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Comment by Spivak | Hacker News Reader

> “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?

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Yep. There's so much bullshit you hear about elasticity of demand and extracting the most amount of profit from your customers.

Yes, if I charge 3 times more, and lose less than two thirds of my customers, I'll make more profit in the short term.

But long term, network effects and the size of my customer base is very important for my ability to make money. Personal recommendations are a very important marketing factor, and having three times the number of customers is worth something even if you make the same profit.

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.

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)

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.

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.

> 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.

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

http://steamcommunity.com/profiles/76561197986674427

but I don't play more than 10 probably XD

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.

463 here, of which 238 are for Linux.

I was actually quite happy when Linux made up half my library; it really put paid to the idea that Linux isn't for gaming. If a publisher doesn't release multi-platform, I just don't buy it anymore. But those deals sucker me in for just about any game that says it's on SteamOS.

They've also trained me to buy a whole bunch of games just because they are massively on sale even though I'll probably never play them. I guess Valve figures this works out better for them overall.

Delivering games has minimal marginal cost to Steam. So they're not giving anything up by offering discounts.

They are -- the opportunity cost of more revenue. Just because you have low marginal costs doesn't mean you should train your userbase to expect discounts.

My guess is that Steam sales prompt people to purchase when they wouldn't have otherwise. I assume (hopefully correctly) that they're A/B testing this stuff and have data on the results.

yeah steam was what I had in mind when I wrote that.

but it has changed policy last year or so: before titles got cheaper by time and got discounts on top, so it was usual to find a year old aaa game for 5$ or 7$ in the summer sale, now titles take at least two years before even starting to cheapen in price, and publisher are using the trick of giving out big discount (75% is common) but starting from incredibly high prices (so it ends up never going below 20$)

You have to be very careful with discounts in some situations.

The case that we ran into involved a product that required a fairly large amount of time investment on the part of the user to be valuable. Our customers that were willing to devote a fair amount of up-front time and 30-60 min per day to our tool were getting a pretty massive ROI, both on the time they spent and the monthly subscription cost. Those that weren't putting in the time got very little benefit. But we also found that when salespeople gave discounts for the first few months, our cancelation rate was significantly higher. We were much better off losing potential customers during the sales process because the customers we did end up signing had higher LTV and Net Promoter scores.

The lesson learned was that high/full price increased the investment that customers felt in our product and triggered their impulse to get their money's worth. Discounts signaled customers to make a shallow evaluation of the product and ultimately sabotaged our value proposition.

I'm tackling a very similar issue right now and it's a maddeningly difficult problem to solve. It would be incredibly helpful to bounce some ideas off someone who has been there if its no imposition? My email address in in my profile.

I have this feeling with Intercom, that every bit of added value I want to extract next, I have to upgrade my plan or buy yet another plan. Their pricing pisses me off every single time, yet I pay every single time... after insulting them copiously. They're that good.

Ideally a user should get at least 10x the value than what they paid.

When pricing, I try to go for a price that people pay, but with resistance from X% of leads. Then you can give some/many of them limited-time discounts, which nudges them over the edge.

If you don't price high enough, you don't have room to do that. If you don't have resistance, you have no-one to do it for.

And people are MUCH more likely to buy when there's a time limit and they might lose something if they wait too long.

Any source or reasoning for 10x? I've got some software that saves a certain type of business about 40-70% on tech support measured in time to resolution (and time spent). Plus it provides a large bonus in "can actually solve an issue invested of telling customer to keep trying to repro".

If a tech costs $5000 a month and a company can save on one tech, only price it at $500/month?

If it's $5000 net, the gross the company has to pay for is much higher.

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