One thing I learned about pricing
The picture above summarises 1 thing we learned about pricing for last 3–4 months: fixed pricing strategy has the problem of lost benefits because of 2 groups of users
- Those who could have paid more, because they value product higher than the price you set
- Those who do not buy, because they value product lower than you priced it, so they don’t convert to paying users.
There are a lot of tactics to fix this problem, but all of them are summarised by term “price differentiation” (though I prefer the term “price discrimination”). Couple of examples:
- Travel: Saturday-night stay — business travelers want to spend weekends with their families, thats why they are willing to pay higher price to get back on Friday instead of Sunday.
- Retail: coupons to identify price-sensitive & local shoppers
- Entertainment: discounts for students and price premiums for “prime time” moviegoers
The key is to find a way of selling the same product at different prices to different people.
For example, App in the Air users who travel domestically do not need flight status alerts to be delivered by text (SMS), since they have national roaming and push notifications are enough. And much much more, which I will not cover here :)
But I will share result:
NB: Beware, most customers instinctively think that price discrimination is unfair.
