10 ms·

the impression of utility is more important than actual utility. what does the extremely high priced option (50k in the example) signal to the customer? that

the impression of utility is more important than actual utility. what does the extremely high priced option (50k in the example) signal to the customer? that someone out there is deriving 50,000 + x value from that service.

lsc 17y ago
depends on what you are selling, as a previous poster said, and who you are selling it to. My experience selling to computer nerds has been that we are a very rational and price-sensitive bunch. we shop around, and we want objective measures. Actual utility, much like truth during a court battle, is a big advantage. Sure, it's not overwhelming, but it helps a lot. If you are providing actual utility, your customers will do your marketing for you. Personally, I think the choice depends a lot on what you are good at. If you are good at marketing and have little technical and/or engineering skill, sure, you will get more out of marketing. But the opposite can work too. Personally, I'm always very amused by people telling me I should raise my prices. I started out selling FreeBSD jails (with an actual utility close to my current $8 product) for $40 each. I rented two. Switching to xen, then dramatically dropping my prices (well, and a few years of actually, you know, learning what I was doing) helped me a lot. Marketing is easy when you have obvious and objective advantages over competing products. You can yammer all day about this or that or the other, but if you can point at your price sheet and say 'hey, look- I'm kinda like that other guy, only 1/4th the price' well, for price sensitive customers, that's a difficult to refute reason to give you a shot, especially if the advantages your competitors cite for the price premium are not immediately testable. Differentiation is only in your interest if you are better at marketing (and/or have higher costs) than the competition. In my case, the competition is much better at marketing, and my costs are such that I can dramatically undercut them while making a profit, so it makes sense for me to just focus on providing a decent product while occasionally saying "Hey, look at me. I'm kindof like the competition, only 1/4th the price!"
- nazgulnarsil 17y ago
  the point of the higher priced option is that it doesn't cost you any current customers while potentially bringing in customers who wouldn't have otherwise used you though. like the article said, even if the premium option just adds a bunch of management-appeal language with no objective value, you still might be able to get it into the hands of the engineers who work under them (at companies where idiots make the purchasing decisions) that might otherwise not had the option. secondly, the view that undercutting (for the same objective value) will always be interpreted correctly by the customer is a little naive. In reality you often don't want to undercut your competition by too much for exactly the same reason my initial post was about: perceived value.
  - lsc 17y ago
    /secondly, the view that undercutting (for the same objective value) will always be interpreted correctly by the customer is a little naive. In reality you often don't want to undercut your competition by too much for exactly the same reason my initial post was about: perceived value./ The thing is, I've tried setting prices at par with the competition. Sure, it was high margin in terms of computer hardware, but computer hardware is the cheapest part of the equation. Cutting prices dramatically is why this project went from being a net loss to paying for my rent and a new server or two every month. It became much 'higher margin' because it's cheaper to just give everyone 4x as much ram than it is for me to compete on marketing with the other players in this field. Sure, there are people I'll never appeal to, and that's fine. There are some real reasons why you might want to pay extra to have a 'real company' handle your VPS rather than three guys. I think that if you want to retain credibility, you can't pretend that you can serve everyone. Besides, I'd go nuts if I had to teach unix to every middle manager who decided to sign up. Slicehost is great. if you need a bunch of hand holding, use them. Sure, you've gotta pay for it, but you know what? tech support is a soul-sucking job. It's incredibly difficult to maintain a good support organization, and I think it is quite reasonable to charge extra if you are able to do so. (I mean, assuming slicehost's support is as good as people seem to say; I haven't personally used them. But I hear nothing but good things.) if you know what you are doing, and if you have a system, like mine,[1] that allows you out of band console, rebooter, and rescue media, you don't need very much support. This is good for you and good for me, and my prices just don't work, otherwise. Hardware is cheap, good people willing to do tech support are not. Objective, testable arguments appeal to my market, and 'Hey, I'm kindof like slicehost, only 25% the cost' is a very strong, testable argument. But my central point is that you should focus your marketing effort. saying "I am all things to all people" is an obvious lie, which will cause most technical people to write you off as worthless marketing garbage before you get a chance to explain what you are actually good at. Figure out what you are good at, and focus on and talk about that. Be consistent. Sure, Perceived value is what you get paid for, but unless you are a whole lot better at marketing than I am, increasing objective value is by far the easiest way to manipulate perceived value. Besides, increasing objective value makes me feel good about myself, and increasing perceived value without increasing objective value makes me feel kinda slimy. [1] in the interests of full disclosure, and, uh, in not getting people signing up then exercising my 30 day money back thing, I will point out that my system sucks badly if you want to provision a new server, or if you want to resize your server. I'm working on it. But I do think my system does a very good job of emulating a remote server in a co-lo with a serial console, a rebooter, and a rescue CD in the drive.

lsc 17y ago

depends on what you are selling, as a previous poster said, and who you are selling it to. My experience selling to computer nerds has been that we are a very rational and price-sensitive bunch. we shop around, and we want objective measures. Actual utility, much like truth during a court battle, is a big advantage. Sure, it's not overwhelming, but it helps a lot. If you are providing actual utility, your customers will do your marketing for you. Personally, I think the choice depends a lot on what you are good at. If you are good at marketing and have little technical and/or engineering skill, sure, you will get more out of marketing. But the opposite can work too. Personally, I'm always very amused by people telling me I should raise my prices. I started out selling FreeBSD jails (with an actual utility close to my current $8 product) for $40 each. I rented two. Switching to xen, then dramatically dropping my prices (well, and a few years of actually, you know, learning what I was doing) helped me a lot. Marketing is easy when you have obvious and objective advantages over competing products. You can yammer all day about this or that or the other, but if you can point at your price sheet and say 'hey, look- I'm kinda like that other guy, only 1/4th the price' well, for price sensitive customers, that's a difficult to refute reason to give you a shot, especially if the advantages your competitors cite for the price premium are not immediately testable. Differentiation is only in your interest if you are better at marketing (and/or have higher costs) than the competition. In my case, the competition is much better at marketing, and my costs are such that I can dramatically undercut them while making a profit, so it makes sense for me to just focus on providing a decent product while occasionally saying "Hey, look at me. I'm kindof like the competition, only 1/4th the price!"

nazgulnarsil 17y ago
the point of the higher priced option is that it doesn't cost you any current customers while potentially bringing in customers who wouldn't have otherwise used you though. like the article said, even if the premium option just adds a bunch of management-appeal language with no objective value, you still might be able to get it into the hands of the engineers who work under them (at companies where idiots make the purchasing decisions) that might otherwise not had the option. secondly, the view that undercutting (for the same objective value) will always be interpreted correctly by the customer is a little naive. In reality you often don't want to undercut your competition by too much for exactly the same reason my initial post was about: perceived value.
- lsc 17y ago
  /secondly, the view that undercutting (for the same objective value) will always be interpreted correctly by the customer is a little naive. In reality you often don't want to undercut your competition by too much for exactly the same reason my initial post was about: perceived value./ The thing is, I've tried setting prices at par with the competition. Sure, it was high margin in terms of computer hardware, but computer hardware is the cheapest part of the equation. Cutting prices dramatically is why this project went from being a net loss to paying for my rent and a new server or two every month. It became much 'higher margin' because it's cheaper to just give everyone 4x as much ram than it is for me to compete on marketing with the other players in this field. Sure, there are people I'll never appeal to, and that's fine. There are some real reasons why you might want to pay extra to have a 'real company' handle your VPS rather than three guys. I think that if you want to retain credibility, you can't pretend that you can serve everyone. Besides, I'd go nuts if I had to teach unix to every middle manager who decided to sign up. Slicehost is great. if you need a bunch of hand holding, use them. Sure, you've gotta pay for it, but you know what? tech support is a soul-sucking job. It's incredibly difficult to maintain a good support organization, and I think it is quite reasonable to charge extra if you are able to do so. (I mean, assuming slicehost's support is as good as people seem to say; I haven't personally used them. But I hear nothing but good things.) if you know what you are doing, and if you have a system, like mine,[1] that allows you out of band console, rebooter, and rescue media, you don't need very much support. This is good for you and good for me, and my prices just don't work, otherwise. Hardware is cheap, good people willing to do tech support are not. Objective, testable arguments appeal to my market, and 'Hey, I'm kindof like slicehost, only 25% the cost' is a very strong, testable argument. But my central point is that you should focus your marketing effort. saying "I am all things to all people" is an obvious lie, which will cause most technical people to write you off as worthless marketing garbage before you get a chance to explain what you are actually good at. Figure out what you are good at, and focus on and talk about that. Be consistent. Sure, Perceived value is what you get paid for, but unless you are a whole lot better at marketing than I am, increasing objective value is by far the easiest way to manipulate perceived value. Besides, increasing objective value makes me feel good about myself, and increasing perceived value without increasing objective value makes me feel kinda slimy. [1] in the interests of full disclosure, and, uh, in not getting people signing up then exercising my 30 day money back thing, I will point out that my system sucks badly if you want to provision a new server, or if you want to resize your server. I'm working on it. But I do think my system does a very good job of emulating a remote server in a co-lo with a serial console, a rebooter, and a rescue CD in the drive.