations can help, but often miss f…

> That is kind of like saying the purpose of human life is breathing. Yes, breathing is critical and fully integrated into existence, but there is so much more to living well.

Yeah, this is inaccurate at a systems level. It would be better to say that human life is about ensuring your genes pass on to the next generation. That's life in a nutshell, and from the POV of nature, you're either contributing to that endeavor, or a waste of resources for those who do.

All the higher things of human experience are running on top of the substrate that's self-optimizing to propagate itself further. The purpose is what we ascribe to what we see; nature has no obligation to agree, and as much as it doesn't, we can either suffer, change our understanding of purpose, or - thanks to technology - work to realign nature to our sensibilities.

> Similarly the purpose of business is to create value. Survival through flows of money comes as a result of that.

Similarly here, the importance is reversed. Money flow and profit are fundamental, they're the substrate. They're what the system will do naturally. Value creation is the meaning we ascribe to it, which is not necessary for businesses to run (this one should be plainly obvious, as a lot of well-known businesses, including many hot startups, are arguably net negative). Making the market better align with our ideals takes work, because it's counter to its natural dynamics.

Re: Principles of Pricing

#15

Post by PeterisP »

m0llusk wrote: post #7

> ... business ... purpose is ... to survive, and ... to maximise profit ... That is kind of like saying the purpose of human life is breathing. Yes, breathing is critical and fully integrated into existence, but there is so much more to living well. Similarly the purpose of business is to create value. Survival through flows of money comes as a result of that. Money dominated conversations can help, but often miss f…

Unlike human life, a business is an artificial construct intentionally created for some specific goal. If its creators chose profit to be this goal - which often is the case, explicitly written in the company founding documentation - then that actually is the purpose of that particular business, nothing else, and nothing more, only creation of money for its creators or future owners.

Re: Principles of Pricing

#16

Post by scarface74 »

m0llusk wrote: post #7

> ... business ... purpose is ... to survive, and ... to maximise profit ... That is kind of like saying the purpose of human life is breathing. Yes, breathing is critical and fully integrated into existence, but there is so much more to living well. Similarly the purpose of business is to create value. Survival through flows of money comes as a result of that. Money dominated conversations can help, but often miss f…

> but customers tend to have very different feelings toward each model.

Seeing the success that Microsoft and Adobe have had once they moved to subscription pricing, it seems like a better business model.

Even small software companies have found that subscriptions are much more sustainable.

Re: Principles of Pricing

#17

Post by lo_zamoyski »

PeterisP wrote: post #15
m0llusk wrote: post #7

> ... business ... purpose is ... to survive, and ... to maximise profit ... That is kind of like saying the purpose of human life is breathing. Yes, breathing is critical and fully integrated into existence, but there is so much more to living well. Similarly the purpose of business is to create value. Survival through flows of money comes as a result of that. Money dominated conversations can help, but often miss f…

Unlike human life, a business is an artificial construct intentionally created for some specific goal. If its creators chose profit to be this goal - which often is the case, explicitly written in the company founding documentation - then that actually is the purpose of that particular business, nothing else, and nothing more, only creation of money for its creators or future owners.

That's a fair point (artifact vs. living thing, a distinction misunderstood by mechanism especially where teleology is concerned). However, artificial does not mean arbitrary. What is artificial follows from human ends, and human ends are ultimately rooted in the ends of human nature (which, strangely enough, we can live in opposition to). Thus, the normative definition of a business would have to be understood in terms of human nature. Of course, financial profit is desirable, but not in itself, but as instrument. Anyone pursuing profit for its own sake is idolizing money as if it were an end in itself.

So the purpose of a business is to create value for others in exchange for profit (profit is money which is a medium of economic exchange) to be used for other valuable ends. That is to say, both of you are partially right, but incomplete.

Re: Principles of Pricing

#18

Post by sacrosanct »

> https://www.principlesofpricing.com/the-price

The USD 5.00 per month thing is relatively 'cheap' but the designers of the pricing model don't take into account all the other services people are signed up to. This is why super cheap tiers are great, like $1.00/mo tiers where I may not get all features, but at least I get to save some money. Spotify, Netflix, Hosting, Domain Renewals, etc all start to add up.

Re: Principles of Pricing

#19

Post by Comevius »

sacrosanct wrote: post #18

> https://www.principlesofpricing.com/the-price The USD 5.00 per month thing is relatively 'cheap' but the designers of the pricing model don't take into account all the other services people are signed up to. This is why super cheap tiers are great, like $1.00/mo tiers where I may not get all features, but at least I get to save some money. Spotify, Netflix, Hosting, Domain Renewals, etc all start to add up.

It's costly and risky to have cheap tiers though. Transactions have a fixed cost, and small transactions tend to be more fraudulent. Fraudulent transactions are not only costly, but if your chargeback rate reaches 1% most financial institutions drop you like a hot potato.

Re: Principles of Pricing

#20

Post by FrontierPsych »

Closi wrote: post #10
m0llusk wrote: post #7

> ... business ... purpose is ... to survive, and ... to maximise profit ... That is kind of like saying the purpose of human life is breathing. Yes, breathing is critical and fully integrated into existence, but there is so much more to living well. Similarly the purpose of business is to create value. Survival through flows of money comes as a result of that. Money dominated conversations can help, but often miss f…

The bit of the sentance you stripped out was the bit where they emphasised that they were describing a basic and simplified definition because there is actually an entire chapter on what you are talking about - i.e. consumer preferences and different considerations for different models (including "What does the customer perceive it as fair/value when considering SaaS vs perpetual licencing?"). Sometimes you start wit…

Right. Or what atoms look like.

Atoms don't look like the stereotypical depiction. I remember in my high school chemistry class, our teacher specifically said that atoms were not like this but for teaching at our level, it was fine, but to know that orbits are not like this.

I feel it is crucial that teachers explicitely add the caveat that the explanation is a simplification. It's a whole lot easier to add new info if you know things area simplification, rather than a cast in stone model.

Post reply on HN