I admit it. Pricing is often baffling to me. Test your pricing IQ by answering these 10 simple questions.
1. Why is an iPhone application expensive at $4.99 but a magazine can sell for $6.95, and a no-frills 20-ounce cup of coffee for $2.50 without anyone getting up in arms?
2. Why is a gallon of gas expensive at $3.00 when a gallon of bottled water costing $4.00 isn’t an outrage ?
3. Why is a Sunday newspaper just fine at $1.00 and up but a news website way too expensive at $2.99 per month?
4-5. Why are great applications like Google Earth or Evernote free? My generation was taught to mistrust the man in the trench coat offering free candy. Should we worry?
6. Why do we accept advertising without question in newspapers and magazines and most television, but not in an iPhone app we paid $2.99 for?
7-10. Why do we assume email is free? Why do we pay hundreds of dollars for one productivity suite, or nothing for another? Why do we assume content has no value, and why do content providers give it away? Why do we assume anything we can copy has no value, or that copying isn’t stealing?
Pricing is magic. And baffling. And to score this test, make something up. I have no idea.
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[…] again with this example, it seems like pricing is magic. Does the availability of millions of free Creative Commons images on Flickr have an effect? Jon […]
Part of it isn’t pricing of a particular quantity, but how the unit must be purchased. Bottled water isn’t purchased a gallon at a time, but 79 cents or $1.29 at a time, and at your convenience. Gas is purchased 15 gallons at a time, or more.
Sunday papers at $1.00 I actually purchase for the advertising – both the ad circulars and the printed ads in the paper, as well as the content. The key is that the ad doesn’t intrude, but is there when I want to read it. In the iPhone app, and on many websites, the ad pops over my content, or delays my content. And when I do click the ad, my content goes away, either a back button or a tab away. I recognize it’s related to the medium, but the problem remains. On the other hand, sites like Techbargains, Fat Wallet, Groupon and dozens of others recognize the value of advertisements, particularly discounts, and their audience seeks those ads.
As to worrying about the free content and apps, I think perhaps we should. Eric Schmidt seems to have explicitly articulated the price. Free software usually costs data, and Google (and others) are going to use it. http://www.marketwatch.com/story/eric-schmidt-google-and-privacy-2009-12-11 has a good, though perhaps over-the-top, discussion. Unfortunately, I have no illusion that if I pay for content or applications that they aren’t just as likely to want to try to find ways to use my data. Privacy may be dead, but it may also enable things we couldn’t do before. I’ll leave the weighing of the balance to everyone individually.
Pricing is all about what the market will bear, and is limited by the perceived differential value of the offering. In many cases, buyers have become accustomed to things that don’t seem to make sense (your bottled water being a great example).
Free offerings like Google Earth and Evernote bring in users for advertisers, or serve as a marketing tool to target prospects for premium versions.