

User-Generated Pricing - czottmann
http://blog.servus.io/post/2013-05-29-user-generated-pricing

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maxbrown
It's an interesting concept, and I'm curious what results you find.

Here's my issue:

You say you value a $0.99 app as throw-away, and that the more you spend, the
less throw-away it feels. Sure, if you priced your app at $20.00, I agree that
it would feel less throw-away (if a customer decided to buy it, they value it
at >= $20).

But you're not pricing it at $20.00. You're pricing it at $2.50-$20.00.
Really, anything I pay above $2.50 is a donation to you, for your work. But in
my head, it's still a $2.50 app, isn't it? Because other people are paying
that amount even if I'm not.

I think what you're talking about is setting my expectation of the value it
will add for me. For a $0.99 app, the creator thought it would typically only
add $0.99 of value. For a $5.00 app, they thought it would add >= $5.00 of
value.

It just sounds like you're not sure how much it's worth (or you have customers
who it's worth $2.50 to and customers who it's worth $20.00 to, and you can't
choose who to target).

One more point/question... wouldn't it be better for them to "pay-what-they-
want" after they try it? Before they use it, they can only guess how much
value it adds for them. Are you expecting that they've already downloaded and
used your trial, and then return to the website to buy?

~~~
czottmann
Hey, thanks for your input!

> But in my head, it's still a $2.50 app, isn't it?

Is it? See, that's what I am trying to figure out. Personally, I don't think
of the "excess amount" as a donation, it's part of the price I've picked
myself. And when you buy the app, the amount on the invoice is just one
number, it's not split between "base price" and "donation".

> It just sounds like you're not sure how much it's worth (or you have
> customers who it's worth $2.50 to and customers who it's worth $20.00 to,
> and you can't choose who to target).

I know what it's worth to me, in my eyes. But even though I've sold a number
of licenses, both full price and 20% off, I have no idea whether it's worth
the same to my _potential_ customers. Instead of running A/B tests and or
different sales I'm trying to speed up the process and see how it pans out.

> wouldn't it be better for them to "pay-what-they-want" after they try it?

Of course everybody should try the app before plunking down money. That's why
there is a 14-day trial period. :) Again, I can only judge from my personal
experience, but when I run a trial of an app I like I tend to "return to the
website to buy". Don't you? :)

~~~
keesj
> Instead of running A/B tests and or different sales I'm trying to speed up
> the process and see how it pans out.

Ironically, you won't know whether you're speeding up the process unless you'd
test both approaches (A/B-testing and 'pay-what-you-want'-pricing) and see
whether they always lead to same outcome. (I'm betting against it.)

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dwild
I love the pay-what-you-want model but it doesn't work. Every single Humble
Indie Bundle has multiple popular games that sell for $10 to $20. They even
has an incentive to give more than the average by giving more great games (and
sometime even the games from the last Humble Indie Bundle).

Still they get less than 6$ in average... We know for a fact that people are
ready to pay full price for each of these games. Yeah I know, these people
probably already bought these games but I don't think the distribution of the
values are that far (either you pay 20$ and more or you pay 5$).

I think it would work better if you offered multiple prices with more feature.
You could have the 0,99$ one that offer the strict minimum but is a great
showcase of the application (it could even be free). Then you have the 4,99$
one that has more feature, etc... Give your customer a reason to pay more.

~~~
simonw
Surely Humble Bundle demonstrates that it DOES work, otherwise they wouldn't
still be running offers and would not be able to convince game developers to
participate in the deals.

The average purchase may be $6, but how many of those purchases are from
people who wouldn't have bought the individual games at all if not for the
offer? If they weren't going to buy at all, that's $6 of revenue that you
wouldn't have seen at all otherwise.

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ry0ohki
The problem with user generated pricing is there is no supply/demand, so the
user will basically pick the lowest price they feel non-guilty about, which is
usually a buck or so. Something I always thought would be interesting is a
floating market price, so you start the price at say $1, and as demand
increases at that price, it keeps going up.

~~~
huhtenberg
Still there's quite a bit of wiggle room for experimenting.

Compare -

    
    
      Pick a price between $1.95 and $19.95
    

to -

    
    
      Pick a price between $4.95 and $49.95
    

Both allow picking up a copy for under $5, but the second one will yield a
higher average price. That's your good old _anchoring_.

Another example. If you have an axis representing suggested prices, then if
your tick marks go in $0.50 increments, people will likely to end up paying
less on average compared to $5.00 increments.

And so on. Cognitive manipulation is your friend :)

[0] <http://en.wikipedia.org/wiki/Anchoring>

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philfrasty
You can read some research on name-your-own pricing in e-commerce from my
former prof: one is here from the Journal of Marketing <http://www-
bcf.usc.edu/~tellis/PriceAuct.pdf> (for more just check out Google-Scholar and
type „name your own price“)

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nawitus
Game theory doesn't support "pay what you want" really well, e.g. there's no
market to somehow arbitrate the price.

A true market could be created by enabling people to buy and sell the service,
or perhaps by bidding. This doesn't work unless the supply of the service is
artificially restricted (otherwise the price goes to near zero immediately).
Of course, some argue that the "true price" of intellectual property is very
close to zero, but the app in the article can be thought of as a service.

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subpixel
I suspect that giving users a blank field to fill out may result in increased
payment amounts. If a user tries to checkout with no amount, maybe reload the
page with a high amount pre-filled for them, like $25, that they can then
reduce.

But there's just no way, psychologically, I'm going to move that slider to the
right. (If many have, I'd be interested to hear that.)

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BenSS
I'd be fascinated to see what the impact is if you give the user an indication
of what the next user(s) will have to pay if they adjust the price scale.
Down? They get guilted by seeing the next users will end up paying more. Up?
Nice pay-it-forward aspect.

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ronaldx
Is there some reason you decided to have a maximum price?

I was curious that you felt the app had $20 value personally to you, yet you
don't think anyone else would value it higher than that?

I found that decision surprising.

~~~
czottmann
OP here.

I didn't want to appear greedy. That being said, I've increased the upper
range limit a bit. :)

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hawleyal
Isn't that similar to donation-supported freeware?

~~~
czottmann
No, as there is a base price. It's PWYW, but "what you want" > 0.

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iamleppert
Irony: his app is down.

~~~
czottmann
My "app is down"? You mean the site? (It isn't.)

