6 ms·

well, that is economics 101. consumers price goods by value, not by costs. if your costs are higher than consumers are willing to pay, then you will at some poi

well, that is economics 101. consumers price goods by value, not by costs. if your costs are higher than consumers are willing to pay, then you will at some point go bankrupt.

freehunter 8y ago
Exactly. No one cares what the product costs to make, they care what it costs from their own pocket. If the app isn't worth $40, then it doesn't have the features and/or the polish to have multiple full-time developers working on it. If the price people are willing to pay is lower than your cost of goods sold, lower your COGS or raise your value proposition. Those are the only options.
- AceJohnny2 8y ago
  > If the app isn't worth $40 Ay, there's the rub. The problem is also related to price anchoring [1]: People [2] accepted the price of $70 for the perpetual value provided by the app (including cloud syncing), but balked at $40/year. The latter price makes the app more expensive over 2 years, and the developer promising updates doesn't have quite the impact to justify the change in the eyes of the angry customers. If the app initially cost, say, $160, maybe the newer pricing would've been better accepted. I hear Adobe and Microsoft are doing quite well with the subscription models... [1] https://en.wikipedia.org/wiki/Anchoring https://en.wikipedia.org/wiki/Anchoring [2] The people who bought it. This is important, because it ignores all the people who thought this wasn't good value. Maybe some of the initial non-purchasers became subscribers. Market analysis is hard.
  - sincerely 8y ago
    On the other hand, there's a million different competing not-microsoft-word text editors for writers. Whereas there's no real alternatives to adobe or microsoft products if you need them for your career.
    - chii 8y ago
      > if you need them for your career. if you need 'em for your career, then make the person providing your career pay for it. if you're self-employed, then use an open alternative.
      - LeoNatan25 8y ago
        So I guess you’ve never used one of those “open” “alternatives”? Often broken mess, lacking features, incoherent or antiquated UI, etc., ending up costing you more in time needed to ge things done than the paid alternative.
- marklgr 8y ago
  > No one cares what the product costs to make The production cost is one of the metrics customers use to decide if a price is fair or not, to them. There are other metrics, like the time that can be saved by using the product (ie. some way to quantify the product "use value"), but the production cost is often quite useful to detect abuses--and boy, aren't there a lot of attempts of such abuses.
  - chii 8y ago
    > production cost is one of the metrics customers use to decide if a price is fair or not only approximately, and only if the consumer really knows the cost. Think jewlery (like diamonds), or expensive brand name goods like designer clothing. The production cost for those goods is "low", but the charge is in marketing and status symbol representation (which is modified via marketing).
    - marklgr 8y ago
      It could be argued that those two examples are good cases where the customer could be concerned about the value they get, even including the status factor. Diamonds are notoriously high-priced because of a quasi-monopoly, and high-end clothing is pretty often of poor value, quality-wise. If you like designer clothes--and you're not on unlimited budget--you eventually learn what designers/brands to avoid, because the value is just not there, even for that industry. So this looks like a case in point, where having a rough ideas of the production cost (some parts hand-made, made in France/Italy/England, expansive material like quality cashmere etc.) is important.
chrisseaton 8y ago
> consumers price goods by value, not by costs But the point is he's a consumer and he isn't pricing by value - he's pricing by costs.
- gerbilly 8y ago
  I disagree, I saw it as him pricing by value, but mentioning that the costs don't seem to make sense either.
- notSupplied 8y ago
  "consumers price goods by value, not by costs" That is in itself a great argument for the subscription model. Consumes receive value from continued use over time, so why not fit revenue to the same shape?

well, that is economics 101. consumers price goods by value, not by costs. if your costs are higher than consumers are willing to pay, then you will at some point go bankrupt.

freehunter 8y ago

Exactly. No one cares what the product costs to make, they care what it costs from their own pocket. If the app isn't worth $40, then it doesn't have the features and/or the polish to have multiple full-time developers working on it. If the price people are willing to pay is lower than your cost of goods sold, lower your COGS or raise your value proposition. Those are the only options.

AceJohnny2 8y ago
> If the app isn't worth $40 Ay, there's the rub. The problem is also related to price anchoring [1]: People [2] accepted the price of $70 for the perpetual value provided by the app (including cloud syncing), but balked at $40/year. The latter price makes the app more expensive over 2 years, and the developer promising updates doesn't have quite the impact to justify the change in the eyes of the angry customers. If the app initially cost, say, $160, maybe the newer pricing would've been better accepted. I hear Adobe and Microsoft are doing quite well with the subscription models... [1] https://en.wikipedia.org/wiki/Anchoring https://en.wikipedia.org/wiki/Anchoring [2] The people who bought it. This is important, because it ignores all the people who thought this wasn't good value. Maybe some of the initial non-purchasers became subscribers. Market analysis is hard.
- sincerely 8y ago
  On the other hand, there's a million different competing not-microsoft-word text editors for writers. Whereas there's no real alternatives to adobe or microsoft products if you need them for your career.
  - chii 8y ago
    > if you need them for your career. if you need 'em for your career, then make the person providing your career pay for it. if you're self-employed, then use an open alternative.
    - LeoNatan25 8y ago
      So I guess you’ve never used one of those “open” “alternatives”? Often broken mess, lacking features, incoherent or antiquated UI, etc., ending up costing you more in time needed to ge things done than the paid alternative.
marklgr 8y ago
> No one cares what the product costs to make The production cost is one of the metrics customers use to decide if a price is fair or not, to them. There are other metrics, like the time that can be saved by using the product (ie. some way to quantify the product "use value"), but the production cost is often quite useful to detect abuses--and boy, aren't there a lot of attempts of such abuses.
- chii 8y ago
  > production cost is one of the metrics customers use to decide if a price is fair or not only approximately, and only if the consumer really knows the cost. Think jewlery (like diamonds), or expensive brand name goods like designer clothing. The production cost for those goods is "low", but the charge is in marketing and status symbol representation (which is modified via marketing).
  - marklgr 8y ago
    It could be argued that those two examples are good cases where the customer could be concerned about the value they get, even including the status factor. Diamonds are notoriously high-priced because of a quasi-monopoly, and high-end clothing is pretty often of poor value, quality-wise. If you like designer clothes--and you're not on unlimited budget--you eventually learn what designers/brands to avoid, because the value is just not there, even for that industry. So this looks like a case in point, where having a rough ideas of the production cost (some parts hand-made, made in France/Italy/England, expansive material like quality cashmere etc.) is important.

chrisseaton 8y ago

> consumers price goods by value, not by costs But the point is he's a consumer and he isn't pricing by value - he's pricing by costs.

gerbilly 8y ago
I disagree, I saw it as him pricing by value, but mentioning that the costs don't seem to make sense either.
notSupplied 8y ago
"consumers price goods by value, not by costs" That is in itself a great argument for the subscription model. Consumes receive value from continued use over time, so why not fit revenue to the same shape?