6 ms·

Interesting pricing experiment ($0.99 iPhone app changed to $350.00)

58 points by credo 17y ago

nreece 17y ago
It's simple. A high price causes a perception of value.
- deleted 17y ago
  [deleted]
- batiudrami 17y ago
  Well, sure. But look at the screenshot of the game. This is clearly a 99c game, and while I can see the perceived value argument working for a sale price of $15, I struggle to believe he made any sales at $299.
- scotty79 17y ago
  I think it's like this. There are people rich enough that there is not much difference for them between 3$ and 300$. Some of this people own iPhone. They don't really care what the price is. Apart from their richness they are normal people who like to buy dumb toys. By pricing your fart app at 300$ you tap exactly into this market. What's interesting that despite rarity of rich dumb people you may be well off with targeting them.
  - m0nty 17y ago
    > There are people rich enough that there is not much difference for them between 3$ and 300$. I used to know someone who sold beds for a while. He had a couple come into the shop and after about an hour they were still having trouble deciding between two beds. He said "Would it help if I told you that one cost UKP300 while that one costs UKP800?" "No," said the customer. "No, it wouldn't." This is why you hire marketing people.
    - pw0ncakes 17y ago
      This actually makes sense. 500 pounds is trivial in comparison to the pain associated with getting the wrong bed, and it's difficult to tell if a bed that is comfortable when you first lay on it will still be comfortable after 8-10 hours. If the beds were functionally indistinguishable, it'd make sense to buy the cheaper one. If they're different but incomparable, then the price difference doesn't add much new information.
      - scotty79 17y ago
        I think it was more about aesthetics. They wanted their bed to be perfect (that's why choosing took them so long). Since it's rare purchase 500 pounds more or less had no value in comparison to regret of getting the wrong one because it was cheaper. Price (if not exorbitant) is often not an issue (at least for some people) when choosing items that are meant to look nice.
petercooper 17y ago
I did something like this with job ads on my main site. I was charging $199 for 30 days, but wanted to get out of the contract with the people who ran the board by stopping new ads. So I put the price up to $499 but I still got a few sales. So I put it up to $899. A day later, I got a sale.. at $899! Since then, the board has had better traffic so I've stuck with the provider and now charge $249 for 60 days. Seems a good middle point between quantity and money.
- bombs 17y ago
  $249 or $2499? The $249 for 60 days is less than your original price of $199 for 30 days ($4.15/day vs $6.63/day). Does that mean that you've in fact seen more success at your lowest price point?
  - JoachimSchipper 17y ago
    On one hand, yes; but on the other, how likely are people to buy two back-to-back one-month ads? The second month is not as valuable as the first.
  - petercooper 17y ago
    $249. But as JoachimSchipper notes, 60 days isn't really a draw. I'm going to change it back to 30 (or perhaps 45). In most cases the job has had enough applicants in 30 days and, in many cases, is no longer even open (so attracting traffic unnecessarily).
eob 17y ago
It's the trick luxury brands have been playing for years. Walk into a Tiffany's store and you see the same silver that was poured to make the jewelry at the department store, but the blue box costs you a 2000% premium. I've always wanted to go into the luxury goods business for this exact reason. I just never thought there was such a thing as luxury software goods..
- jacquesm 17y ago
  Check out the now banned "I am rich" app.
- ars 17y ago
  > I just never thought there was such a thing as luxury software goods.. There is. That's why educational pricing for software exists (non-luxury), and why Microsoft sells eight different versions of Vista http://en.wikipedia.org/wiki/Windows_Vista_editions http://en.wikipedia.org/wiki/Windows_Vista_editions and six versions of Windows 7 http://en.wikipedia.org/wiki/Windows_7_editions http://en.wikipedia.org/wiki/Windows_7_editions (I provided the links so you can see a sampling of changes to make a luxury software item.) That's why both movies and games sell in collectors editions. The profit on the "plus/premium" editions is far far far more than the extra expense of making them. This whole science is called http://en.wikipedia.org/wiki/Price_discrimination http://en.wikipedia.org/wiki/Price_discrimination And if you are going to sell anything you MUST learn it. (Although maybe not from wikipedia :)
  - maukdaddy 17y ago
    Yes, yes, yes, right in every regard. Don't forget one of the biggest examples: Apple. You see price discrimination across all of their product lines (MacBook Pro -> MacBook -> Plastic MacBook), (27" iMac, 24" iMac, 21" iMac). I'd definitely pick up a good book/econ textbook to learn about price discrimination if you're in a business selling to consumers.
- bmelton 17y ago
  The craftsmanship really is superior at Tiffany's though, and they also have a lot of 'not-found-elsewhere' items because of their uniqueness. I view Tiffany akin to the way I view art, which is to say yes, if you melted it down, it would lose significant value, but you weren't buying it for the raw materials were you?
tdm911 17y ago
i don't mean to doubt the experiment, but 14 people paid $299 for this game? my understanding is that sales of any app over $5 are quite hard to come by. looking at this game in itunes, it really shows nothing that i imagine would convince someone to pay any more that a few dollars for. itunes link: http://itunes.apple.com/au/app/zits-giggles/id309069413?mt=8 http://itunes.apple.com/au/app/zits-giggles/id309069413?mt=8
- DougBTX 17y ago
  my understanding is that sales of any app over $5 are quite hard to come by Do you know of any data to back this up? It was my impression too, but thinking critically about it, that impression is founded only on seeing lots of apps competing on price. Eg, it is based on what developers sell apps for, not what $800 phone owning people are willing to spend.
  - tdm911 17y ago
    no, not on hand. it's my impression as a user, from blog posts by developers and the comments here on hacker news.
    - DougBTX 17y ago
      Well, I'll have a go at getting some myself :-) I've written a small for-fun app, which is selling at $1.99, once I've had a week worth of sales, I'll double the price and see how that affects sales. Then if it looks good, double again the next week!
- credo 17y ago
  Human beings are irrational :) As Jacquesm notes below, remember the $999 "I am rich" app
  - tdm911 17y ago
    true, but as i recall that only had 2 or 3 purchases in total before being pulled. it also had notoriety as the most expensive app on the app store.
aresant 17y ago
Never underestimate the power of perceived value. Years ago I advertised a "Wholesalers Secrets" handbook on Google to help people find discounted wholesale goods to sell on EBAY. When priced at $9.95 I sold an average of 10 copies a day against ~$50 ad spend. When I upped the price to $99.95 I sold an average of 5 copies a day against ~$50 ad spend. That was a big lesson, imagine my surprise when I discovered that there’s a whole science behind this  -> http://en.wikipedia.org/wiki/Price_elasticity_of_demand http://en.wikipedia.org/wiki/Price_elasticity_of_demand
- maukdaddy 17y ago
  And HN says that MBA's aren't valuable ;)
  - teej 17y ago
    It may have taken an MBA or an Econ major to write that article, but luckily it doesn't take one to benefit from the knowledge it provides.
    - jhancock 17y ago
      Not only was an MBA not a requirement for writing the article, the knowledge has been around for ages. My grandfather taught the principle to me. He was born in 1889 and his "formal" education ended at age 11.
ledger123 17y ago
Minimal features and instant usability seem to be two (of probably many others) characteristics of these superficially high priced products. Any thing sufficiently complicated or with steep learning curve is not going to be purchased by deep-pocket people.
CoreDumpling 17y ago
The real trick is to figure out a way to both charge $350 to the people who are willing to pay $350 for it, while also collecting 99 cents from the people who won't pay more than that. I wonder if a viral $349 off coupon would do the job...
- scotty79 17y ago
  Maybe subsequently rinsing the price as this guy did is also viable (although non obvious) strategy. Especially for macarena like products.
scotty79 17y ago
> "My conclusion to all of this," Refenes said, "is that the people who you're selling to on the App Store are not necessarily gamers." That's a clever and funny insult. Gamers as in game players but also gamers as people who have any wit at all.
mattblalock 17y ago
Luxury and perceived value are powerful things. I can cut the price on a set of products for several days and boost the sales of products that are not on sale - while not even selling any of the items that are discounted. Just the increased awareness combined with the desire to be more luxurious (with a hint of the awesomeness of a $150 vibrator) sells it.
makeee 17y ago
Sorry, I don't believe anyone would intentionally buy this game for $299. Sure, a high price can cause a perception of value, but that is ridiculous. I think it's more likely that these people thought it was $2.99.
- xelfer 17y ago
  Wouldn't it appear as $299.00 in the app store though?
  - dmn001 17y ago
    I can't see it on the app store, maybe it was removed. The price on the google cache of the itunes preview was $399.99 The game was released around 1 year ago. There is a page in the forums: http://forums.toucharcade.com/showthread.php?t=7404 http://forums.toucharcade.com/showthread.php?t=7404
BRadmin 17y ago
Sorry but I don't think this is a good case-study about perceived value -- more likely user error and a deceiving app description that states the app costs "a friggin' dollar?" I'm going to go out on a limb and say that a lot of people will be demanding (and getting) refunds.
deleted 17y ago
[deleted]
pw0ncakes 17y ago
It's like this: http://www.milliondollarhomepage.com/ http://www.milliondollarhomepage.com/ It works for the first person who tries it, because of curiosity. People were probably curious about what could possibly make a silly iPhone app worth $299. The joke (and a hilarious one) was on them. After a few people do this, the app store will be pushed to allow returns, adding headaches for developers.
- jonknee 17y ago
  The first person who tried it did it years ago, remember the I'm Rich app? The app store also already has returns, you get 90 days (which caused a stir as developers get their money sooner than that so it's theoretically possible to owe Apple money at the end of the month). http://gizmodo.com/5034122/guy-buys-999-im-rich-app-discovers-hes-just-dumb http://gizmodo.com/5034122/guy-buys-999-im-rich-app-discover...

58 points by credo 17y ago

nreece 17y ago

It's simple. A high price causes a perception of value.

deleted 17y ago
[deleted]
batiudrami 17y ago
Well, sure. But look at the screenshot of the game. This is clearly a 99c game, and while I can see the perceived value argument working for a sale price of $15, I struggle to believe he made any sales at $299.
scotty79 17y ago
I think it's like this. There are people rich enough that there is not much difference for them between 3$ and 300$. Some of this people own iPhone. They don't really care what the price is. Apart from their richness they are normal people who like to buy dumb toys. By pricing your fart app at 300$ you tap exactly into this market. What's interesting that despite rarity of rich dumb people you may be well off with targeting them.
- m0nty 17y ago
  > There are people rich enough that there is not much difference for them between 3$ and 300$. I used to know someone who sold beds for a while. He had a couple come into the shop and after about an hour they were still having trouble deciding between two beds. He said "Would it help if I told you that one cost UKP300 while that one costs UKP800?" "No," said the customer. "No, it wouldn't." This is why you hire marketing people.
  - pw0ncakes 17y ago
    This actually makes sense. 500 pounds is trivial in comparison to the pain associated with getting the wrong bed, and it's difficult to tell if a bed that is comfortable when you first lay on it will still be comfortable after 8-10 hours. If the beds were functionally indistinguishable, it'd make sense to buy the cheaper one. If they're different but incomparable, then the price difference doesn't add much new information.
    - scotty79 17y ago
      I think it was more about aesthetics. They wanted their bed to be perfect (that's why choosing took them so long). Since it's rare purchase 500 pounds more or less had no value in comparison to regret of getting the wrong one because it was cheaper. Price (if not exorbitant) is often not an issue (at least for some people) when choosing items that are meant to look nice.

petercooper 17y ago

I did something like this with job ads on my main site. I was charging $199 for 30 days, but wanted to get out of the contract with the people who ran the board by stopping new ads. So I put the price up to $499 but I still got a few sales. So I put it up to $899. A day later, I got a sale.. at $899! Since then, the board has had better traffic so I've stuck with the provider and now charge $249 for 60 days. Seems a good middle point between quantity and money.

bombs 17y ago
$249 or $2499? The $249 for 60 days is less than your original price of $199 for 30 days ($4.15/day vs $6.63/day). Does that mean that you've in fact seen more success at your lowest price point?
- JoachimSchipper 17y ago
  On one hand, yes; but on the other, how likely are people to buy two back-to-back one-month ads? The second month is not as valuable as the first.
- petercooper 17y ago
  $249. But as JoachimSchipper notes, 60 days isn't really a draw. I'm going to change it back to 30 (or perhaps 45). In most cases the job has had enough applicants in 30 days and, in many cases, is no longer even open (so attracting traffic unnecessarily).

eob 17y ago

It's the trick luxury brands have been playing for years. Walk into a Tiffany's store and you see the same silver that was poured to make the jewelry at the department store, but the blue box costs you a 2000% premium. I've always wanted to go into the luxury goods business for this exact reason. I just never thought there was such a thing as luxury software goods..

jacquesm 17y ago
Check out the now banned "I am rich" app.
ars 17y ago
> I just never thought there was such a thing as luxury software goods.. There is. That's why educational pricing for software exists (non-luxury), and why Microsoft sells eight different versions of Vista http://en.wikipedia.org/wiki/Windows_Vista_editions http://en.wikipedia.org/wiki/Windows_Vista_editions and six versions of Windows 7 http://en.wikipedia.org/wiki/Windows_7_editions http://en.wikipedia.org/wiki/Windows_7_editions (I provided the links so you can see a sampling of changes to make a luxury software item.) That's why both movies and games sell in collectors editions. The profit on the "plus/premium" editions is far far far more than the extra expense of making them. This whole science is called http://en.wikipedia.org/wiki/Price_discrimination http://en.wikipedia.org/wiki/Price_discrimination And if you are going to sell anything you MUST learn it. (Although maybe not from wikipedia :)
- maukdaddy 17y ago
  Yes, yes, yes, right in every regard. Don't forget one of the biggest examples: Apple. You see price discrimination across all of their product lines (MacBook Pro -> MacBook -> Plastic MacBook), (27" iMac, 24" iMac, 21" iMac). I'd definitely pick up a good book/econ textbook to learn about price discrimination if you're in a business selling to consumers.
bmelton 17y ago
The craftsmanship really is superior at Tiffany's though, and they also have a lot of 'not-found-elsewhere' items because of their uniqueness. I view Tiffany akin to the way I view art, which is to say yes, if you melted it down, it would lose significant value, but you weren't buying it for the raw materials were you?

tdm911 17y ago

i don't mean to doubt the experiment, but 14 people paid $299 for this game? my understanding is that sales of any app over $5 are quite hard to come by. looking at this game in itunes, it really shows nothing that i imagine would convince someone to pay any more that a few dollars for. itunes link: http://itunes.apple.com/au/app/zits-giggles/id309069413?mt=8 http://itunes.apple.com/au/app/zits-giggles/id309069413?mt=8

DougBTX 17y ago
my understanding is that sales of any app over $5 are quite hard to come by Do you know of any data to back this up? It was my impression too, but thinking critically about it, that impression is founded only on seeing lots of apps competing on price. Eg, it is based on what developers sell apps for, not what $800 phone owning people are willing to spend.
- tdm911 17y ago
  no, not on hand. it's my impression as a user, from blog posts by developers and the comments here on hacker news.
  - DougBTX 17y ago
    Well, I'll have a go at getting some myself :-) I've written a small for-fun app, which is selling at $1.99, once I've had a week worth of sales, I'll double the price and see how that affects sales. Then if it looks good, double again the next week!
credo 17y ago
Human beings are irrational :) As Jacquesm notes below, remember the $999 "I am rich" app
- tdm911 17y ago
  true, but as i recall that only had 2 or 3 purchases in total before being pulled. it also had notoriety as the most expensive app on the app store.

aresant 17y ago

Never underestimate the power of perceived value. Years ago I advertised a "Wholesalers Secrets" handbook on Google to help people find discounted wholesale goods to sell on EBAY. When priced at $9.95 I sold an average of 10 copies a day against ~$50 ad spend. When I upped the price to $99.95 I sold an average of 5 copies a day against ~$50 ad spend. That was a big lesson, imagine my surprise when I discovered that there’s a whole science behind this  -> http://en.wikipedia.org/wiki/Price_elasticity_of_demand http://en.wikipedia.org/wiki/Price_elasticity_of_demand

maukdaddy 17y ago
And HN says that MBA's aren't valuable ;)
- teej 17y ago
  It may have taken an MBA or an Econ major to write that article, but luckily it doesn't take one to benefit from the knowledge it provides.
  - jhancock 17y ago
    Not only was an MBA not a requirement for writing the article, the knowledge has been around for ages. My grandfather taught the principle to me. He was born in 1889 and his "formal" education ended at age 11.

ledger123 17y ago

Minimal features and instant usability seem to be two (of probably many others) characteristics of these superficially high priced products. Any thing sufficiently complicated or with steep learning curve is not going to be purchased by deep-pocket people.

CoreDumpling 17y ago

The real trick is to figure out a way to both charge $350 to the people who are willing to pay $350 for it, while also collecting 99 cents from the people who won't pay more than that. I wonder if a viral $349 off coupon would do the job...

scotty79 17y ago
Maybe subsequently rinsing the price as this guy did is also viable (although non obvious) strategy. Especially for macarena like products.

scotty79 17y ago

> "My conclusion to all of this," Refenes said, "is that the people who you're selling to on the App Store are not necessarily gamers." That's a clever and funny insult. Gamers as in game players but also gamers as people who have any wit at all.

mattblalock 17y ago

Luxury and perceived value are powerful things. I can cut the price on a set of products for several days and boost the sales of products that are not on sale - while not even selling any of the items that are discounted. Just the increased awareness combined with the desire to be more luxurious (with a hint of the awesomeness of a $150 vibrator) sells it.

makeee 17y ago

Sorry, I don't believe anyone would intentionally buy this game for $299. Sure, a high price can cause a perception of value, but that is ridiculous. I think it's more likely that these people thought it was $2.99.

xelfer 17y ago
Wouldn't it appear as $299.00 in the app store though?
- dmn001 17y ago
  I can't see it on the app store, maybe it was removed. The price on the google cache of the itunes preview was $399.99 The game was released around 1 year ago. There is a page in the forums: http://forums.toucharcade.com/showthread.php?t=7404 http://forums.toucharcade.com/showthread.php?t=7404

BRadmin 17y ago

Sorry but I don't think this is a good case-study about perceived value -- more likely user error and a deceiving app description that states the app costs "a friggin' dollar?" I'm going to go out on a limb and say that a lot of people will be demanding (and getting) refunds.

deleted 17y ago

[deleted]

pw0ncakes 17y ago

It's like this: http://www.milliondollarhomepage.com/ http://www.milliondollarhomepage.com/ It works for the first person who tries it, because of curiosity. People were probably curious about what could possibly make a silly iPhone app worth $299. The joke (and a hilarious one) was on them. After a few people do this, the app store will be pushed to allow returns, adding headaches for developers.

jonknee 17y ago
The first person who tried it did it years ago, remember the I'm Rich app? The app store also already has returns, you get 90 days (which caused a stir as developers get their money sooner than that so it's theoretically possible to owe Apple money at the end of the month). http://gizmodo.com/5034122/guy-buys-999-im-rich-app-discovers-hes-just-dumb http://gizmodo.com/5034122/guy-buys-999-im-rich-app-discover...