Do not talk about pricing
medium.com
medium.com
I'm sure these things work, but they also alienate customers sometimes. People have founded entire businesses on offering clearer pricing schemes.
...actually, the more I think about it, this may be a business idea in itself, for the poor suckers who don't afford a solitary launch!
It's different for software that actually needs integration of some sort (SAP, most of the IBM portfolio, …) but SaaS startups doing this shit are just deluding themselves.
The rule is to be clear about pricing when it works in your advantage and to obfuscate otherwise.
you have to schedule a consultation if you want prices.
- The state of the roof (does it need reinforcing? will the installers need scaffolding?) - The complexity of the installation (lots of little roof sections with earth tiles and 2 or 3 transformers? Or a plain and simple one-transformer south facing asphalt roof?) - Does the crew need to drive 5h from headquarters? Or just 1h? - A 3kW installation may be worthwhile in some locations but not in others.
And finally since solar city depends on the performance of the panels (which they sell as debt), they must ensure that your house will be a good candidate. If it's not, they don't want you as a customer.
Is that millitonnes, more commonly known as kilograms?
That's to illustrate the difference between an imperial ton, which is 2000 lbs (or ~907kg).
Or (unfortunately not) better known as one megagram.
I do hate when small companies do it though. I'm looking for a new AC unit and so few dealers will just give me a price straight away. I just want to enter my credit card and have it delivered.
They don't quote a price because the cost of the product they sell makes up only a small percentage of the overall cost. The vast majority comes from consulting and product customization, which is billable by the hour. And since you don't know the prospect's exact need during the initial engagement, providing pricing would be silly.
Source: I work in that exact market. When a prospect asks for a price up front, they basically fail lead qualification. As the saying goes, if you have to ask how much it is, you ain't the target audience.
Secret pricing is exactly how they conduct that business: With no public price, employees can't challenge IBM's consultants to provide the value they're charged for. If all from Atlassian to SpaceX publish their pricing, any other behaviour should trigger a SEC investigation.
I did sign up to see what Autodesk Maya cost in my country's currency. At the time, in $US is was $3,995 for a single seat. In my country, it was around $US12000.
I did what any good person with a goodly amount of cash in the bank would do - I said "$#@! it," and bought a house instead.
The best part is that they brought in McDonald's UC4 engineer to talk about how good it was. When we asked him how they automated its deployment and where they got their init scripts from, since UC4 didn't include any (wtf), his answer was that it was basically his full time job to deploy it by hand, since he didn't know how to automate anything. Somehow he turned his lack of skill and McDonald's apparent lack of good tech leadership into a positive thing - which the execs also loved. These are the kinds of people making large, absurdly expensive software decisions for multi, multi billion dollar companies.
I have nightmares of trying to figure out their database schema. 2-6ish letter German acronyms for table names....
Their wiki gives a good impression of their character: https://en.wikipedia.org/wiki/Automic
In comparison, BMC was up front with an engineer during the eval and provided us with great documentation including the DB schema. We didn't go with them or others in the automation space for... reasons... but it was a very different experience.
[edit: Why the downvotes? My experience with another 800-lbs gorilla confirms the parent comment]
Not to defend these two but in some cases for IBM you will, if you know the incantation and buzzwords, find the price. For example WebSphere Application Server and WebSphere MQ can be looked up because IBM deals in PVU's (processor value unit) and bundled licenses that include support. They do provide a PVU calculator. Of course, you'll have to register to get more information or download a demo. It's frustrating but not impossible.
Actually they do target the small fish, that's why they won't publish prices. The idea here is that $big_co may pay $5m for $software, but $small_co will get the near equivalent for $100,000. $big_co doesn't want to feel it got ripped off, so secretive pricing all around.
Also, this pricing allows for a lot of negotiation, volume pricing, and "we'll beat the competition" tactics. Now the competition needs to also engage in secretive pricing to stay competitive.
they're saving everyone involved a lot of time.
Unfortunately this seems to be common practice whenever you deal with products/services that target businesses.
>we believe strongly in a core message of the Lean Startup movement: We want to talk to people.
What if people don't want to talk to you? This should be entirely opt-in. Intercom makes this a seamless experience.
A certain large segment of people want upfront pricing information with no human involved. If you can't give exact pricing because your product/service is too complicated at least give some example setups and their respective costs. This way at least we have a ball park figure to anchor our thinking. No one wants to waste time exploring unfeasible (due to cost) options. Otherwise it becomes a turn off because it starts to feel like a negotiation rather than an exchange.
I used to work for a company that provided custom pricing software for highly complex products (did you know a semi truck can have over 4000 options?). They charged hundreds of thousands for a custom pricing software solution - but it was mostly a custom job, some off-the-shelf software but mostly a ton of customization for that particular customer and their very complex business needs.
So no, you can't just charge a flat rate like it's a box of Fruit Loops.
This is not a very meaningful distinction. Big enterprise software deals inevitably involve customizations and integrations.
For example,you provide SaaS which is applicable to a wide audience, from personal account and tiny teams, to large companies. It's totally fine then to have public pricing for smaller use cases but need to get in touch with sales person to get a larger plan. In this case, your needs probably don't match typical plans (you need a lot of X, and no Y), and the amount of money is big enough to be negotiable. That's cool, since you don't buy these things willie nillie every few days.
Speaking of salesmen themselves, it varies a lot from my experience. Some will send you 10 emails during 14 days trial with live demos and trying to arrange a call and shit I don' care about. They do nothing at all to make the sale happen, just annoy a lot. While others just ask for your needs, ask a few questions for clarifications and about potentials needs and give a quote, not trying to arrange pointless calls. I have no problem with this kind of salesmen.
I agree with you on the small end of the spectrum - but there is a reason many "Enterprise" level plans are "call us" because the level of hassle involved can be directly tied into the cost you can charge.
With years of experience from dealing with "ask for quote" businesses, this strategy is by now an immediate k.o. criteria for me when considering anything.
I may return for your offer only after spending considerable time of not finding any more transparent business (quite rare, but possible for very customized products like renting glass fiber for an office).
In practice this never happens and I've been a much happier customer ever since - with my business life cleaned up from 95% of dealing with crappy sales reps.
Recent case in the point: I was in the market for a Herman Miller Embody. I would've ordered it online at retail for ~$1500, but I wanted it ASAP so I went to a local HM dealer to see if they kept any in stock (they didn't). While there, the sales person got me a more-upgraded version of the Embody for less than $1000 by invoking dealership and small business discounts. Effectively, I made $500/hr during that trip to the HM dealership.
The downside of this experience was that, contrary to my original intention, it took about 5 weeks for the chair to arrive. :\ It would've shipped faster if I had paid full retail from the HM store online.
Of course, it's going to depend on the good, but considering that salespeople usually have a strong incentive structure to get your sale to go through them instead of an online retailer or to a competing business, they really will pull out all the stops to keep you around.
The ideal is some kind of pricing calculator, though. 3 packages and a custom quote generator, or "call".
"I'm interested in XYZ. How much is it?"
"Well, with Option A or Option W?"
"... How much is either?"
"Oh, well that depends on if we make it with pixie dust or faerie magik."
"Ok. How much?"
"Well, which would you like? XYZ with A from Pixie Dust or XYZ with W made from Faerie Magik?"
"How much for either?"
"Well, that depends on ..."
No. No it does not depend. You have a chart in your hand, I guarantee it. It has pricing on it. Stop the dance.
One time, I asked a guy "Can you make this and how much would it cost?".
He responded: "We can do whatever you want." Really? I want a number, but you seem to have trouble giving it to me.
This happens more often than not, and I usually eventually find someone to quote me a price within my budget on the first visit. I understand that that is typically how business is done, or more specifically haggling, but I don't want to haggle. Even if it is outside of my budget, I'll postpone the project until I get the money, and then call back whichever vendor didn't budge on price the first time (and had the lowest price, of course).
You may not care for negotiation, but that doesn't mean it is dishonest. Items and services don't have a "real" price, they are only worth what people will pay for them.
I am always very honest with them, and expect the same. Heck, I don't even hesitate to pay them when they screw something up. I pay them promptly, and then hope they will do the right thing.
While items and services don't have a "real" price, they do have a "best" price.
EDIT: I'd also like to add that, while the article focuses on consumer pricing, I am different when it comes to B2B pricing. E.g. I would quote a successful law firm more than a mom-and-pop shop for consulting services. Back when I was an entrepreneur, I actually lost a couple of contracts because my quotes were too low.
There is a divergence in moral values in here, and even if you think someone should accept a certain view on negotiation, it is, however, especially when there is no visible benefit at all for them, their choice to refuse to do so. The commerce has on its core the idea of mutual benefit and this haggling-justling violates the sense of mutual benefit. It is only natural to expect less trust from your "customers" when you've treated them this way.
"Oh look, this $2500 sofa is only $1899.99 right now. What a great deal!"
One experiment had respondents use the last two digits of their social security number as the initial price for a bottle of wine or other good. This completely-arbitrary price had a strong correlation with the price they were willing to pay for the item.
The effect is described in greater detail in Thinking, Fast and Slow[3]
[1] https://en.wikipedia.org/wiki/Anchoring
[2] http://www.inc.com/the-build-network/the-anchoring-effect.ht...
[3] http://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/...
http://www.amazon.com/Predictably-Irrational-Revised-Expanded-Decisions/dp/0061353248
It is also crazy to think how relational it all is. I don't really need that extra $7 beer at the bar, "but who cares, we're having fun". Whereas paying $8 a month to the New York Times took me months and months to decide on because I wasn't used to paying for it, even though I'd been a reader for years.
It really is a mostly emotional decision.
How much future annoyance is your product worth? 8 dollars per year?
The mental overhead in case my card changes might not be worth it.
On top of that, it's not even really about the money. You don't want to feel bad about getting tricked into paying for a crap app. You'd feel like a sucker. It would be frustrating. People do all kinds of mental gymnastics to avoid feeling embarrassment and frustration --to the point that it's dangerous to call out a scammer because they are likely to get geniunely indignant and angry to avoid feeling the embarrassment of their obvious lie. Procrastination to avoid possible frustration is very, very common.
Two counter-arguments:
People buy enticing stuff off of supermarket shelves all the time though -- things that they are not certain if they'll like them.
Lots of people who have bought and generally like an app (or so they say), still complain for its price on boards, even if it's comparable to a beer. E.g. they ask why a $2.99 app isn't $0.99 etc.
So it's not just "uncertainty".
One pitch I found pretty neat goes roughly as follows.
Buy <product> now, and if within (30|90|365) days you at any point feel unsatisfied with it, feel free to ask for full refund, no questions asked, and you get to keep our <marginal cost 0 infoproduct>, valued X$, as a gift from us for trying it out.
Short breakdown of it.
"Buy <product> now" - bog standard call to action
"(30|90|365) days" - if the product is any good, longer guarantees usually reduce returns, since they give more time to grow on the product and forget the guarantee date.
"feel unsatisfied" - eg. you don't even need a reason to return it
"full refund" - that's pretty d'uh now, try a 110% refund for extra excitement
"no questions asked" - eg. we're not going to hassle you for trying to use this. you will not feel stupid.
"get to keep <infoproduct>" - even if you opt out, you get something
"valued X$" - with a home made infoproduct, that value is pulled straight from the posterior, but gives a value anchor
Not always -- many people are shameless jerks. REI used to have a lifetime no-questions-asked return policy, but people were returning worn-out shoes and such, so they had to discontinue it.
With the app, not only are you out a few dollars, you potentially commit the sin of wasting your time by not fulfilling any desires. Though the upside is exponential (in relation to the food), so is the downside.
(Yes, I'm aware that attendance is the "price" for the pizza, but let's just say that cold pizza can still be had for free.)
People, I find, are simply irrational when it comes to monthly subscriptions. I'm a student with <1000E income and a monthly cost <20E doesn't even register; as long as I get something from it I want. If it's not big enough to induce a lifestyle change, what's the problem? So often I see people use Spotify and complain about the commercials, and I'm just like 'What is wrong with you? Literally nothing would change if you spent that money and clearly you would benefit from it. Why do you not do it?'
This is an extreme example (after all, you're not going to spend 10 dollars on Spotify for the rest of your life), but the principle of the matter stands: Money saved now will be worth more later thanks to compounding interest. In a sense, the dollars you earn today are the most valuable dollars you'll ever earn.
It's up to you to make the judgment call on a case by case basis whether you'd like to live in the moment, or whether you'd prefer to save. Everybody draws the line somewhere (I personally have a Spotify subscription), but to call it irrational is... a bit irrational.
Anyway, all that is true, and I did know that when younger. What nobody tells you is that there are a few times when your income grows faster than an exponential. Everything you save up before of one of those few times is basically worthless.
Anybody's main goal should be to have as many of those income growing events as possible. Not giving-up everything when young because of compounded interest.
Yet, this thing is not predictable, thus it's always good to save a bit. It's a balancing act, not a clear-cut good vs. bad situation.
And even if one went with it: I'll be up by a multiple of 33.5k because I spent money on things that put me in a better mood to work on myself and lead me to better jobs etc. etc.
And then there's the whole micro payment economy which is another thing.
It also costs $some_amount_of_money to make digital media, yet once created, it can be duplicated indefinitely for free.
At least, that's what always hangs out in the back of my mind.
I go to Five Below or a Dollar Store and stock up on $2-$3 items that are kind of neat even venturing into the $5 range occasionally for "premium garbage" yet I get on the Google Play store and see a really awesome app that fills one of my needs but it's $2! How can someone charge $2 for THAT? They only spent a year working on it and it fits my need perfectly but $2 is too much!
It's really weird, for sure.
I think the hardest part with things like the New York Times is that a lot of us are getting our news from aggregators. I don't give a shit about the New York Times as a company nor any others. I read down through places like Hacker News and click links there. If, occasionally, it's a link to a NYT article, I read it (or don't.. I guess?) but otherwise, if any one of the news sites disappeared off of the face of the globe, I'd be no better or worse off.
Also, $8/mon is nothing when it's one news site but if each site begins charging, using a news aggregator is going to be a very expensive proposition...
I think there's something primal about touching/seeing something before buying, and I haven't seen anything digital that even comes close to this sense of grokking the whole thing you're buying in a few seconds/a minute of physical inspection.
I'm curious what the difference is (if any) in effect of the GBB pricing model in a store front versus online marketplace.
Yes, it could be, but that won't happen unless the act of publishing gets regulated (like in China, where even bloggers have to (or will have to) have publishing licenses) and forced upon an artificial asking price.
I can imagine this as general purpose advice but this is no way to build a loyal base. There are some services that I have that I begrudgingly pay for because they price so aggressively that they extract nearly all of the value from my subscription, and then there are services that I'm actually happy to pay the bill because it's such good value. Guess which services I recommend to others, and which services I actively look for alternatives for?
When pricing, I try to go for a price that people pay, but with resistance from X% of leads. Then you can give some/many of them limited-time discounts, which nudges them over the edge.
If you don't price high enough, you don't have room to do that. If you don't have resistance, you have no-one to do it for.
And people are MUCH more likely to buy when there's a time limit and they might lose something if they wait too long.
If a tech costs $5000 a month and a company can save on one tech, only price it at $500/month?
I'm still surprised that Steam has so many discounts; they've basically trained me to never pay full price. But I feel no need to play new games right when they're released; maybe there are enough people that do.
Now the $10 I spent on limbo of different. I didn't wait for a sale. I just bought it. I think steam optimized the revenue from me pretty well. And it all started with them giving me portal (one) for free.
Heh, same for me. I was quite surprised when my library recently hit the 100 games mark.
http://steamcommunity.com/profiles/76561197986674427
but I don't play more than 10 probably XD
I was actually quite happy when Linux made up half my library; it really put paid to the idea that Linux isn't for gaming. If a publisher doesn't release multi-platform, I just don't buy it anymore. But those deals sucker me in for just about any game that says it's on SteamOS.
but it has changed policy last year or so: before titles got cheaper by time and got discounts on top, so it was usual to find a year old aaa game for 5$ or 7$ in the summer sale, now titles take at least two years before even starting to cheapen in price, and publisher are using the trick of giving out big discount (75% is common) but starting from incredibly high prices (so it ends up never going below 20$)
The case that we ran into involved a product that required a fairly large amount of time investment on the part of the user to be valuable. Our customers that were willing to devote a fair amount of up-front time and 30-60 min per day to our tool were getting a pretty massive ROI, both on the time they spent and the monthly subscription cost. Those that weren't putting in the time got very little benefit. But we also found that when salespeople gave discounts for the first few months, our cancelation rate was significantly higher. We were much better off losing potential customers during the sales process because the customers we did end up signing had higher LTV and Net Promoter scores.
The lesson learned was that high/full price increased the investment that customers felt in our product and triggered their impulse to get their money's worth. Discounts signaled customers to make a shallow evaluation of the product and ultimately sabotaged our value proposition.
Yes, if I charge 3 times more, and lose less than two thirds of my customers, I'll make more profit in the short term.
But long term, network effects and the size of my customer base is very important for my ability to make money. Personal recommendations are a very important marketing factor, and having three times the number of customers is worth something even if you make the same profit.
Obviously the ability to pay quality journalists is a valuable cause, but it irks me that retaining a large percentage of customers/consumers, and the corresponding potential to make much more of a difference in the world, isn't also considered a mention-worthy aim in itself.
Got the opportunity to cure diseases but decides to play mind games for fun instead? In a position to bring awesome tech to the masses but prefers to market it as luxury item to a limited audience? Making lots of profits already but spends serious effort to drive the competitor out of business to earn even more as monopolist? ...good for you, "disruptor".
There very definitely is a market in this - the market for newspapers. Buying a newspaper as a proprietor is a fairly cost-effective way of getting a society to replicate your prejudices; you can get a huge amount of influence for a mere few tens or hundreds of millions of dollars.
And no offence, but it's very unlikely your product or service is that unique that there's no viable alternatives out there. That don't waste everyone's time.
I really don't have time for that crap. And salesmen generally give me the creeps. I think it's because so many of them are just there for the paycheck, but need to pretend to be interested in what they're selling. Ugh.
The problem with "do not talk about pricing" is that you're assuming your customers are idiots. There's nothing wrong with having a bunch of profitable idiots as customers, but that's not quite the target audience for a product like newspapers. The simple fact is that the cost of delivering volume to subscribers (one more subscriber) is so teeny tiny small that inflating the price more than a reasonable amount (when in fact you're losing advertising eyeballs) is what's not smart business. Companies that presume I'm an idiot don't get my business.
You cannot talk about pricing without talking about cost. Intelligent businesses are unafraid to be transparent with their variable costs (which for a digital-only newspaper are significantly less than for a print version); what trips prices is the bulky overhead fixed costs: CEO and executive management pay, benefits, and unnecessarily swanky office space.
Realtors are probably the best example of this IRL, operating in an industry that "doesn't want you to talk about pricing" (e.g. negotiated commission at an hourly rate, for example) ... just sign on the dotted line and let them abscond with all your equity in a lump sum payment.
Now that some of the crazyness of Internet Advertising has fallen by the wayside (lower CPCs == less crazyness), it becomes important to pay people who will research things, write eloquently about them, and convey the information you seek. I have really been enjoying Blendle[1] and their model. Happy to pay for decent content, not willing to pay for content I don't read. A good mix.
I hope more publications buy into that model.
[1] blendle.com
But for how long? I'm fairly certain that once those 300,000 loyal readers kick the bucket that The Times' digital subscription service will too.
How is 22 million regular readers (who will keep coming back and telling their friends about your articles, because they're free) worth less than 300,000 paying subscribers (who for some reason absolutely have to read what's in The Times no matter the price, and would probably have a hard time encouraging others to be so vehement).
Not to mention the types of journalists you will attract with a readership of a very small city, vs the readership of the population of New York State.
Monetarily. The ad market has only got worse since the Times made the move away from pure ad-funded pageviews, so the ability to turn those 22 million people's eyeballs into a revenue stream has become even less viable than it was when they replaced them with 300,000 paying customers.
"Not to mention the types of journalists you will attract.."
... with an engaged and interested audience who are directly paying to read what you have to say, who aren't merely being driven to your site by clickbait headlines and paid placement? I dunno, would think you'd be able to attract pretty good journalists on that basis...
¹ The publishers are aware of this, that's why they are using pay-walling only per article, after it reaches a number of views. By this they try to balance the the opportunity to get new clients (i.e. monetize the contents) with the risk of a complete audience drain (i.e. loss of relevance).
When you put multiple products/services in one store, that is when your products get to be next to both competing and non-competing (non directly substituable) products, there are other consumer feelings to add like the sum of all things they're going to buy -- whether or not they have a budget, the sum of the things will either look "cheap" or "expensive". And who knows what they will buy next... if they come back at all.
I learnt from running a part of a furniture chain's website that garbage is often placed with the item people want to move.
Retail I learnt is more about selling profit than selling product or services.
Pricing remains hard, and tricky, and several states like California have made it illegal to display MSRP type pricing, because everything's a great deal.
- what you are selling - how much you are selling it
If I meet a company that does not talk about one of these two things, I'll move along.
Say your software is licensed at $10 per person using it per year. In addition to the $10, I need to consider the costs of installation, configuration, first level support, entitlement/license management, and what it will cost me to extract the data and munge it into a usable form when we decide in three years that your competitor does it better.
Now consider that most companies offer lousy support for their products, so I also have to do a test roll-out to a small number of people, manage that, and figure out if it will all be worthwhile.
If you discount based on quantity, can I roll the test group into the main group? If you price in chunks larger than per-user, do I fall between your levels in some disadvantageous way?
Is it any wonder that I vastly prefer standard-protocol based, open-source applications with healthy user communities? No, it is not.
Does per-seat licensing work best, or something modeling the amount of data being processed? Fixed or floating seats? We're definitely looking at higher pricing, from hundreds to a few thousand per seat annually (not unusual in the market). I'm not worried about whether the product will be loved - we're engineers ourselves, totally focused on the suckiest parts of working on enterprise systems. If our product isn't a pleasure to use, I'll take it as a personal failure. But then we have to sell it. And I'm an engineer solving my own pain points, not a sales guy. That part is new to me!
Here's a question: will people want to use the software because it makes their lives easier, or will people want to have the software running because it makes their lives easier? That's the difference between a good per-seat plan (where customers want more seats because employees want to use it) or a good per-[quantity] plan, where nobody cares who is running it but the company does better as a result.
Feel free to email me at the address in my profile if you want a deeper discussion.
At my last job at a multi-$Bn corporation, we were pretty price-insensitive. I was charged with finding a vendor for a specific type of software and there was a set budget. I found someone I liked that cost $x, my colleague working with me found someone else that cost $0.3x, but we had some concerns about them delivering on time because it didn't seem like they quite understood the scope. We went with the $x bid because they seemed like a safer bet. In the words of my manager "we already have that amount budgeted, and I don't get anything extra if I save money."
OTOH, I'm now at a much smaller company and a 3:1 cost difference between vendors would have us doing a detailed analysis to be sure that the 3x guys are worth it, and in the end, my gut tells me that we'd go with the cheaper ones anyway.
So... after all that, what would drive me away from a buy decision on an otherwise great product? I'd be leery of buying your product if it's beyond my budget (if I have to fight for budget and the software turns out to be crap, I look like an idiot) or I think you won't be around to support it if it's SaaS or something else that needs ongoing support. I have no problem picking up the phone and asking you to quote me a price if it's not shown. IME, that short phone call can save me $$$.
Now I'm curious if the Seattle Times is a big enough deal to supplant NYT (presumably yes)...
I know why it happens, but it's somewhat ironic that The Times is given a made-up regional-sounding name (The London Times or Times of London) to differentiate it from shorthand versions of region-specific titles that are, directly or indirectly, inspired by The Times.
When did commerce get so bloody hard?
I guess since the revenue optimization ideas kicked in! How do you think something as enticing as revenue could have eluded the desire of "doing it better"?