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Apologies to the author but I have to object to the entire premise; these are 'business anti-patterns'. I feel all of his points imply a misunderstanding of ba
by jariel 7y ago
Apologies to the author but I have to object to the entire premise; these are 'business anti-patterns'.
I feel all of his points imply a misunderstanding of basic business and microeconomics.
1) Businesses like predictability. Consistency is such an important concept that stocks that pay regular dividends are worth considerably more than those that pay irregular dividends. People with consistent credit payments are more creditworthy than those who are irregular.
This isn't just for the seller, it's also for the buyer. A financial manager would always prefer some type of easy, annual fixed fee all other things being equal.
It's why you pay less for longer-term AWS EC2 contracts.
Predictability usually reduces the operational burden, which reduces costs and enables a better deal.
Your own understanding of your own long term business objectives is an advantage that you can 'signal' down the value chain to your supplier by engaging in long term contracts. They do the same, and invariably competitive pressure means lower prices.
This notion of 'Enterprise plans being good for nobody' due to 'adversarial' notions is basically rubbish, makes no sense.
2) Often, price doesn't matter. In many cases, the surpluses yielded from a specific product is quite a lot, so much that nobody cares that much about the price. If your company with $2B revenues uses some service, if it costs $1k or $10k / year, it makes no difference at all. Nobody wants any kind of headache, it's like 'tranche pricing' for a haircut.
3) Combined with #2, we have the concept of 'Total Cost of Ownership'. The product 'features' that can matter more than price are usability and support. A cheap product that causes headaches is not cheap. A cheap product with extremely expensive support is not cheap. So consider 'total cost of ownership'.
On the seller side, they incur costs for giving free or cheap services. It may simply not be worth their while to deal with the tiny bits of incremental revenue.
4) The tiering models don't necessarily imply 'more or less value' for one or the other sides, it depends very much on the actual price - they could all be a ripoff or a great deal.
5) I don't think any particular pricing model is more or less 'adversarial' than the other.
6) Different pricing models are usually advantageous to the customer and the seller. Far from being 'adversarial', it's just the opposite: they enable customers and suppliers to engage on common ground, by building a financial premise that makes sense for both parties. Only each individual party understands their own needs, so more variety means more opportunity for common ground.