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Comment by ascorbic | Hacker News Reader

>just making the price up based on what you think I can pay

It's called supply and demand, and it's the way things have been priced since the dawn of commerce. The only time the price is based on cost is when the market is competitive enough to drive that price down, and the cost acts as the floor. Even then, if you can get your costs below those of your competitors then it's your competitors cost that can act as the floor.

The way things should be priced is based on the value it gives you. If your service makes me or saves me $100 of value per month, I should be prepared to pay up to a little below $100 for it.

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No it's not called supply and demand, it's called price discrimination. The way things should be priced is based on the value it gives the market as a whole. Anything further is an anti-competitive attempt to vacuum up more of the buyer surplus.

Price discrimination is the practice of charging different amounts to different people, according to what they're willing to pay. It's a more efficient approach than just setting a single price that clears the market. It sounds underhand, but most people like it in practice: it's the basis of most discounts and coupons.

Why?

I disagree, but genuinely asking why you think that. Why is it ok if it's on the market level but not on the individual level? Price discrimination is all around us all the time, often "hidden" because people get uncomfortable with it, but I don't see it as a bad thing (and it's often very net positive socially).

> It's called supply and demand

Supply of the kinds of services under discussion here is rarely limited in any practical sense, so scarcity does not play.

> The way things should be priced is based on the value it gives you. If your service makes me or saves me $100 of value per month, I should be prepared to pay up to a little below $100 for it.

This ignores opportunity cost. Very few buyers have infinite cash, they do tend to have infinite ways they could spend money though and many of them will give a far better return than a couple of percent.

In reality if you're adjusting your pricing to try and extract the most you think you can get away with from the customer, you will lose a substantial number of buyers - and probably more so with buyers who have a technical mindset.

And also, the customer has the money and gets to make a choice. Sure, supply and demand is a real thing. But there is also a notion of friction blocking the sale. Everyone absolutely hates considering a new purchase that doesn't give you clarity on details and price.

So that CTO says I'm probably not going to bother with you if you don't have a clear price. I also practice this purchasing way. Everyone should. So sure, someone in sales will fight to the death to justify their strategy of obfuscation and charging what the market will bear, and to try to justify their presence in the sales process with some kind of commission and argument about how they caused pain for the buyers and got more money. Meanwhile, company B sold me a widget for whatever, I already paid them, there was no salesperson wasting time on either side.

As a corporate executive, buying things for good prices is a substantial part of your job. You're not some grandma looking for a movie to watch who will bail if she can't figure out how much it costs. Sure, you can refuse to buy things altogether, but it won't be very good for your company - these kinds of companies seem to have been broadly outcompeted by ones that do buy things.

Sure, but as a corporate executive you also have a limited amount of time. If you invest all of your time on inefficient sales processes then you may only get to consider one or two or three providers. If instead you eliminate the ones that have bad signs (like heavy price obfuscation) you can instead focus on the vendors that don't do those things. In the end you might not get the best product and/or the best price, but the same is also true if you waste all your time jumping through sales hoops and aren't able to examine more players.

If jumping the hoops guaranteed the best price, then I would agree with you, but I would vehemently disagree that it does.

What you're saying is akin to someone entering a clothes shop and the store clerk asking what they work on, to gauge the T-shirt prices according to the client's salary.

No, it's setting a price and seeing how many people will pay that price, varying it and see who will pay that. You can derive a demand curve and work out the best price to maximise your revenue. And you can do even better if you can do some price discrimination, so you can sell some to people who otherwise wouldn't be able to afford it, which still charging other more. This isn't judging someone's salary before quoting a price, it's things like charging different prices in different markets, or offering student or senior discounts, or coupons etc.

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