A Rule of Thumb: Pricing Should Be Simple - by @Gruber

There is nothing we have used so much time, as to decide how to set the prize for our apps. So reading a discussion on prizing is always welcome.

A post from .com by has the whole story. Here is a part:

One thing many companies — in any industry — can learn from Apple is the importance of simple pricing. If you make it easy for people to understand how much they’re paying, and what they’re paying for, it is more likely that they’ll buy it. Or perhaps this is driven more by the converse: if people are confused about how much they have to pay, they’re more likely not to. The decision to purchase and the act of paying are part of the experience for any product or service, and should be designed accordingly. 

Not paying is always simple. 

Those companies that succeed with complex pricing schemes tend to be those with no competition (e.g. cable companies and land-line phone services) or those with a limited number of competitors, all of whom offer similarly complex pricing schemes. E.g. new car dealers and cell phone carriers. Car dealers get away with loose, uncertain “try negotiating down from a ‘sticker’ price almost no one actually pays” pricing because that’s how all other car dealers work, too — and because (at least here in the U.S.) a car is something most people need (or at least think they need). Cell phone carriers get away with confusing bills, chock-a-block with nickel-and-dime fees and charges, because there are only a handful of carriers (and as time goes on, we need fewer and fewer fingers to count them all — again, at least here in the U.S.) and, again, because cell phones are something most people consider a necessity. 

For non-necessities, simplicity of pricing is key. Apple thrives at this. Their consumer products tend to follow a simple good/better/best pricing hierarchy, where the only difference is storage capacity. iPods, iPads, and iPhones all follow this model. When they deviate from this, the reasons are relatively easy to understand. For example, a regular Wi-Fi iPad costs $499/599/699 for 16/32/64 GB of storage. If you want an iPad with built-in 3G, it costs $130 extra for the iPad itself, and offers a simple no-contract two-tier pricing plan: $15/month for 250 MB data, $25 for 2 GB. Easy to sign up for, easy to cancel, no hidden fees, and several warnings before you hit your data limits.

John Gruber now uses NetFlix and the digital NYTimes as exemples, and discusse the latter. Then he let Jean-Louis Gassée explain:

Customers don’t make decisions with their neocortex, an organ that is too easy to bullshit. They decide within deeper, comforting recesses, and they rationalize when the culture demands a seemingly logical, socially acceptable “post-plantation”. 

What price do NYT’s execs put on simplicity, on ease, on reader enjoyment vs. catering to their own internal discourse? If they don’t like talking to Steve Jobs (and vice versa) they could turn to Jeff Bezos for tips on simplicity. 

iTunes has taught us that customers are willing to pay for content if the process is simple if it’s easy on the mind and the wallet. One could argue that consumers aren’t paying for the content, they’re paying for the delivery service. Regard Netflix on Demand, to use another example. Restricted content, instant delivery, success.

And finish:

I don’t know that a simpler, lower-priced digital subscription plan would work for The Times, but I feel strongly that it would be more likely to work than what they’ve announced. I have a bad feeling about this.