4 ms·

User-Generated Pricing

30 points by czottmann 13y ago

maxbrown 13y ago
It's an interesting concept, and I'm curious what results you find. Here's my issue: You say you value a $0.99 app as throw-away, and that the more you spend, the less throw-away it feels. Sure, if you priced your app at $20.00, I agree that it would feel less throw-away (if a customer decided to buy it, they value it at >= $20). But you're not pricing it at $20.00. You're pricing it at $2.50-$20.00. Really, anything I pay above $2.50 is a donation to you, for your work. But in my head, it's still a $2.50 app, isn't it? Because other people are paying that amount even if I'm not. I think what you're talking about is setting my expectation of the value it will add for me. For a $0.99 app, the creator thought it would typically only add $0.99 of value. For a $5.00 app, they thought it would add >= $5.00 of value. It just sounds like you're not sure how much it's worth (or you have customers who it's worth $2.50 to and customers who it's worth $20.00 to, and you can't choose who to target). One more point/question... wouldn't it be better for them to "pay-what-they-want" after they try it? Before they use it, they can only guess how much value it adds for them. Are you expecting that they've already downloaded and used your trial, and then return to the website to buy?
- czottmann 13y ago
  Hey, thanks for your input! > But in my head, it's still a $2.50 app, isn't it? Is it? See, that's what I am trying to figure out. Personally, I don't think of the "excess amount" as a donation, it's part of the price I've picked myself. And when you buy the app, the amount on the invoice is just one number, it's not split between "base price" and "donation". > It just sounds like you're not sure how much it's worth (or you have customers who it's worth $2.50 to and customers who it's worth $20.00 to, and you can't choose who to target). I know what it's worth to me, in my eyes. But even though I've sold a number of licenses, both full price and 20% off, I have no idea whether it's worth the same to my potential customers. Instead of running A/B tests and or different sales I'm trying to speed up the process and see how it pans out. > wouldn't it be better for them to "pay-what-they-want" after they try it? Of course everybody should try the app before plunking down money. That's why there is a 14-day trial period. :) Again, I can only judge from my personal experience, but when I run a trial of an app I like I tend to "return to the website to buy". Don't you? :)
  - keesj 13y ago
    > Instead of running A/B tests and or different sales I'm trying to speed up the process and see how it pans out. Ironically, you won't know whether you're speeding up the process unless you'd test both approaches (A/B-testing and 'pay-what-you-want'-pricing) and see whether they always lead to same outcome. (I'm betting against it.)
dwild 13y ago
I love the pay-what-you-want model but it doesn't work. Every single Humble Indie Bundle has multiple popular games that sell for $10 to $20. They even has an incentive to give more than the average by giving more great games (and sometime even the games from the last Humble Indie Bundle). Still they get less than 6$ in average... We know for a fact that people are ready to pay full price for each of these games. Yeah I know, these people probably already bought these games but I don't think the distribution of the values are that far (either you pay 20$ and more or you pay 5$). I think it would work better if you offered multiple prices with more feature. You could have the 0,99$ one that offer the strict minimum but is a great showcase of the application (it could even be free). Then you have the 4,99$ one that has more feature, etc... Give your customer a reason to pay more.
- simonw 13y ago
  Surely Humble Bundle demonstrates that it DOES work, otherwise they wouldn't still be running offers and would not be able to convince game developers to participate in the deals. The average purchase may be $6, but how many of those purchases are from people who wouldn't have bought the individual games at all if not for the offer? If they weren't going to buy at all, that's $6 of revenue that you wouldn't have seen at all otherwise.
subpixel 13y ago
I suspect that giving users a blank field to fill out may result in increased payment amounts. If a user tries to checkout with no amount, maybe reload the page with a high amount pre-filled for them, like $25, that they can then reduce. But there's just no way, psychologically, I'm going to move that slider to the right. (If many have, I'd be interested to hear that.)
ry0ohki 13y ago
The problem with user generated pricing is there is no supply/demand, so the user will basically pick the lowest price they feel non-guilty about, which is usually a buck or so. Something I always thought would be interesting is a floating market price, so you start the price at say $1, and as demand increases at that price, it keeps going up.
- dualogy 13y ago
  > as demand increases at that price, it keeps going up Don't most ISVs/startups already have that? Just not in real-time, which would be punishing/annoying prospects needlessly.
- huhtenberg 13y ago
  Still there's quite a bit of wiggle room for experimenting. Compare - Pick a price between $1.95 and $19.95 to - Pick a price between $4.95 and $49.95 Both allow picking up a copy for under $5, but the second one will yield a higher average price. That's your good old anchoring. Another example. If you have an axis representing suggested prices, then if your tick marks go in $0.50 increments, people will likely to end up paying less on average compared to $5.00 increments. And so on. Cognitive manipulation is your friend :) [0] http://en.wikipedia.org/wiki/Anchoring http://en.wikipedia.org/wiki/Anchoring
- keesj 13y ago
  Pinboard[1] does this: "The fee is based on the formula (number of users * $0.001), so the earlier you join, the less you pay."[2] [1] https://pinboard.in/ https://pinboard.in/ [2] https://pinboard.in/help/fee/ https://pinboard.in/help/fee/
philfrasty 13y ago
You can read some research on name-your-own pricing in e-commerce from my former prof: one is here from the Journal of Marketing http://www-bcf.usc.edu/~tellis/PriceAuct.pdf http://www-bcf.usc.edu/~tellis/PriceAuct.pdf (for more just check out Google-Scholar and type „name your own price“)
iamleppert 13y ago
Irony: his app is down.
- czottmann 13y ago
  My "app is down"? You mean the site? (It isn't.)
ronaldx 13y ago
Is there some reason you decided to have a maximum price? I was curious that you felt the app had $20 value personally to you, yet you don't think anyone else would value it higher than that? I found that decision surprising.
- czottmann 13y ago
  OP here. I didn't want to appear greedy. That being said, I've increased the upper range limit a bit. :)
hawleyal 13y ago
Isn't that similar to donation-supported freeware?
- czottmann 13y ago
  No, as there is a base price. It's PWYW, but "what you want" > 0.
BenSS 13y ago
I'd be fascinated to see what the impact is if you give the user an indication of what the next user(s) will have to pay if they adjust the price scale. Down? They get guilted by seeing the next users will end up paying more. Up? Nice pay-it-forward aspect.
nawitus 13y ago
Game theory doesn't support "pay what you want" really well, e.g. there's no market to somehow arbitrate the price. A true market could be created by enabling people to buy and sell the service, or perhaps by bidding. This doesn't work unless the supply of the service is artificially restricted (otherwise the price goes to near zero immediately). Of course, some argue that the "true price" of intellectual property is very close to zero, but the app in the article can be thought of as a service.

30 points by czottmann 13y ago

It's an interesting concept, and I'm curious what results you find. Here's my issue: You say you value a $0.99 app as throw-away, and that the more you spend, the less throw-away it feels. Sure, if you priced your app at $20.00, I agree that it would feel less throw-away (if a customer decided to buy it, they value it at >= $20). But you're not pricing it at $20.00. You're pricing it at $2.50-$20.00. Really, anything I pay above $2.50 is a donation to you, for your work. But in my head, it's still a $2.50 app, isn't it? Because other people are paying that amount even if I'm not. I think what you're talking about is setting my expectation of the value it will add for me. For a $0.99 app, the creator thought it would typically only add $0.99 of value. For a $5.00 app, they thought it would add >= $5.00 of value. It just sounds like you're not sure how much it's worth (or you have customers who it's worth $2.50 to and customers who it's worth $20.00 to, and you can't choose who to target). One more point/question... wouldn't it be better for them to "pay-what-they-want" after they try it? Before they use it, they can only guess how much value it adds for them. Are you expecting that they've already downloaded and used your trial, and then return to the website to buy?

czottmann 13y ago
Hey, thanks for your input! > But in my head, it's still a $2.50 app, isn't it? Is it? See, that's what I am trying to figure out. Personally, I don't think of the "excess amount" as a donation, it's part of the price I've picked myself. And when you buy the app, the amount on the invoice is just one number, it's not split between "base price" and "donation". > It just sounds like you're not sure how much it's worth (or you have customers who it's worth $2.50 to and customers who it's worth $20.00 to, and you can't choose who to target). I know what it's worth to me, in my eyes. But even though I've sold a number of licenses, both full price and 20% off, I have no idea whether it's worth the same to my potential customers. Instead of running A/B tests and or different sales I'm trying to speed up the process and see how it pans out. > wouldn't it be better for them to "pay-what-they-want" after they try it? Of course everybody should try the app before plunking down money. That's why there is a 14-day trial period. :) Again, I can only judge from my personal experience, but when I run a trial of an app I like I tend to "return to the website to buy". Don't you? :)
- keesj 13y ago
  > Instead of running A/B tests and or different sales I'm trying to speed up the process and see how it pans out. Ironically, you won't know whether you're speeding up the process unless you'd test both approaches (A/B-testing and 'pay-what-you-want'-pricing) and see whether they always lead to same outcome. (I'm betting against it.)

dwild 13y ago

I love the pay-what-you-want model but it doesn't work. Every single Humble Indie Bundle has multiple popular games that sell for $10 to $20. They even has an incentive to give more than the average by giving more great games (and sometime even the games from the last Humble Indie Bundle). Still they get less than 6$ in average... We know for a fact that people are ready to pay full price for each of these games. Yeah I know, these people probably already bought these games but I don't think the distribution of the values are that far (either you pay 20$ and more or you pay 5$). I think it would work better if you offered multiple prices with more feature. You could have the 0,99$ one that offer the strict minimum but is a great showcase of the application (it could even be free). Then you have the 4,99$ one that has more feature, etc... Give your customer a reason to pay more.

simonw 13y ago
Surely Humble Bundle demonstrates that it DOES work, otherwise they wouldn't still be running offers and would not be able to convince game developers to participate in the deals. The average purchase may be $6, but how many of those purchases are from people who wouldn't have bought the individual games at all if not for the offer? If they weren't going to buy at all, that's $6 of revenue that you wouldn't have seen at all otherwise.

subpixel 13y ago

I suspect that giving users a blank field to fill out may result in increased payment amounts. If a user tries to checkout with no amount, maybe reload the page with a high amount pre-filled for them, like $25, that they can then reduce. But there's just no way, psychologically, I'm going to move that slider to the right. (If many have, I'd be interested to hear that.)

ry0ohki 13y ago

The problem with user generated pricing is there is no supply/demand, so the user will basically pick the lowest price they feel non-guilty about, which is usually a buck or so. Something I always thought would be interesting is a floating market price, so you start the price at say $1, and as demand increases at that price, it keeps going up.

dualogy 13y ago
> as demand increases at that price, it keeps going up Don't most ISVs/startups already have that? Just not in real-time, which would be punishing/annoying prospects needlessly.
huhtenberg 13y ago
Still there's quite a bit of wiggle room for experimenting. Compare - Pick a price between $1.95 and $19.95 to - Pick a price between $4.95 and $49.95 Both allow picking up a copy for under $5, but the second one will yield a higher average price. That's your good old anchoring. Another example. If you have an axis representing suggested prices, then if your tick marks go in $0.50 increments, people will likely to end up paying less on average compared to $5.00 increments. And so on. Cognitive manipulation is your friend :) [0] http://en.wikipedia.org/wiki/Anchoring http://en.wikipedia.org/wiki/Anchoring
keesj 13y ago
Pinboard[1] does this: "The fee is based on the formula (number of users * $0.001), so the earlier you join, the less you pay."[2] [1] https://pinboard.in/ https://pinboard.in/ [2] https://pinboard.in/help/fee/ https://pinboard.in/help/fee/

philfrasty 13y ago

You can read some research on name-your-own pricing in e-commerce from my former prof: one is here from the Journal of Marketing http://www-bcf.usc.edu/~tellis/PriceAuct.pdf http://www-bcf.usc.edu/~tellis/PriceAuct.pdf (for more just check out Google-Scholar and type „name your own price“)

iamleppert 13y ago

Irony: his app is down.

czottmann 13y ago
My "app is down"? You mean the site? (It isn't.)

ronaldx 13y ago

Is there some reason you decided to have a maximum price? I was curious that you felt the app had $20 value personally to you, yet you don't think anyone else would value it higher than that? I found that decision surprising.

czottmann 13y ago
OP here. I didn't want to appear greedy. That being said, I've increased the upper range limit a bit. :)

hawleyal 13y ago

Isn't that similar to donation-supported freeware?

czottmann 13y ago
No, as there is a base price. It's PWYW, but "what you want" > 0.

BenSS 13y ago

I'd be fascinated to see what the impact is if you give the user an indication of what the next user(s) will have to pay if they adjust the price scale. Down? They get guilted by seeing the next users will end up paying more. Up? Nice pay-it-forward aspect.

nawitus 13y ago

Game theory doesn't support "pay what you want" really well, e.g. there's no market to somehow arbitrate the price. A true market could be created by enabling people to buy and sell the service, or perhaps by bidding. This doesn't work unless the supply of the service is artificially restricted (otherwise the price goes to near zero immediately). Of course, some argue that the "true price" of intellectual property is very close to zero, but the app in the article can be thought of as a service.