On pricing: Where does the value occur?

Product managers and others seem to love to discuss pricing, whether they have control of it or not. The question seems to be focused on the mechanics of different pricing systems--up-front, subscription, usage--when it should be focused on aligning the price with the product value.

It seems to me that the trick to successful product pricing is to get the money immediately after the customer has received the value. And that's probably the best time to upsell them too.

"You've enjoyed the product. Pay for it now. And what else can we sell you?"

You've had good food and good service at a new restaurant. The bill comes after you've eaten. And along the way, the server has upsold you on coffee, dessert, maybe an after-dinner drink. Good thing they didn't have you pay in advance.

I kinda wish that hotels were that way. The Residence Inn in Burlington, VT is so much nicer and friendlier than I expected it would be. I know it'd be weird but I'd be inclined to pay a little more than I was charged. And yet, name a hotel in New York City that you feel you've gotten your money's worth. ("I'm paying $425 a night for THIS! Heck, I'd rather sleep in the street.")

I would probably buy tickets for upcoming attractions as soon as I've seen the trailer, before the movie even came out, assuming the theater could sell me a ticket without derailing the movie experience. Many times, I watch the "coming attractions," and think, "I'd rather see that movie than the one I am here to see." (And sometimes I have even forgotten what movie I'm there to see. But dang! Those upcoming films look great.) What if I could send a text to pre-pay for that movie and be notified when the movie is in theaters--and better yet, get an offer to see the movie in some kind of exclusive setting rather than packed into a sold-out show.

Compare that with buying an article online. You hope it'll have the information you need for the report or article that you're writing but you won't know until you buy it. So you pay for the article and then don't find what you need. Dang! What a rip-off. And you tell your friends to avoid that service in future.

On the other hand, consider the try-and-buy option on Kindle. "Hmmm, I wonder if I'll like this book?" Not sure? Try it. Amazon downloads the first dozen pages for you to read. And the end of the sample, there's a "Buy Now" button.

So it seems to me that pricing products is difficult because we try to charge people too soon. Could it be because we fear that they won't value the product as much after they've seen it and used it?

Other than restaurants, can you think of products that charge you when you're most likely to appreciate the value?

 

Steve Johnson

Steve Johnson

Steve Johnson was a founding instructor at Pragmatic Institute, a role he held for more than 15 years before he left to start Under10 Playbook. In his return to Pragmatic Institute, Steve supports the complete learning path for product teams, ensuring they are fully armed for success. 

Over the course of his career, Steve has helped thousands of companies and tens of thousands of product professionals implement product management processes. He has worked in the high-tech arena since 1981, rising through the ranks from product manager to chief marketing officer. Steve has experience in technical, sales and marketing management positions at companies that specialize in both hardware and software. In addition, he is an author, speaker and advisor on product strategy and product management.


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