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increasing perceived value without increasing objective value makes me feel kinda slimy. I feel like this is representative of why technical people leave money

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.
- nazgulnarsil 17y ago
  I'm better off if it appears that I'm not trying. well that's a different signal, depending on your market (technical people in this case) it could be a superior signal.
  - lsc 17y ago
    yes. I understand it is marketing, just as much as having a $25 burger on the menu. The difference is that I don't understand what a $25 burger can honestly signal. Maybe, for the target market, a $25 burger can honestly signal something important, that I just don't understand? Perhaps "we take care to make you feel like you are eating at an expensive restaurant." I can imagine that being important to some people. I'm pretty certain, though, that a $25 burger on my menu would signal something that was very negative to my target market. If nothing else, it would look like a dishonest signal. Because I don't understand what a $25 burger is signaling, I would not follow through on that signal. I mean, I am trying to signal that I'm one of you. I'm not going to fuck around in an attempt to extract pennies from you. I'd be doing this for free if that didn't carry some serious negative consequences. If you are not a nerd, you have no idea how much many of us hate talking to sales every time we need to buy new equipment or space. Like most marketing signals, if I don't follow through, if this isn't an honest signal, the market would believe me for about five minutes.
    - nazgulnarsil 17y ago
      the $25 burger signals that your restaurant is capable of making a burger worth $25 to someone. this then reflects well on the care you take with your cheaper offerings. of course in reality the relative qualities of product offerings can be completely unrelated, but our monkey brains are not objective. thinking that nerds are free of bias is a bias :)
      - lsc 17y ago
        I don't see how a $25 burger on the menu signifies that $25 burgers are selling. Especially in the IT industry. It's normal for vendors to have 'list prices' that are 50%-70% higher than what you can negotiate them down to. (seriously. talk to a small business who has bought a new NetAPP or EMC storage device.) Also, yeah, we are all biased, even nerds. I'm sure you could, for a short while, trick nerds into paying more because of those biases. But I'd bet money that they'd figure it out, probably sooner rather than later, and they'd be mad at you. If you are selling to the middle managers who tell nerds what to do, it's different. But I'm a long ways from being able to hire someone who can pull off that sort of thing.
lsc 17y ago
saying there is no such thing as objective value is like dodging any other philosophical question with a 'but can you prove reality is as it seems?' While in philosophy class you have a point, I can't define 'objective value' in the philosophical sense any more than I can prove I'm not a butterfly dreaming that I am a man, but I think that says more about philosophy than it says about the concept of objective value. If you want to actually do something real, you must move past word games. All men are 9/10ths empiricists. I know what I mean when I speak of objective value. So do my customers, and I believe, so do you.
- nazgulnarsil 17y ago
  um, no. please see the marginal revolution. price signals preferences. objective value would imply objective preferences.
  - lsc 17y ago
    huh. Interesting blog. But what I read doesn't have anything about objective value, or price signaling preference. Link? Yes, I understand that one of these 32GiB ram, 8 core servers is worth about $1500 to me, or $6000, to someone unable to assemble a server from parts. There can be no value without a valuer, so technically, there can be no objective value. (just like I can't prove that you are not a figment of my imagination. It's impossible to do with the tools provided by philosophy. But I am unlikely to live a very successful life if I act as if others around me don't actually exist.) However, the price of a commodity tends to fall to just above the cost of production, because, in the example above, building a server is fairly trivial once you have a good ESD setup, so if you charge $3K instead of $6K for the $1.5K server, someone else is going to charge $2.5, or $2K, until you get down to the smallest profit margin someone will accept to do the job.[1] This is what I mean by 'objective value' Of course, some businesses try to say "Oh, our product is not a commodity" which is fine, but I would argue as a businessperson, I want as many of the inputs to my business as possible to be commodities. The idea is that if I use commodities, it is easy to compare pricing between vendors, and if one vendor fucks it up, I can easily switch to another. 'differentiated' products usually cost more, but they usually provide less value for those very reasons. Of course, some businesses seem to prefer to spend $6K on the $1.5K server, even after seeing another vendor charge $3K for what amounts to the same hardware. I don't know why this is. My theory is that the people making that decision, the managers, do not have enough technical knowledge to know that the hardware is comparable, but more importantly, they are more concerned with minimizing their own personal risk than with maximizing the total expected return for the shareholders, who are ultimately paying for the hardware. Clearly, I don't understand that market. Quite possibly there are good rational reasons why they like to pay 3x what they need to pay for hardware. I don't target this market because while I can build good servers, this market wants something else. I don't understand them so I can not serve them well. Besides, there are many good companies serving that market, and right now, I'm scaling at a comfortable pace. Serving a large corporation would require speeding that growth perhaps more than is healthy. I will stick with serving my people for now. If shareholders start demanding that larger companies watch their budgets more closely, well, I'm here, and I'm learning more every day. Hopefully, when that day comes, I will be prepared. Until then, there are enough technical people with hobbies and small businesses to make me quite comfortable [1] see serversdirect.com - I have no experience with them, but a co-lo customer of mine uses them. their prices /as posted on the website/ are very good; about what I'd charge if you asked me to build you servers.

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.

nazgulnarsil 17y ago
I'm better off if it appears that I'm not trying. well that's a different signal, depending on your market (technical people in this case) it could be a superior signal.
- lsc 17y ago
  yes. I understand it is marketing, just as much as having a $25 burger on the menu. The difference is that I don't understand what a $25 burger can honestly signal. Maybe, for the target market, a $25 burger can honestly signal something important, that I just don't understand? Perhaps "we take care to make you feel like you are eating at an expensive restaurant." I can imagine that being important to some people. I'm pretty certain, though, that a $25 burger on my menu would signal something that was very negative to my target market. If nothing else, it would look like a dishonest signal. Because I don't understand what a $25 burger is signaling, I would not follow through on that signal. I mean, I am trying to signal that I'm one of you. I'm not going to fuck around in an attempt to extract pennies from you. I'd be doing this for free if that didn't carry some serious negative consequences. If you are not a nerd, you have no idea how much many of us hate talking to sales every time we need to buy new equipment or space. Like most marketing signals, if I don't follow through, if this isn't an honest signal, the market would believe me for about five minutes.
  - nazgulnarsil 17y ago
    the $25 burger signals that your restaurant is capable of making a burger worth $25 to someone. this then reflects well on the care you take with your cheaper offerings. of course in reality the relative qualities of product offerings can be completely unrelated, but our monkey brains are not objective. thinking that nerds are free of bias is a bias :)
    - lsc 17y ago
      I don't see how a $25 burger on the menu signifies that $25 burgers are selling. Especially in the IT industry. It's normal for vendors to have 'list prices' that are 50%-70% higher than what you can negotiate them down to. (seriously. talk to a small business who has bought a new NetAPP or EMC storage device.) Also, yeah, we are all biased, even nerds. I'm sure you could, for a short while, trick nerds into paying more because of those biases. But I'd bet money that they'd figure it out, probably sooner rather than later, and they'd be mad at you. If you are selling to the middle managers who tell nerds what to do, it's different. But I'm a long ways from being able to hire someone who can pull off that sort of thing.

lsc 17y ago

saying there is no such thing as objective value is like dodging any other philosophical question with a 'but can you prove reality is as it seems?' While in philosophy class you have a point, I can't define 'objective value' in the philosophical sense any more than I can prove I'm not a butterfly dreaming that I am a man, but I think that says more about philosophy than it says about the concept of objective value. If you want to actually do something real, you must move past word games. All men are 9/10ths empiricists. I know what I mean when I speak of objective value. So do my customers, and I believe, so do you.

nazgulnarsil 17y ago
um, no. please see the marginal revolution. price signals preferences. objective value would imply objective preferences.
- lsc 17y ago
  huh. Interesting blog. But what I read doesn't have anything about objective value, or price signaling preference. Link? Yes, I understand that one of these 32GiB ram, 8 core servers is worth about $1500 to me, or $6000, to someone unable to assemble a server from parts. There can be no value without a valuer, so technically, there can be no objective value. (just like I can't prove that you are not a figment of my imagination. It's impossible to do with the tools provided by philosophy. But I am unlikely to live a very successful life if I act as if others around me don't actually exist.) However, the price of a commodity tends to fall to just above the cost of production, because, in the example above, building a server is fairly trivial once you have a good ESD setup, so if you charge $3K instead of $6K for the $1.5K server, someone else is going to charge $2.5, or $2K, until you get down to the smallest profit margin someone will accept to do the job.[1] This is what I mean by 'objective value' Of course, some businesses try to say "Oh, our product is not a commodity" which is fine, but I would argue as a businessperson, I want as many of the inputs to my business as possible to be commodities. The idea is that if I use commodities, it is easy to compare pricing between vendors, and if one vendor fucks it up, I can easily switch to another. 'differentiated' products usually cost more, but they usually provide less value for those very reasons. Of course, some businesses seem to prefer to spend $6K on the $1.5K server, even after seeing another vendor charge $3K for what amounts to the same hardware. I don't know why this is. My theory is that the people making that decision, the managers, do not have enough technical knowledge to know that the hardware is comparable, but more importantly, they are more concerned with minimizing their own personal risk than with maximizing the total expected return for the shareholders, who are ultimately paying for the hardware. Clearly, I don't understand that market. Quite possibly there are good rational reasons why they like to pay 3x what they need to pay for hardware. I don't target this market because while I can build good servers, this market wants something else. I don't understand them so I can not serve them well. Besides, there are many good companies serving that market, and right now, I'm scaling at a comfortable pace. Serving a large corporation would require speeding that growth perhaps more than is healthy. I will stick with serving my people for now. If shareholders start demanding that larger companies watch their budgets more closely, well, I'm here, and I'm learning more every day. Hopefully, when that day comes, I will be prepared. Until then, there are enough technical people with hobbies and small businesses to make me quite comfortable [1] see serversdirect.com - I have no experience with them, but a co-lo customer of mine uses them. their prices /as posted on the website/ are very good; about what I'd charge if you asked me to build you servers.