Principles of Pricing
principlesofpricing.com
principlesofpricing.com
Pricing is an unbelievably complex subject which this doesn't get close to discussing properly.
Van Westendorp is great for understanding what prices the market will accept, but not great for allowing you to model what will maximise your returns.
Overall though it's a good intro to the subject.
The USD 5.00 per month thing is relatively 'cheap' but the designers of the pricing model don't take into account all the other services people are signed up to. This is why super cheap tiers are great, like $1.00/mo tiers where I may not get all features, but at least I get to save some money. Spotify, Netflix, Hosting, Domain Renewals, etc all start to add up.
That is kind of like saying the purpose of human life is breathing. Yes, breathing is critical and fully integrated into existence, but there is so much more to living well. Similarly the purpose of business is to create value. Survival through flows of money comes as a result of that. Money dominated conversations can help, but often miss fundamental issues. For example, there is a big psychological difference between a software service with regular payments versus occasional software releases that can be bought and owned. With the right pricing the two are essentially the same, but customers tend to have very different feelings toward each model.
The result was a mass consolidation of products. For a time there were high and low end versions of portable and desktop computers and that was it. Deciding between a Mac and a Mac Pro was not confusing or difficult, and this approach worked well with the core values of Apple. The goal of the company was to make computing highly available with systems that Just Worked in predictable and reliable ways. Structuring offerings and price options to make buying decisions easy for people who just wanted a computer caused an immediate boost to both sales and customer satisfaction.
So price optimization can mean very different things. In this case what seemed to be a straightforward targeting of market segments resulted in customer confusion that held back both sales and customer satisfaction. The solution involved a product packaging and pricing strategy that was more aligned with the goals of the company rather than tuning prices to reflect the diversity of the customer base. For best results pricing strategies must be integrated with company goals and messaging.
Sometimes you start with overly simplified concepts to help people frame/grasp later ones, i.e. when teaching a child science it's better to teach them that there are 4 fundamental states of matter first, before they later learn that there are 29 known including the Bose–Einstein condensate, Fermionic condensate and Rydberg molecule.
Atoms don't look like the stereotypical depiction. I remember in my high school chemistry class, our teacher specifically said that atoms were not like this but for teaching at our level, it was fine, but to know that orbits are not like this.
I feel it is crucial that teachers explicitely add the caveat that the explanation is a simplification. It's a whole lot easier to add new info if you know things area simplification, rather than a cast in stone model.
Yeah, this is inaccurate at a systems level. It would be better to say that human life is about ensuring your genes pass on to the next generation. That's life in a nutshell, and from the POV of nature, you're either contributing to that endeavor, or a waste of resources for those who do.
All the higher things of human experience are running on top of the substrate that's self-optimizing to propagate itself further. The purpose is what we ascribe to what we see; nature has no obligation to agree, and as much as it doesn't, we can either suffer, change our understanding of purpose, or - thanks to technology - work to realign nature to our sensibilities.
> Similarly the purpose of business is to create value. Survival through flows of money comes as a result of that.
Similarly here, the importance is reversed. Money flow and profit are fundamental, they're the substrate. They're what the system will do naturally. Value creation is the meaning we ascribe to it, which is not necessary for businesses to run (this one should be plainly obvious, as a lot of well-known businesses, including many hot startups, are arguably net negative). Making the market better align with our ideals takes work, because it's counter to its natural dynamics.
So the purpose of a business is to create value for others in exchange for profit (profit is money which is a medium of economic exchange) to be used for other valuable ends. That is to say, both of you are partially right, but incomplete.
Seeing the success that Microsoft and Adobe have had once they moved to subscription pricing, it seems like a better business model.
Even small software companies have found that subscriptions are much more sustainable.
For devs who need to implement some type of system to support all these pricing models, we recently started working on https://priceops.org