
Do not talk about pricing - hunglee2
https://medium.com/fluxx-studio-notes/the-first-rule-of-pricing-is-you-do-not-talk-about-pricing-1875caa39b89#.de5evml08
======
nitwit005
If you try to buy things, it's sometimes desperately frustrating that no one
will just quote you a simple price. They have different pricing tiers, and
want a salesperson to talk to you so they can pretend to give you a "special"
discount, and all sorts of BS.

I'm sure these things work, but they also alienate customers sometimes. People
have founded entire businesses on offering clearer pricing schemes.

~~~
lucaspiller
They do alienate customers, and for a lot of companies this is on purpose. Try
finding a price for one of Oracle's or IBM's enterprise products on their
website - you won't - their products aren't designed for the casual browser,
they are designed for directors who have budgets in the hundreds of thousands
or millions of dollars range (where strangely the price ends up pretty similar
to the budget). This is the type of person they want as a customer, and so all
their marketing and sales process targets this type of person. It's not worth
it for them to target the small fish, so they purposely push this type of
customer away.

I do hate when small companies do it though. I'm looking for a new AC unit and
so few dealers will just give me a price straight away. I just want to enter
my credit card and have it delivered.

~~~
tajen
I would argue that IBM's business is selling golf courses and Orlando
software-and-wine conferences to CEOs, for having witnessed it, because
honestly, which sysadmin would accept to _run_ such horrible pieces of
software (IBM Rational Suite or IBM FileNet), let alone... pay for it, really?
It looks like nothing more than corruption of officers on fiduciary duty.

Secret pricing is exactly _how_ they conduct that business: With no public
price, employees can't challenge IBM's consultants to provide the value
they're charged for. If all from Atlassian to SpaceX publish their pricing,
any other behaviour should trigger a SEC investigation.

~~~
bpchaps
Other smaller companies act like this, too. Was invited to a steak lunch for
automic's UC4 (job scheduling) at a fancy dinner far away from anything
relevant and at no point, during a two hour talk, was anything of substance
actually said. They were trying to sell us UC4 (we already owned it, ffs) yet
they didn't even show us the damn interface! Everything was fluff upon fluff
upon fluff. And the execs - wearing some of the most expensive suits and
watches I've ever seen - friggin' loved it.

The best part is that they brought in McDonald's UC4 engineer to talk about
how good it was. When we asked him how they automated its deployment and where
they got their init scripts from, since UC4 didn't include any (wtf), his
answer was that it was basically his full time job to deploy it by hand, since
he didn't know how to automate anything. Somehow he turned his lack of skill
and McDonald's apparent lack of good tech leadership into a positive thing -
which the execs also loved. These are the kinds of people making large,
absurdly expensive software decisions for multi, multi billion dollar
companies.

I have nightmares of trying to figure out their database schema. 2-6ish letter
German acronyms for table names....

Their wiki gives a good impression of their character:
[https://en.wikipedia.org/wiki/Automic](https://en.wikipedia.org/wiki/Automic)

~~~
geon
They use a large, expensive platform for automation, and they don't know how
to automate?

~~~
bpchaps
Yep. In complete fairness to the guy, it sounded like he knew the work was
unfairly shoveled onto him. That fairness can't be extended towards his
management, though.

------
clarkmoody
The phenomenon is called anchoring[1], and it works like this: the first price
we see anchors our thinking about additional information. This is why
furniture stores have a perpetual sale.

"Oh look, this $2500 sofa is only $1899.99 right now. What a great deal!"

One experiment had respondents use the last two digits of their social
security number as the initial price for a bottle of wine or other good. This
completely-arbitrary price had a strong correlation with the price they were
willing to pay for the item.

The effect is described in greater detail in _Thinking, Fast and Slow_ [3]

[1]
[https://en.wikipedia.org/wiki/Anchoring](https://en.wikipedia.org/wiki/Anchoring)

[2] [http://www.inc.com/the-build-network/the-anchoring-
effect.ht...](http://www.inc.com/the-build-network/the-anchoring-effect.html)

[3] [http://www.amazon.com/Thinking-Fast-Slow-Daniel-
Kahneman/dp/...](http://www.amazon.com/Thinking-Fast-Slow-Daniel-
Kahneman/dp/0374533555)

~~~
boulos
Predictably irrational by Dan Ariely has a good number of case studies that I
think illuminate the topic particularly well:

    
    
      http://www.amazon.com/Predictably-Irrational-Revised-Expanded-Decisions/dp/0061353248
    

Unsurprisingly there's some sort of combo deal to get Thinking Fast and Slow
with it.

~~~
pc86
If you remove the spaces before that link it will be clickable.

~~~
boulos
Ugh, I always forget that I shouldn't do that here (I move URLs out of the way
like this for email) and its been too long to edit.
[http://www.amazon.com/Predictably-Irrational-Revised-
Expande...](http://www.amazon.com/Predictably-Irrational-Revised-Expanded-
Decisions/dp/0061353248)

------
josephjrobison
The most surprising thing I learned from this is that even juxtaposing two
options will help you get higher pricing. When thinking of product and service
pricing, for me it's difficult to invent three different options sometimes, so
it's relieving to know that I could create just two and it will get me most of
the way there.

It is also crazy to think how relational it all is. I don't really need that
extra $7 beer at the bar, "but who cares, we're having fun". Whereas paying $8
a month to the New York Times took me months and months to decide on because I
wasn't used to paying for it, even though I'd been a reader for years.

It really is a mostly emotional decision.

~~~
ipsin
For me, the thing is that you're buying one beer for $7 one time, not "beer in
perpetuity, or until you remember to change your mind".

~~~
marcoperaza
You make a good point but I don't think this is the main dynamic at play. I'm
much more hesitant to buy a $5 app, a one-time purchase, than a $7 beer.

~~~
increment_i
Is it possible that you now (like most consumers) have been conditioned to
expect apps to be free? Meanwhile, nobody expects anyone to give them a pizza
or a beer for free.

~~~
labster
I guess you've never gone to university then, because those places don't
function without free pizza. It is the only reliable way to get students (and
postdocs) to attend your event.

(Yes, I'm aware that attendance is the "price" for the pizza, but let's just
say that cold pizza can still be had for free.)

~~~
increment_i
While that's an interesting edge case, what I probably should have said is
that pizza and beer is something adults expect to exchange money for, as
opposed to apps.

------
Spivak
> “It is not your customer’s job to set pricing. An optimal price is one that
> is accepted but not without some initial resistance” says Ash Mauyra
> explains in this great piece.

I can imagine this as general purpose advice but this is no way to build a
loyal base. There are some services that I have that I begrudgingly pay for
because they price so aggressively that they extract nearly all of the value
from my subscription, and then there are services that I'm actually happy to
pay the bill because it's such good value. Guess which services I recommend to
others, and which services I actively look for alternatives for?

~~~
mediumdeviation
One of the first thing you learn in microeconomics 101 is that demand forms a
curve - there will always be people who are extracting more value (and thus
willing to pay more) for something, and people who don't (and thus don't buy
it). Neither of those groups matter - the only ones that do are the people at
the margin - if lose a less than proportional amount of customers by charging
more, then you still come out on top. This is also what the quote is alluding
to.

~~~
LoSboccacc
If anything peolpe are afraid to explore the curve to find maximum profit.
Starting high and giving out discoubts at various level trough the year can
help building a model and set the best price if it's not overdone (as in,
customer expecting continual discounts)

~~~
orangecat
_if it 's not overdone (as in, customer expecting continual discounts)_

I'm still surprised that Steam has so many discounts; they've basically
trained me to never pay full price. But I feel no need to play new games right
when they're released; maybe there are enough people that do.

~~~
newjersey
I wouldn't see myself as a game buyer at all. So, for me the $5 I paid for
skyrim or however much I didn't on other several games I bought is money I
wouldn't have spent.

Now the $10 I spent on limbo of different. I didn't wait for a sale. I just
bought it. I think steam optimized the revenue from me pretty well. And it all
started with them giving me portal (one) for free.

~~~
majewsky
> And it all started with them giving me portal (one) for free.

Heh, same for me. I was quite surprised when my library recently hit the 100
games mark.

~~~
LoSboccacc
far from a hoarder here, and I'm at 300+

[http://steamcommunity.com/profiles/76561197986674427](http://steamcommunity.com/profiles/76561197986674427)

but I don't play more than 10 probably XD

~~~
majewsky
Heh. The only game that I currently play in Steam is not even a Steam game,
but PCSX2 (a PS2 emulator); I only need Steam for the Steam Controller.

------
jpetso
Is it not notable how, among all of these examples and thought processes, not
a single word was lost on the value provided to the totality of customers, in
addition to how much is monetizable?

Obviously the ability to pay quality journalists is a valuable cause, but it
irks me that retaining a large percentage of customers/consumers, and the
corresponding potential to make much more of a difference in the world, isn't
also considered a mention-worthy aim in itself.

Got the opportunity to cure diseases but decides to play mind games for fun
instead? In a position to bring awesome tech to the masses but prefers to
market it as luxury item to a limited audience? Making lots of profits already
but spends serious effort to drive the competitor out of business to earn even
more as monopolist? ...good for you, "disruptor".

~~~
pjc50
_Journalists .. corresponding potential to make much more of a difference in
the world_

There very definitely is a market in this - the market for newspapers. Buying
a newspaper as a proprietor is a fairly cost-effective way of getting a
society to replicate your prejudices; you can get a huge amount of influence
for a mere few tens or hundreds of millions of dollars.

------
CM30
If I get told to 'ask the sales team for a quote', then sorry, I'll find
another product or service that just provides the information up front. Would
I be willing to pay their prices if I talked to the sales guys? Maybe, but
it's still an extra inconvenience that's easier to avoid than go along with.

And no offence, but it's very unlikely your product or service is that unique
that there's no viable alternatives out there. That don't waste everyone's
time.

------
creshal
"Contact our sales team for a quote" == "Our prices are non-competitive and we
know it" in my experience.

~~~
wccrawford
Yeah, and in addition, "We're going to need time and persuasion to convince
you to pay that much."

I really don't have time for that crap. And salesmen generally give me the
creeps. I think it's because so many of them are just there for the paycheck,
but need to pretend to be interested in what they're selling. Ugh.

------
shawnee_
_At The Times, we realised that converting customers who paid £8 /week for the
printed newspaper into customers paying £2/week for the digital edition (often
after paying Apple £500 for an iPad on which to read the edition) wasn’t great
business. ... So — over two years — we gradually raised the price for those
original customers to £6/week. _

The problem with "do not talk about pricing" is that you're assuming your
customers are idiots. There's nothing wrong with having a bunch of profitable
idiots as customers, but that's not quite the target audience for a product
like newspapers. The simple fact is that the _cost_ of delivering volume to
subscribers (one more subscriber) is so teeny tiny small that inflating the
price more than a reasonable amount (when in fact you're losing advertising
eyeballs) is what's not smart business. Companies that presume I'm an idiot
don't get my business.

You cannot talk about pricing without talking about cost. Intelligent
businesses are unafraid to be transparent with their variable costs (which for
a digital-only newspaper are significantly less than for a print version);
what trips prices is the bulky overhead fixed costs: CEO and executive
management pay, benefits, and unnecessarily swanky office space.

Realtors are probably the best example of this IRL, operating in an industry
that "doesn't want you to talk about pricing" (e.g. negotiated commission at
an hourly rate, for example) ... just sign on the dotted line and let them
abscond with all your equity in a lump sum payment.

------
ChuckMcM
This quote sums it up _" When The Times introduced a paywall, the number of
people looking at their digital service dropped by 98.7% (from 22m to around
300,000), yet the switch was a huge financial success."_

Now that some of the crazyness of Internet Advertising has fallen by the
wayside (lower CPCs == less crazyness), it becomes important to pay people who
will research things, write eloquently about them, and convey the information
you seek. I have really been enjoying Blendle[1] and their model. Happy to pay
for decent content, not willing to pay for content I don't read. A good mix.

I hope more publications buy into that model.

[1] blendle.com

~~~
estefan
It can't have worked out that well because they've taken down the paywall for
The Sun...

------
GigabyteCoin
>When The Times introduced a paywall, the number of people looking at their
digital service dropped by 98.7% (from 22m to around 300,000), yet the switch
was a huge financial success.

But for how long? I'm fairly certain that once those 300,000 loyal readers
kick the bucket that The Times' digital subscription service will too.

How is 22 million regular readers (who will keep coming back and telling their
friends about your articles, because they're free) worth less than 300,000
paying subscribers (who for some reason absolutely have to read what's in The
Times no matter the price, and would probably have a hard time encouraging
others to be so vehement).

Not to mention the types of journalists you will attract with a readership of
a very small city, vs the readership of the population of New York State.

~~~
jameshart
"How is 22 million regular readers worth less than 300,000 paying subscribers"

Monetarily. The ad market has only got worse since the Times made the move
away from pure ad-funded pageviews, so the ability to turn those 22 million
people's eyeballs into a revenue stream has become even less viable than it
was when they replaced them with 300,000 paying customers.

"Not to mention the types of journalists you will attract.."

... with an engaged and interested audience who are directly paying to read
what you have to say, who aren't merely being driven to your site by clickbait
headlines and paid placement? I dunno, would think you'd be able to attract
pretty good journalists on that basis...

------
restalis
What we should be aware about pay-walling broad public information is that
we're not talking about some pure and simple business model here, with a
publisher providing information as good for consumption (for which the clients
pay). The act of information dissemination and the ability to reach an
audience has value in itself. Interested parties will gladly step in to fill
the void left by "independent" publishers gone pay-walled. Will the pay-walled
information be of higher quality compared to the free one? Maybe! Actually
it's safe to assume that the free information will be "free" only as in "free
beer", but who cares? Then there is this bitch called "the network effect"
which erodes that pool of "loyal customers" day by day making the pay-walled
publishers gradually slipping into obscurity¹. Pay-walling information
channels addressed at the broad public is a loosing strategy in the long run,
no mater how one twists it under a study or another, and that is exactly
because information is not in the same category with the tea lights or some
other "IKEA pack".

¹ The publishers are aware of this, that's why they are using pay-walling only
per article, after it reaches a number of views. By this they try to balance
the the opportunity to get new clients (i.e. monetize the contents) with the
risk of a complete audience drain (i.e. loss of relevance).

------
mikeokner
When I was in college, we bought the absolute cheapest beer per oz we could
find as long as it wasn't Red Dog. Not sure where they found college kids
fooled by a % discount.

~~~
restalis
They must have studied a group through hypothetical choices (instead of actual
choices that had any weight on their budget), or they did an open study in
which the tested subjects could have chosen something based on how they wanted
to be seen choosing, or it may be just plain memetics, or any other reason.
That is, however, most of the time the close as you can get to the actual
human behavior within a reasonable effort (i.e. unless you're willing to go
with covert surveillance or something).

------
boulos
While I think this is fine advice for most consumer things (and that generally
you should talk about _value_ not price), this falls down in a number of
interesting markets. For example, with cloud where I work, the pricing is a
_huge_ component of decision making. Many organizations base their decisions
on TCO, and that's not crazy. Generally speaking, if you have a commodity (or
near commodity) then price is something to talk about.

------
rapht
Very good points in this post, but it seems to me that they are only valid if
you look at a single line of products / services at a time.

When you put multiple products/services in one store, that is when your
products get to be next to both competing and non-competing (non directly
substituable) products, there are other consumer feelings to add like the sum
of all things they're going to buy -- whether or not they have a budget, the
sum of the things will either look "cheap" or "expensive". And who knows what
they will buy next... if they come back at all.

------
uptownfunk
Reminds me how we assign points to tasks in an agile sprit. It takes practice
and it helps to have small tasks in relation to which we assign points to the
larger ones.

------
j45
Pricing remains the hardest thing in almost any business.

I learnt from running a part of a furniture chain's website that garbage is
often placed with the item people want to move.

Retail I learnt is more about selling profit than selling product or services.

Pricing remains hard, and tricky, and several states like California have made
it illegal to display MSRP type pricing, because everything's a great deal.

------
Iv
What a bunch of crap. Of course people spend a lot of time arguing,
discussing, even getting emotional about prices. When talking with a company
you are client with you basically have two things you need to talk about :

\- what you are selling \- how much you are selling it

If I meet a company that does not talk about one of these two things, I'll
move along.

------
beat
So those of you who make purchase decisions for software used in-house... what
are your turn-ons and turn-offs? If I'm trying to sell you a product that you
find technically useful and exciting, how does pricing play into it? What
would drive you away from a buy decision on an otherwise great product?

~~~
dsr_
For the most part, you need to represent value far in excess of the total
lifetime cost, which includes half of the transition cost to the replacement.

Say your software is licensed at $10 per person using it per year. In addition
to the $10, I need to consider the costs of installation, configuration, first
level support, entitlement/license management, and what it will cost me to
extract the data and munge it into a usable form when we decide in three years
that your competitor does it better.

Now consider that most companies offer lousy support for their products, so I
also have to do a test roll-out to a small number of people, manage that, and
figure out if it will all be worthwhile.

If you discount based on quantity, can I roll the test group into the main
group? If you price in chunks larger than per-user, do I fall between your
levels in some disadvantageous way?

Is it any wonder that I vastly prefer standard-protocol based, open-source
applications with healthy user communities? No, it is not.

~~~
beat
It's software that automates a lot of costly auditing and troubleshooting in
complex systems, so the core value proposition is hours that humans don't
spend (and reduced downtime). If it can reduce the workload of senior/lead
engineers by 5-10%, what's that worth? This sort of thing is really hard to
quantify, although I'm sure we'll get more data as it grows.

Does per-seat licensing work best, or something modeling the amount of data
being processed? Fixed or floating seats? We're definitely looking at higher
pricing, from hundreds to a few thousand per seat annually (not unusual in the
market). I'm not worried about whether the product will be loved - we're
engineers ourselves, totally focused on the suckiest parts of working on
enterprise systems. If our product isn't a pleasure to use, I'll take it as a
personal failure. But then we have to sell it. And I'm an engineer solving my
own pain points, not a sales guy. That part is new to me!

~~~
dsr_
Everybody prefers predictability. That shows up in the comments on this page
about people who hate to see "Call for pricing" on the site: it means that the
cost is extremely complex.

Here's a question: will people want to use the software because it makes their
lives easier, or will people want to have the software running because it
makes their lives easier? That's the difference between a good per-seat plan
(where customers want more seats because employees want to use it) or a good
per-[quantity] plan, where nobody cares who is running it but the company does
better as a result.

Feel free to email me at the address in my profile if you want a deeper
discussion.

------
drauh
This? "Dark Patterns by the Boston Globe"

[https://news.ycombinator.com/item?id=11562414](https://news.ycombinator.com/item?id=11562414)

------
tedmiston
Just me or does anyone else only picture The New York Times when you hear "The
Times"? Is that just me? Or just an American thing?

~~~
boulos
Don't feel bad, it's a _regional_ thing. In San Francisco, if someone says
"The Times" I also assume NYT. But, for example, folks nearer LA, think the LA
Times. A lab mate and I joked about making a visualization along these lines
(and the more common "Which city is 'The City'?").

Now I'm curious if the Seattle Times is a big enough deal to supplant NYT
(presumably yes)...

~~~
icelancer
Not really. Been out here 10 years and "The Times" tends to refer to NYT.
Seattle Times is referred to in full generally; the only other competing paper
(now dead) was referred to as the PI (post intelligencer). At least in the
circles I ran in, which was mostly finance/tech.

------
known
Similar to salary negotiations?

~~~
pmorici
No, salary negotiation is a whole different ball of wax.

------
FussyZeus
How about instead of anchoring or negotiating or special discounts or sales or
any of this nonsense, we have a simple agreement: I, a customer, will give you
money for a product/service, and you deliver that product/service as described
with no conditions, strings, or other such insulting attachments and we call
it a freaking day?

When did commerce get so bloody hard?

~~~
cromulent
Totally agree, but I think haggling and anchoring have been around for a very
long time, at least as long as markets. I don't see them going away any time
soon.

~~~
Consultant32452
It's certainly true that haggling and such have been around essentially
forever, but scientific rigor hasn't. There are now entire generations of PhDs
who have carefully studied these psychological phenomenon to maximize
business' ability to squeeze every last drop of blood out of you. Meanwhile
the consumer has been left relatively uneducated and unprepared to recognize
and maneuver in this world.

------
colincarter41
There should be price transparency to customer, Most of the business in
service industry don't disclose price upfront. This will sometimes cost them.

------
sickbeard
Yea no price = buzz off. There's nothing more annoying than call for quote.

