4 ms·

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

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.
- nazgulnarsil 17y ago
  increasing perceived value without increasing objective value makes me feel kinda slimy. I feel like this is representative of why technical people leave money on the table in general. every product has a laffer maximum, objective value doesn't really exist. also you are getting that you can maintain your current pricing structure completely unchanged except for adding some premium option that you don't intend to actually sell (you can price any added features that you don't really want to support so high that on the off chance someone does buy it you won't mind working for that money), right?
  - lsc 17y ago
    I could... $20,000 setup, $10,000/month; I will rent you 10 32GiB ram/8 core servers, and give you a gigabit connection to the 'net, and hold your hand when not working on prgmr.com; See, I don't think that would increase the perceived value of my existing offerings. Just because you have the price posted, that doesn't mean people believe it's actually selling. Really, if you want to charge that kind of margin, you need to give half of it to a salesguy.
  - lsc 17y ago
    "I feel like this is representative of why technical people leave money on the table in general. every product has a laffer maximum, objective value doesn't really exist." Maybe. what about comparative advantage? I can probably compete with the best SysAdmins my competitors hire. Yeah, some of them are better than I am, but it's at least a contest, you know? I'm not completely outclassed. I have a fighting chance. Put me up against the best marketing guys my competition can hire, though, and I'll be humiliated. I'm just not very good at manipulating emotions, so I'm better off if it appears that I'm not trying. That, and I still don't believe I'm leaving money on the table. my growth rate right now, (a bit over a server a month) is probably about optimal. It's fast enough to be exciting, but it's slow enough to be not overwhelming. The hardware margins are fine; a full server more than pays for itself in two months. Really, any more than that is just silly. I think what I need to be focusing on now is automating the bits of support we are currently (badly) doing by hand, that is, provisioning and re-sizing domains. Next, I think, backups, as that's the biggest threat right now. Data-loss events are horrible.

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.

nazgulnarsil 17y ago
increasing perceived value without increasing objective value makes me feel kinda slimy. I feel like this is representative of why technical people leave money on the table in general. every product has a laffer maximum, objective value doesn't really exist. also you are getting that you can maintain your current pricing structure completely unchanged except for adding some premium option that you don't intend to actually sell (you can price any added features that you don't really want to support so high that on the off chance someone does buy it you won't mind working for that money), right?
- lsc 17y ago
  I could... $20,000 setup, $10,000/month; I will rent you 10 32GiB ram/8 core servers, and give you a gigabit connection to the 'net, and hold your hand when not working on prgmr.com; See, I don't think that would increase the perceived value of my existing offerings. Just because you have the price posted, that doesn't mean people believe it's actually selling. Really, if you want to charge that kind of margin, you need to give half of it to a salesguy.
- lsc 17y ago
  "I feel like this is representative of why technical people leave money on the table in general. every product has a laffer maximum, objective value doesn't really exist." Maybe. what about comparative advantage? I can probably compete with the best SysAdmins my competitors hire. Yeah, some of them are better than I am, but it's at least a contest, you know? I'm not completely outclassed. I have a fighting chance. Put me up against the best marketing guys my competition can hire, though, and I'll be humiliated. I'm just not very good at manipulating emotions, so I'm better off if it appears that I'm not trying. That, and I still don't believe I'm leaving money on the table. my growth rate right now, (a bit over a server a month) is probably about optimal. It's fast enough to be exciting, but it's slow enough to be not overwhelming. The hardware margins are fine; a full server more than pays for itself in two months. Really, any more than that is just silly. I think what I need to be focusing on now is automating the bits of support we are currently (badly) doing by hand, that is, provisioning and re-sizing domains. Next, I think, backups, as that's the biggest threat right now. Data-loss events are horrible.