18 ms·

Do not talk about pricing

489 points by hunglee2 11y ago

creshal 11y ago
"Contact our sales team for a quote" == "Our prices are non-competitive and we know it" in my experience.
- wccrawford 11y ago
  Yeah, and in addition, "We're going to need time and persuasion to convince you to pay that much." I really don't have time for that crap. And salesmen generally give me the creeps. I think it's because so many of them are just there for the paycheck, but need to pretend to be interested in what they're selling. Ugh.
- oneeyedpigeon 11y ago
  True. If you're not willing to show me your price, in a huge font, with big flashing letters, chances are you're secretly a bit ashamed of that price, and I shouldn't be paying it in the first place.
josephjrobison 11y ago
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 the bar, "but who cares, we're having fun". Whereas paying $8 a month to the New York Times took me months and months to decide on because I wasn't used to paying for it, even though I'd been a reader for years. It really is a mostly emotional decision.
- CaptSpify 11y ago
  I think this is modern tech poking it's holes in our economic model. I know that it costs $some_amount_of_money to make a batch of beer. But there's only so much of it. Sure someone can make another batch, but that costs another $some_amount_of_money. It also costs $some_amount_of_money to make digital media, yet once created, it can be duplicated indefinitely for free. At least, that's what always hangs out in the back of my mind.
- ipsin 11y ago
  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".
  - percept 11y ago
    "You'll be back." - Beer
  - hobs 11y ago
    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.
    - msutherl 11y ago
      I think you meant "Yep, I brew this as 'future annoyance'"?
  - marcoperaza 11y ago
    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.
    - sjg007 11y ago
      I think you know the value of the beer vs the unknown app.
    - dingo_bat 11y ago
      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.
      - lucaspiller 11y ago
        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?
- rtehfm 11y ago
  Tangible objects provide a higher sense of gratification, I suppose. $10-15 USD for a single, one-time, movie ticket or $1-5 dollars for a phone application. And then there's the whole micro payment economy which is another thing.
- deleted 11y ago
  [deleted]
- Manishearth 11y ago
  You may also enjoy reading about how airline pricing works. It doesn't have an emotional component, but they get away with charging wildly different prices for the same service by having prices fluctuate on a day-to-day basis and some other tricks. It's sort of a "people who can pay, will pay" model, where they can gather from a larger chunk of the demand curve.
- zodPod 11y ago
  Seriously! Think about how we deal with Android/iPhone apps. I go to Five Below or a Dollar Store and stock up on $2-$3 items that are kind of neat even venturing into the $5 range occasionally for "premium garbage" yet I get on the Google Play store and see a really awesome app that fills one of my needs but it's $2! How can someone charge $2 for THAT? They only spent a year working on it and it fits my need perfectly but $2 is too much! It's really weird, for sure. I think the hardest part with things like the New York Times is that a lot of us are getting our news from aggregators. I don't give a shit about the New York Times as a company nor any others. I read down through places like Hacker News and click links there. If, occasionally, it's a link to a NYT article, I read it (or don't.. I guess?) but otherwise, if any one of the news sites disappeared off of the face of the globe, I'd be no better or worse off. Also, $8/mon is nothing when it's one news site but if each site begins charging, using a news aggregator is going to be a very expensive proposition...
  - Benjammer 11y ago
    There is something to be said though about being able to see, touch, and feel that $3 tchotchke in the store rather than downloading an app with no idea of it's depth or quality (unless there is a brand reputation already). I think there's something primal about touching/seeing something before buying, and I haven't seen anything digital that even comes close to this sense of grokking the whole thing you're buying in a few seconds/a minute of physical inspection. I'm curious what the difference is (if any) in effect of the GBB pricing model in a store front versus online marketplace.
  - restalis 11y ago
    "if each site begins charging, using a news aggregator is going to be a very expensive proposition" Yes, it could be, but that won't happen unless the act of publishing gets regulated (like in China, where even bloggers have to (or will have to) have publishing licenses) and forced upon an artificial asking price.
Spivak 11y ago
> “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 subscription, and then there are services that I'm actually happy to pay the bill because it's such good value. Guess which services I recommend to others, and which services I actively look for alternatives for?
- Swizec 11y ago
  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 when there's a time limit and they might lose something if they wait too long.
  - MichaelGG 11y ago
    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?
    - eru 11y ago
      If it's $5000 net, the gross the company has to pay for is much higher.
- mediumdeviation 11y ago
  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 top. This is also what the quote is alluding to.
uptownfunk 11y ago
Reminds me how we assign points to tasks in an agile sprit. It takes practice and it helps to have small tasks in relation to which we assign points to the larger ones.
clarkmoody 11y ago
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 https://en.wikipedia.org/wiki/Anchoring [2] http://www.inc.com/the-build-network/the-anchoring-effect.html http://www.inc.com/the-build-network/the-anchoring-effect.ht... [3] http://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555 http://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/...
- boulos 11y ago
  Predictably irrational by Dan Ariely has a good number of case studies that I think illuminate the topic particularly well: http://www.amazon.com/Predictably-Irrational-Revised-Expanded-Decisions/dp/0061353248 Unsurprisingly there's some sort of combo deal to get Thinking Fast and Slow with it.
  - pc86 11y ago
    If you remove the spaces before that link it will be clickable.
    - deleted 11y ago
      [deleted]
    - boulos 11y ago
      Ugh, I always forget that I shouldn't do that here (I move URLs out of the way like this for email) and its been too long to edit. http://www.amazon.com/Predictably-Irrational-Revised-Expanded-Decisions/dp/0061353248 http://www.amazon.com/Predictably-Irrational-Revised-Expande...
  - clarkmoody 11y ago
tedmiston 11y ago
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?
- boulos 11y ago
  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)...
  - icelancer 11y ago
    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.
- hartpuff 11y ago
  It's not just you, and probably not even just an American thing. I personally think of the The Times when I see "The Times", but I'm British, like the author of this Medium article. I know why it happens, but it's somewhat ironic that The Times is given a made-up regional-sounding name (The London Times or Times of London) to differentiate it from shorthand versions of region-specific titles that are, directly or indirectly, inspired by The Times.
known 11y ago
Similar to salary negotiations?
- pmorici 11y ago
  No, salary negotiation is a whole different ball of wax.
boulos 11y ago
While I think this is fine advice for most consumer things (and that generally you should talk about value not price), this falls down in a number of interesting markets. For example, with cloud where I work, the pricing is a huge component of decision making. Many organizations base their decisions on TCO, and that's not crazy. Generally speaking, if you have a commodity (or near commodity) then price is something to talk about.
j45 11y ago
Pricing remains the hardest thing in almost any business. I learnt from running a part of a furniture chain's website that garbage is often placed with the item people want to move. Retail I learnt is more about selling profit than selling product or services. Pricing remains hard, and tricky, and several states like California have made it illegal to display MSRP type pricing, because everything's a great deal.
nitwit005 11y ago
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.
- endymi0n 11y ago
  This. With years of experience from dealing with "ask for quote" businesses, this strategy is by now an immediate k.o. criteria for me when considering anything. I may return for your offer only after spending considerable time of not finding any more transparent business (quite rare, but possible for very customized products like renting glass fiber for an office). In practice this never happens and I've been a much happier customer ever since - with my business life cleaned up from 95% of dealing with crappy sales reps.
  - cookiecaper 11y ago
    The other side being that, depending on the good, if you have a salesperson, you can often, ironically, get a better price overall. Recent case in the point: I was in the market for a Herman Miller Embody. I would've ordered it online at retail for ~$1500, but I wanted it ASAP so I went to a local HM dealer to see if they kept any in stock (they didn't). While there, the sales person got me a more-upgraded version of the Embody for less than $1000 by invoking dealership and small business discounts. Effectively, I made $500/hr during that trip to the HM dealership. The downside of this experience was that, contrary to my original intention, it took about 5 weeks for the chair to arrive. :\ It would've shipped faster if I had paid full retail from the HM store online. Of course, it's going to depend on the good, but considering that salespeople usually have a strong incentive structure to get your sale to go through them instead of an online retailer or to a competing business, they really will pull out all the stops to keep you around.
- desdiv 11y ago
  It's a funny world when Elon Musk will openly display "$90M to send 6.4mT of your shit into geosynchronous orbit"[0] and yet millions of businesses selling things that are far less expensive and far more fungible want you to "contact our sales team for a quote". [0] http://www.spacex.com/about/capabilities http://www.spacex.com/about/capabilities
FussyZeus 11y ago
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?
- cromulent 11y ago
  Totally agree, but I think haggling and anchoring have been around for a very long time, at least as long as markets. I don't see them going away any time soon.
  - Consultant32452 11y ago
    It's certainly true that haggling and such have been around essentially forever, but scientific rigor hasn't. There are now entire generations of PhDs who have carefully studied these psychological phenomenon to maximize business' ability to squeeze every last drop of blood out of you. Meanwhile the consumer has been left relatively uneducated and unprepared to recognize and maneuver in this world.
  - FussyZeus 11y ago
    I would say haggling is similar but fundamentally different, that's more between a customer and a salesperson and usually involves more or less them on equal footing (the example that comes to mind first is a car, and the old saying that no one but a sucker pays sticker price). That's a luxury good where the need isn't immediate and the customer can exert some influence, unlike the vast majority of sales situations where the need is apparent and they can't just go to the 'next lot' whatever that might be.
- restalis 11y ago
  "When did commerce get so bloody hard?" I guess since the revenue optimization ideas kicked in! How do you think something as enticing as revenue could have eluded the desire of "doing it better"?
ChuckMcM 11y ago
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
- estefan 11y ago
  It can't have worked out that well because they've taken down the paywall for The Sun...
CM30 11y ago
If I get told to 'ask the sales team for a quote', then sorry, I'll find another product or service that just provides the information up front. Would I be willing to pay their prices if I talked to the sales guys? Maybe, but it's still an extra inconvenience that's easier to avoid than go along with. And no offence, but it's very unlikely your product or service is that unique that there's no viable alternatives out there. That don't waste everyone's time.
jpetso 11y ago
Is it not notable how, among all of these examples and thought processes, not a single word was lost on the value provided to the totality of customers, in addition to how much is monetizable? Obviously the ability to pay quality journalists is a valuable cause, but it irks me that retaining a large percentage of customers/consumers, and the corresponding potential to make much more of a difference in the world, isn't also considered a mention-worthy aim in itself. Got the opportunity to cure diseases but decides to play mind games for fun instead? In a position to bring awesome tech to the masses but prefers to market it as luxury item to a limited audience? Making lots of profits already but spends serious effort to drive the competitor out of business to earn even more as monopolist? ...good for you, "disruptor".
- pjc50 11y ago
  Journalists .. corresponding potential to make much more of a difference in the world There very definitely is a market in this - the market for newspapers. Buying a newspaper as a proprietor is a fairly cost-effective way of getting a society to replicate your prejudices; you can get a huge amount of influence for a mere few tens or hundreds of millions of dollars.
rapht 11y ago
Very good points in this post, but it seems to me that they are only valid if you look at a single line of products / services at a time. When you put multiple products/services in one store, that is when your products get to be next to both competing and non-competing (non directly substituable) products, there are other consumer feelings to add like the sum of all things they're going to buy -- whether or not they have a budget, the sum of the things will either look "cheap" or "expensive". And who knows what they will buy next... if they come back at all.
colincarter41 11y ago
There should be price transparency to customer, Most of the business in service industry don't disclose price upfront. This will sometimes cost them.
shawnee_ 11y ago
At The Times, we realised that converting customers who paid £8/week for the printed newspaper into customers paying £2/week for the digital edition (often after paying Apple £500 for an iPad on which to read the edition) wasn’t great business. ... So — over two years — we gradually raised the price for those original customers to £6/week. The problem with "do not talk about pricing" is that you're assuming your customers are idiots. There's nothing wrong with having a bunch of profitable idiots as customers, but that's not quite the target audience for a product like newspapers. The simple fact is that the cost of delivering volume to subscribers (one more subscriber) is so teeny tiny small that inflating the price more than a reasonable amount (when in fact you're losing advertising eyeballs) is what's not smart business. Companies that presume I'm an idiot don't get my business. You cannot talk about pricing without talking about cost. Intelligent businesses are unafraid to be transparent with their variable costs (which for a digital-only newspaper are significantly less than for a print version); what trips prices is the bulky overhead fixed costs: CEO and executive management pay, benefits, and unnecessarily swanky office space. Realtors are probably the best example of this IRL, operating in an industry that "doesn't want you to talk about pricing" (e.g. negotiated commission at an hourly rate, for example) ... just sign on the dotted line and let them abscond with all your equity in a lump sum payment.
sickbeard 11y ago
Yea no price = buzz off. There's nothing more annoying than call for quote.
mikeokner 11y ago
When I was in college, we bought the absolute cheapest beer per oz we could find as long as it wasn't Red Dog. Not sure where they found college kids fooled by a % discount.
- restalis 11y ago
  They must have studied a group through hypothetical choices (instead of actual choices that had any weight on their budget), or they did an open study in which the tested subjects could have chosen something based on how they wanted to be seen choosing, or it may be just plain memetics, or any other reason. That is, however, most of the time the close as you can get to the actual human behavior within a reasonable effort (i.e. unless you're willing to go with covert surveillance or something).
GigabyteCoin 11y ago
>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. But for how long? I'm fairly certain that once those 300,000 loyal readers kick the bucket that The Times' digital subscription service will too. How is 22 million regular readers (who will keep coming back and telling their friends about your articles, because they're free) worth less than 300,000 paying subscribers (who for some reason absolutely have to read what's in The Times no matter the price, and would probably have a hard time encouraging others to be so vehement). Not to mention the types of journalists you will attract with a readership of a very small city, vs the readership of the population of New York State.
- jameshart 11y ago
  "How is 22 million regular readers worth less than 300,000 paying subscribers" Monetarily. The ad market has only got worse since the Times made the move away from pure ad-funded pageviews, so the ability to turn those 22 million people's eyeballs into a revenue stream has become even less viable than it was when they replaced them with 300,000 paying customers. "Not to mention the types of journalists you will attract.." ... with an engaged and interested audience who are directly paying to read what you have to say, who aren't merely being driven to your site by clickbait headlines and paid placement? I dunno, would think you'd be able to attract pretty good journalists on that basis...
beat 11y ago
So those of you who make purchase decisions for software used in-house... what are your turn-ons and turn-offs? If I'm trying to sell you a product that you find technically useful and exciting, how does pricing play into it? What would drive you away from a buy decision on an otherwise great product?
- dsr_ 11y ago
  For the most part, you need to represent value far in excess of the total lifetime cost, which includes half of the transition cost to the replacement. Say your software is licensed at $10 per person using it per year. In addition to the $10, I need to consider the costs of installation, configuration, first level support, entitlement/license management, and what it will cost me to extract the data and munge it into a usable form when we decide in three years that your competitor does it better. Now consider that most companies offer lousy support for their products, so I also have to do a test roll-out to a small number of people, manage that, and figure out if it will all be worthwhile. If you discount based on quantity, can I roll the test group into the main group? If you price in chunks larger than per-user, do I fall between your levels in some disadvantageous way? Is it any wonder that I vastly prefer standard-protocol based, open-source applications with healthy user communities? No, it is not.
  - beat 11y ago
    It's software that automates a lot of costly auditing and troubleshooting in complex systems, so the core value proposition is hours that humans don't spend (and reduced downtime). If it can reduce the workload of senior/lead engineers by 5-10%, what's that worth? This sort of thing is really hard to quantify, although I'm sure we'll get more data as it grows. Does per-seat licensing work best, or something modeling the amount of data being processed? Fixed or floating seats? We're definitely looking at higher pricing, from hundreds to a few thousand per seat annually (not unusual in the market). I'm not worried about whether the product will be loved - we're engineers ourselves, totally focused on the suckiest parts of working on enterprise systems. If our product isn't a pleasure to use, I'll take it as a personal failure. But then we have to sell it. And I'm an engineer solving my own pain points, not a sales guy. That part is new to me!
drauh 11y ago
This? "Dark Patterns by the Boston Globe" https://news.ycombinator.com/item?id=11562414 https://news.ycombinator.com/item?id=11562414
Iv 11y ago
What a bunch of crap. Of course people spend a lot of time arguing, discussing, even getting emotional about prices. When talking with a company you are client with you basically have two things you need to talk about : - what you are selling - how much you are selling it If I meet a company that does not talk about one of these two things, I'll move along.
restalis 11y ago
What we should be aware about pay-walling broad public information is that we're not talking about some pure and simple business model here, with a publisher providing information as good for consumption (for which the clients pay). The act of information dissemination and the ability to reach an audience has value in itself. Interested parties will gladly step in to fill the void left by "independent" publishers gone pay-walled. Will the pay-walled information be of higher quality compared to the free one? Maybe! Actually it's safe to assume that the free information will be "free" only as in "free beer", but who cares? Then there is this bitch called "the network effect" which erodes that pool of "loyal customers" day by day making the pay-walled publishers gradually slipping into obscurity¹. Pay-walling information channels addressed at the broad public is a loosing strategy in the long run, no mater how one twists it under a study or another, and that is exactly because information is not in the same category with the tea lights or some other "IKEA pack". ¹ The publishers are aware of this, that's why they are using pay-walling only per article, after it reaches a number of views. By this they try to balance the the opportunity to get new clients (i.e. monetize the contents) with the risk of a complete audience drain (i.e. loss of relevance).

489 points by hunglee2 11y ago

creshal 11y ago

"Contact our sales team for a quote" == "Our prices are non-competitive and we know it" in my experience.

wccrawford 11y ago
Yeah, and in addition, "We're going to need time and persuasion to convince you to pay that much." I really don't have time for that crap. And salesmen generally give me the creeps. I think it's because so many of them are just there for the paycheck, but need to pretend to be interested in what they're selling. Ugh.
oneeyedpigeon 11y ago
True. If you're not willing to show me your price, in a huge font, with big flashing letters, chances are you're secretly a bit ashamed of that price, and I shouldn't be paying it in the first place.

josephjrobison 11y ago

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 the bar, "but who cares, we're having fun". Whereas paying $8 a month to the New York Times took me months and months to decide on because I wasn't used to paying for it, even though I'd been a reader for years. It really is a mostly emotional decision.

CaptSpify 11y ago
I think this is modern tech poking it's holes in our economic model. I know that it costs $some_amount_of_money to make a batch of beer. But there's only so much of it. Sure someone can make another batch, but that costs another $some_amount_of_money. It also costs $some_amount_of_money to make digital media, yet once created, it can be duplicated indefinitely for free. At least, that's what always hangs out in the back of my mind.
ipsin 11y ago
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".
- percept 11y ago
  "You'll be back." - Beer
- hobs 11y ago
  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.
  - msutherl 11y ago
    I think you meant "Yep, I brew this as 'future annoyance'"?
- marcoperaza 11y ago
  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.
  - sjg007 11y ago
    I think you know the value of the beer vs the unknown app.
  - dingo_bat 11y ago
    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.
    - lucaspiller 11y ago
      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?
rtehfm 11y ago
Tangible objects provide a higher sense of gratification, I suppose. $10-15 USD for a single, one-time, movie ticket or $1-5 dollars for a phone application. And then there's the whole micro payment economy which is another thing.
deleted 11y ago
[deleted]
Manishearth 11y ago
You may also enjoy reading about how airline pricing works. It doesn't have an emotional component, but they get away with charging wildly different prices for the same service by having prices fluctuate on a day-to-day basis and some other tricks. It's sort of a "people who can pay, will pay" model, where they can gather from a larger chunk of the demand curve.
zodPod 11y ago
Seriously! Think about how we deal with Android/iPhone apps. I go to Five Below or a Dollar Store and stock up on $2-$3 items that are kind of neat even venturing into the $5 range occasionally for "premium garbage" yet I get on the Google Play store and see a really awesome app that fills one of my needs but it's $2! How can someone charge $2 for THAT? They only spent a year working on it and it fits my need perfectly but $2 is too much! It's really weird, for sure. I think the hardest part with things like the New York Times is that a lot of us are getting our news from aggregators. I don't give a shit about the New York Times as a company nor any others. I read down through places like Hacker News and click links there. If, occasionally, it's a link to a NYT article, I read it (or don't.. I guess?) but otherwise, if any one of the news sites disappeared off of the face of the globe, I'd be no better or worse off. Also, $8/mon is nothing when it's one news site but if each site begins charging, using a news aggregator is going to be a very expensive proposition...
- Benjammer 11y ago
  There is something to be said though about being able to see, touch, and feel that $3 tchotchke in the store rather than downloading an app with no idea of it's depth or quality (unless there is a brand reputation already). I think there's something primal about touching/seeing something before buying, and I haven't seen anything digital that even comes close to this sense of grokking the whole thing you're buying in a few seconds/a minute of physical inspection. I'm curious what the difference is (if any) in effect of the GBB pricing model in a store front versus online marketplace.
- restalis 11y ago
  "if each site begins charging, using a news aggregator is going to be a very expensive proposition" Yes, it could be, but that won't happen unless the act of publishing gets regulated (like in China, where even bloggers have to (or will have to) have publishing licenses) and forced upon an artificial asking price.

Spivak 11y ago

> “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 subscription, and then there are services that I'm actually happy to pay the bill because it's such good value. Guess which services I recommend to others, and which services I actively look for alternatives for?

Swizec 11y ago
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 when there's a time limit and they might lose something if they wait too long.
- MichaelGG 11y ago
  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?
  - eru 11y ago
    If it's $5000 net, the gross the company has to pay for is much higher.
mediumdeviation 11y ago
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 top. This is also what the quote is alluding to.

uptownfunk 11y ago

Reminds me how we assign points to tasks in an agile sprit. It takes practice and it helps to have small tasks in relation to which we assign points to the larger ones.

clarkmoody 11y ago

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 https://en.wikipedia.org/wiki/Anchoring [2] http://www.inc.com/the-build-network/the-anchoring-effect.html http://www.inc.com/the-build-network/the-anchoring-effect.ht... [3] http://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555 http://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/...

boulos 11y ago
Predictably irrational by Dan Ariely has a good number of case studies that I think illuminate the topic particularly well: http://www.amazon.com/Predictably-Irrational-Revised-Expanded-Decisions/dp/0061353248 Unsurprisingly there's some sort of combo deal to get Thinking Fast and Slow with it.
- pc86 11y ago
  If you remove the spaces before that link it will be clickable.
  - deleted 11y ago
    [deleted]
  - boulos 11y ago
    Ugh, I always forget that I shouldn't do that here (I move URLs out of the way like this for email) and its been too long to edit. http://www.amazon.com/Predictably-Irrational-Revised-Expanded-Decisions/dp/0061353248 http://www.amazon.com/Predictably-Irrational-Revised-Expande...
- clarkmoody 11y ago

tedmiston 11y ago

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?

boulos 11y ago
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)...
- icelancer 11y ago
  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.
hartpuff 11y ago
It's not just you, and probably not even just an American thing. I personally think of the The Times when I see "The Times", but I'm British, like the author of this Medium article. I know why it happens, but it's somewhat ironic that The Times is given a made-up regional-sounding name (The London Times or Times of London) to differentiate it from shorthand versions of region-specific titles that are, directly or indirectly, inspired by The Times.

known 11y ago

Similar to salary negotiations?

pmorici 11y ago
No, salary negotiation is a whole different ball of wax.

boulos 11y ago

While I think this is fine advice for most consumer things (and that generally you should talk about value not price), this falls down in a number of interesting markets. For example, with cloud where I work, the pricing is a huge component of decision making. Many organizations base their decisions on TCO, and that's not crazy. Generally speaking, if you have a commodity (or near commodity) then price is something to talk about.

j45 11y ago

Pricing remains the hardest thing in almost any business. I learnt from running a part of a furniture chain's website that garbage is often placed with the item people want to move. Retail I learnt is more about selling profit than selling product or services. Pricing remains hard, and tricky, and several states like California have made it illegal to display MSRP type pricing, because everything's a great deal.

nitwit005 11y ago

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.

endymi0n 11y ago
This. With years of experience from dealing with "ask for quote" businesses, this strategy is by now an immediate k.o. criteria for me when considering anything. I may return for your offer only after spending considerable time of not finding any more transparent business (quite rare, but possible for very customized products like renting glass fiber for an office). In practice this never happens and I've been a much happier customer ever since - with my business life cleaned up from 95% of dealing with crappy sales reps.
- cookiecaper 11y ago
  The other side being that, depending on the good, if you have a salesperson, you can often, ironically, get a better price overall. Recent case in the point: I was in the market for a Herman Miller Embody. I would've ordered it online at retail for ~$1500, but I wanted it ASAP so I went to a local HM dealer to see if they kept any in stock (they didn't). While there, the sales person got me a more-upgraded version of the Embody for less than $1000 by invoking dealership and small business discounts. Effectively, I made $500/hr during that trip to the HM dealership. The downside of this experience was that, contrary to my original intention, it took about 5 weeks for the chair to arrive. :\ It would've shipped faster if I had paid full retail from the HM store online. Of course, it's going to depend on the good, but considering that salespeople usually have a strong incentive structure to get your sale to go through them instead of an online retailer or to a competing business, they really will pull out all the stops to keep you around.
desdiv 11y ago
It's a funny world when Elon Musk will openly display "$90M to send 6.4mT of your shit into geosynchronous orbit"[0] and yet millions of businesses selling things that are far less expensive and far more fungible want you to "contact our sales team for a quote". [0] http://www.spacex.com/about/capabilities http://www.spacex.com/about/capabilities

FussyZeus 11y ago

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?

cromulent 11y ago
Totally agree, but I think haggling and anchoring have been around for a very long time, at least as long as markets. I don't see them going away any time soon.
- Consultant32452 11y ago
  It's certainly true that haggling and such have been around essentially forever, but scientific rigor hasn't. There are now entire generations of PhDs who have carefully studied these psychological phenomenon to maximize business' ability to squeeze every last drop of blood out of you. Meanwhile the consumer has been left relatively uneducated and unprepared to recognize and maneuver in this world.
- FussyZeus 11y ago
  I would say haggling is similar but fundamentally different, that's more between a customer and a salesperson and usually involves more or less them on equal footing (the example that comes to mind first is a car, and the old saying that no one but a sucker pays sticker price). That's a luxury good where the need isn't immediate and the customer can exert some influence, unlike the vast majority of sales situations where the need is apparent and they can't just go to the 'next lot' whatever that might be.
restalis 11y ago
"When did commerce get so bloody hard?" I guess since the revenue optimization ideas kicked in! How do you think something as enticing as revenue could have eluded the desire of "doing it better"?

ChuckMcM 11y ago

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

estefan 11y ago
It can't have worked out that well because they've taken down the paywall for The Sun...

CM30 11y ago

If I get told to 'ask the sales team for a quote', then sorry, I'll find another product or service that just provides the information up front. Would I be willing to pay their prices if I talked to the sales guys? Maybe, but it's still an extra inconvenience that's easier to avoid than go along with. And no offence, but it's very unlikely your product or service is that unique that there's no viable alternatives out there. That don't waste everyone's time.

jpetso 11y ago

Is it not notable how, among all of these examples and thought processes, not a single word was lost on the value provided to the totality of customers, in addition to how much is monetizable? Obviously the ability to pay quality journalists is a valuable cause, but it irks me that retaining a large percentage of customers/consumers, and the corresponding potential to make much more of a difference in the world, isn't also considered a mention-worthy aim in itself. Got the opportunity to cure diseases but decides to play mind games for fun instead? In a position to bring awesome tech to the masses but prefers to market it as luxury item to a limited audience? Making lots of profits already but spends serious effort to drive the competitor out of business to earn even more as monopolist? ...good for you, "disruptor".

pjc50 11y ago
Journalists .. corresponding potential to make much more of a difference in the world There very definitely is a market in this - the market for newspapers. Buying a newspaper as a proprietor is a fairly cost-effective way of getting a society to replicate your prejudices; you can get a huge amount of influence for a mere few tens or hundreds of millions of dollars.

rapht 11y ago

Very good points in this post, but it seems to me that they are only valid if you look at a single line of products / services at a time. When you put multiple products/services in one store, that is when your products get to be next to both competing and non-competing (non directly substituable) products, there are other consumer feelings to add like the sum of all things they're going to buy -- whether or not they have a budget, the sum of the things will either look "cheap" or "expensive". And who knows what they will buy next... if they come back at all.

colincarter41 11y ago

There should be price transparency to customer, Most of the business in service industry don't disclose price upfront. This will sometimes cost them.

shawnee_ 11y ago

At The Times, we realised that converting customers who paid £8/week for the printed newspaper into customers paying £2/week for the digital edition (often after paying Apple £500 for an iPad on which to read the edition) wasn’t great business. ... So — over two years — we gradually raised the price for those original customers to £6/week. The problem with "do not talk about pricing" is that you're assuming your customers are idiots. There's nothing wrong with having a bunch of profitable idiots as customers, but that's not quite the target audience for a product like newspapers. The simple fact is that the cost of delivering volume to subscribers (one more subscriber) is so teeny tiny small that inflating the price more than a reasonable amount (when in fact you're losing advertising eyeballs) is what's not smart business. Companies that presume I'm an idiot don't get my business. You cannot talk about pricing without talking about cost. Intelligent businesses are unafraid to be transparent with their variable costs (which for a digital-only newspaper are significantly less than for a print version); what trips prices is the bulky overhead fixed costs: CEO and executive management pay, benefits, and unnecessarily swanky office space. Realtors are probably the best example of this IRL, operating in an industry that "doesn't want you to talk about pricing" (e.g. negotiated commission at an hourly rate, for example) ... just sign on the dotted line and let them abscond with all your equity in a lump sum payment.

sickbeard 11y ago

Yea no price = buzz off. There's nothing more annoying than call for quote.

mikeokner 11y ago

When I was in college, we bought the absolute cheapest beer per oz we could find as long as it wasn't Red Dog. Not sure where they found college kids fooled by a % discount.

restalis 11y ago
They must have studied a group through hypothetical choices (instead of actual choices that had any weight on their budget), or they did an open study in which the tested subjects could have chosen something based on how they wanted to be seen choosing, or it may be just plain memetics, or any other reason. That is, however, most of the time the close as you can get to the actual human behavior within a reasonable effort (i.e. unless you're willing to go with covert surveillance or something).

GigabyteCoin 11y ago

>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. But for how long? I'm fairly certain that once those 300,000 loyal readers kick the bucket that The Times' digital subscription service will too. How is 22 million regular readers (who will keep coming back and telling their friends about your articles, because they're free) worth less than 300,000 paying subscribers (who for some reason absolutely have to read what's in The Times no matter the price, and would probably have a hard time encouraging others to be so vehement). Not to mention the types of journalists you will attract with a readership of a very small city, vs the readership of the population of New York State.

jameshart 11y ago
"How is 22 million regular readers worth less than 300,000 paying subscribers" Monetarily. The ad market has only got worse since the Times made the move away from pure ad-funded pageviews, so the ability to turn those 22 million people's eyeballs into a revenue stream has become even less viable than it was when they replaced them with 300,000 paying customers. "Not to mention the types of journalists you will attract.." ... with an engaged and interested audience who are directly paying to read what you have to say, who aren't merely being driven to your site by clickbait headlines and paid placement? I dunno, would think you'd be able to attract pretty good journalists on that basis...

beat 11y ago

So those of you who make purchase decisions for software used in-house... what are your turn-ons and turn-offs? If I'm trying to sell you a product that you find technically useful and exciting, how does pricing play into it? What would drive you away from a buy decision on an otherwise great product?

dsr_ 11y ago
For the most part, you need to represent value far in excess of the total lifetime cost, which includes half of the transition cost to the replacement. Say your software is licensed at $10 per person using it per year. In addition to the $10, I need to consider the costs of installation, configuration, first level support, entitlement/license management, and what it will cost me to extract the data and munge it into a usable form when we decide in three years that your competitor does it better. Now consider that most companies offer lousy support for their products, so I also have to do a test roll-out to a small number of people, manage that, and figure out if it will all be worthwhile. If you discount based on quantity, can I roll the test group into the main group? If you price in chunks larger than per-user, do I fall between your levels in some disadvantageous way? Is it any wonder that I vastly prefer standard-protocol based, open-source applications with healthy user communities? No, it is not.
- beat 11y ago
  It's software that automates a lot of costly auditing and troubleshooting in complex systems, so the core value proposition is hours that humans don't spend (and reduced downtime). If it can reduce the workload of senior/lead engineers by 5-10%, what's that worth? This sort of thing is really hard to quantify, although I'm sure we'll get more data as it grows. Does per-seat licensing work best, or something modeling the amount of data being processed? Fixed or floating seats? We're definitely looking at higher pricing, from hundreds to a few thousand per seat annually (not unusual in the market). I'm not worried about whether the product will be loved - we're engineers ourselves, totally focused on the suckiest parts of working on enterprise systems. If our product isn't a pleasure to use, I'll take it as a personal failure. But then we have to sell it. And I'm an engineer solving my own pain points, not a sales guy. That part is new to me!

drauh 11y ago

This? "Dark Patterns by the Boston Globe" https://news.ycombinator.com/item?id=11562414 https://news.ycombinator.com/item?id=11562414

Iv 11y ago

What a bunch of crap. Of course people spend a lot of time arguing, discussing, even getting emotional about prices. When talking with a company you are client with you basically have two things you need to talk about : - what you are selling - how much you are selling it If I meet a company that does not talk about one of these two things, I'll move along.

restalis 11y ago

What we should be aware about pay-walling broad public information is that we're not talking about some pure and simple business model here, with a publisher providing information as good for consumption (for which the clients pay). The act of information dissemination and the ability to reach an audience has value in itself. Interested parties will gladly step in to fill the void left by "independent" publishers gone pay-walled. Will the pay-walled information be of higher quality compared to the free one? Maybe! Actually it's safe to assume that the free information will be "free" only as in "free beer", but who cares? Then there is this bitch called "the network effect" which erodes that pool of "loyal customers" day by day making the pay-walled publishers gradually slipping into obscurity¹. Pay-walling information channels addressed at the broad public is a loosing strategy in the long run, no mater how one twists it under a study or another, and that is exactly because information is not in the same category with the tea lights or some other "IKEA pack". ¹ The publishers are aware of this, that's why they are using pay-walling only per article, after it reaches a number of views. By this they try to balance the the opportunity to get new clients (i.e. monetize the contents) with the risk of a complete audience drain (i.e. loss of relevance).