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Comment by tbabb | Hacker News Reader

Tiered pricing is a standard way to allow more price-conscious customers to get the product, while still charging higher prices to those who are willing to pay for the best features.

A big fraction of product cost is the overhead of setting up the manufacturing pipeline, so often the product tiers will be very small or even software changes to the exact same object.

This doesn't strike me as unfair. It's helped me recently, when I bought the lowest tier iPad pro (I don't care about storage or built-in cellular, and I want the smallest one). If someone wants to pay more for those things, let them. If it came full-price with all those features bundled, I simply wouldn't have bought it at all.

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I once (like 15 years ago) bought a base model car and the buttons on the radio didn't work right. This was after the era of standard DIN radios, and it wasn't broken, it just didn't do what you told it to. So I took it to the dealer and after initial disbelief, they fixed it.

I realized what happened (they didn't explain in so many words) was that to be as efficient as possible, the difference between the mid level and base level trims was a different plastic faceplate with different labels, and a software switch. So mine apparently had the switch set for a different trim and all that was needed was to change it. But the exact same electronics were installed in all the cars.

Still today. Audi users grab a VAGCOM and enable new features that where disabled by the dealer. Fords disable several cosmetic features based on initial programming that can be overwritten with a change of a single hex value. Etc etc

Once I rented an Audi Q5 from Avis, fancy with leather seats and the touchscreen stereo and all that jazz... but the Nav didn’t work. I didn’t pay for the Nav addon, but the car comes standard with Nav. Looked for the Sd card, and it was there. I figured I’d spend some time after the client to figure out why... well before I even left, while I was putting my bags in the trunk I noticed a panel missing and a cable dangling. I plugged the cable back in, suddenly the car chimes and Nav appears on the stereo.

Don’t underestimate the lack of knowledge by people and the wolves who prey on them.

Note that making the lowest tier product cost less requires the highest tier product to cost more.

(Say the lowest tier widget costs $10 and sells 1000 units. The higher tier costs $20 and sells 100 units. The average revenue per unit is $10.91. The question then is, how many units would they sell if the single-tier unit price was $11?)

What you're saying is true, but it's just the price floor and often not the actual sale price. It's more often "what the market will bear." "Professional" customers are often happy paying significant premiums. If it makes me 2x-10x more productive, the cost is of little relevance. "Consumers" are a lot more price sensitive. A durable orbital sander doesn't mean much if I only use it once every few years.

I do hate the idea of software unlocks, though.

Exactly. You can see this in Tesla with their 60 vs 75 model S. The battery is physically the same in both, but software limited (liftable via OTA) in the 60.

Though I think it's fair to note for that case that the battery unlocked to full capacity is going to wear out faster, and since Tesla has an 8-year warranty for the S, that increases their costs in a way that doesn't happen with pure software unlocks.

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