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Ask HN: Fixed vs Dynamic pricing.
9 points by bobo82 1623 days ago | 5 comments
Let's assume you've got a product that you can sell with two different pricing stratiegies:

A: three-level-pricing: basic - normal - pro

B: Custom pricing: The customer set the complexity (not the single features) on a horizontal slider, and the price adjusts accordingly.

Generally speaking, which one would you adopt?




I would say the tiered pricing is the best. The other method may lead to confusion and lost conversions. Customers want simple, and tiered is simple. They know exactly what they are getting and how much they are paying right up there.

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That's what I thought initially. But what if the client won't buy the basic option because it dosen't fit his needs, and can't afford the normal one? If the customer starts looking around for another service that offer a better aligned feature-price point, I might lose a conversion.

I'm not sold yet.

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If you are in the "but what if..." phase then you already know the answer. Something like AWS's a la carte pricing may appeal to us geeks, but for most people, three buckets just converts best. Relevant link: http://www.michaelmcderment.com/2006/01/19/pricing-web-servi... Make sure you are capturing emails so you can follow up and tweak your offerings as necessary. If your prospects decide your product doesn't fit their needs, they will let you know.

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You should do some reading into the economic theory of bundling.

While custom pricing gives the user the most freedom, it may be confusing, and you may make more money by bundling your services. The classic example of this is movie studios which, when selling movies to theaters, will bundle a hot blockbuster movie with a less popular movie. By bundling these two movies together, the studio ends up with a higher profit than if they sold both movies individually at a higher total price.

That is the important part: by selling goods as a bundle at a lower price than the sum of the prices of the goods sold separately, you can actually increase your total revenue.

Here is a good article to help you: http://livingeconomics.org/article.asp?docId=288

You should be able to use analytics to get a sense of the utilities that users place on each item within your larger product. From there you can construct the pricing of your bundles to maximize your profit.

Good luck!

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Ah difficult.. It kind of depends how that slider would move..

I like basic / normal / pro, but sometimes I like the slider. Assembla, and others do this: They provide a couple of packages, and a 'metered' package, where you pay for what you use.

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