How You Can Use “Pay per Laugh”
A friend and fellow pricing expert, Jon Manning, posted this article, “Comedy club charges customers per laugh” in the Pricing Propheteers LinkedIn group. If you click on the link and scroll to the bottom of the article, you’ll see a video that describes it well.
To summarize, they hooked up cameras to the seat back in front of each patron and used that camera to count laughs based on facial expressions. The show was free to enter, but entrants were charged approximately 30 cents per laugh up to a maximum of 24 Euros.
Imagine you run a theater company and when you decide how to price it, the most logical choice is to set a price for the seat. After all, it’s common. We see that pricing model in other shows, in movie theaters, in airplanes. We are used to charging and paying by the seat. It’s easy. If you run a theater of course you are going to charge by the seat.
But these guys went way beyond what was obvious and answered the question, what are people really buying? Patrons are buying the entertainment, not the seat. That’s what they charged for, the entertainment, not the seat.
What about your company? Most companies do what is obvious. Charge for the product. Charge by the seat (in software). These are obvious and it’s what your customer expects. But what if you could charge directly for the value?
What are your customers really buying? Do they really buy the right to use your product or software? Probably not. They are probably buying some function, some result. Their value comes from that function or result, not from the right to use your product.
Now the hard question: Can you find a way to price your product based on the value your customers receive instead of simply taking the easy way? Think hard. Be creative. If a theater company can charge by the laugh, surely you can come up with something too.
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