Pricing Experiments You Might Not Know, But Can Learn From
conversionxl.com
conversionxl.com
The basic working theory of an economic exchange between parties is that the exchange happens because both parties feel like they are getting more value post-exchange than pre-exchange. I agree to pay you $5 for a sandwich because I have decided that the sandwich is more valuable to me (in my hungry state) than this $5 bill (even if only marginally so) and you have decided that $5 in the register is better than keeping the bread, cheese and meat in the kitchen. It works. If the sandwich were $20, I might not make the same value judgment. Possibly even if it were $7.
When you throw "pay what you want" into the transaction, in theory, you're actually breaking that structure. I'm no longer getting MORE value from the sandwich than from my money - by definition, I'm getting exactly the same value.
So even though the consumer is deciding on pricing, that subtle feeling of "getting a deal" goes away and consumers on the whole actually feel less intrinsically satisfied with the purchase.
I have only one experience at a restaurant that was "pay what you want" and I found the whole thing uncomfortable. Am I paying too little? Am I paying too much? In the end I decided that the uncertainty detracted from my enjoyment so much that I never returned to that restaurant. I much prefer knowing what the price is upfront.
On a related note: I also hate stores where you don't find out the price until you are at the register. It might get a few more dollars out of me the first time I come in, but I won't come back. I guess it makes sense at places like airports where you don't have a huge amount of return customer.
Bottom line #1: people need to be told what to do, including how much money they need to give.
2. When selling subscriptions (I'm the author of MemberWing - wordpress plugin allowing bloggers to sell flexible subscription packages to sell access to premium content) it is wiser to charge flat fee yearly access instead of montlhy access. Why? Because what people are willing to pay today is way different from what people are willing to pay tomorrow. Why yearly? Impulse buyers! When person is excited - he is willing to buy more and pay more.
Bottom line #2: Monetize positive emotion! It may not last long :)
Also, it's easier for the average person to "feel" if something is too expensive or not if it has a real, fixed price. Especially if it is something that is not necessarily utilitarian, like art.
I agree though. People need to be told what to do. This is one of the drivers behind frameworks. They reduce the number of decisions and things to think about for developers. Clearly not the only reason, but a significant one I think.