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Ask HN: Is a pricing grid really the best option?

7 points| 7klBo4t8 | 14 years ago

I've seen it recommended more then a few different places that the more choice you give a potential purchaser the less likely they will be to make any decision at all. Why then does nearly every pricing page have a grid of at least three choices? I realize having one choice (with upgrades after the purchaser has signed up) is not always possible but I would think I'd see more of the single plan with upgrade here (on HN) then elsewhere. Any thoughts?

8 comments

order

patio11|14 years ago

Price discrimination: the top plan that gets bought by people spending other people's money generates ~40%+ of gross revenue. Feel free to innovate in pricing and packaging, but this particular question is testable and tested.

caw|14 years ago

Another reason why I think you'd have 3 plans is so people can compare.

If you offer 3 products, 2 that are similar and 1 that is different, most people will discard the dissimilar item and compare the remaining 2, making a decision based on those two.

Example: Buying a blender. You need a blender to make awesome drinks at your next party. You don't know anything about blenders, so how to choose? 1) 5 speed blender, $35 2) 7 speed blender, $45 3) 7 speed stainless steel blender, $95

If you're price sensitive, you would probably discard the $95 blender as it's too expensive. Then you're comparing 5 speeds for $35 vs $45 for 7 speeds. Maybe there's some other small distinctions, like the finish on the $45 blender which would make it seem better. You go with the $45 blender because it's the obvious better of the two, and you know nothing of blenders. A store may have some incentive to prioritize the selling of #2, since it makes them more profit, which is why they've shown you these 3 particular blenders.

However, there's a segment of customers who will buy the most expensive item because it somehow fits for them. In this case, it might be the stainless steel which matches their other appliances. They put a premium on that feature and are willing to pay for it, and you can use Patrick's "consumer surplus" rule for that.

7klBo4t8|14 years ago

Patrick - Thank you I hadn't heard of price discrimination before. So I can internalize this by giving only one price point I'm forcing those in the market with other peoples money (above my price point) into the lowest tier plan or to take their business where a plan matches their intended use more? And those below my price point to just go elsewhere. My goal / thought was to reduce complexity at the purchase point so in the example of appointment reminder everyone signs up at the personal level and then at the next screen before payment are offered addons like "Record Custom Reminders" and more "Appointments per month" but I can see how I would be introducing more complexity then I'd be removing.

7klBo4t8|14 years ago

Patrick - Thank you I really appreciate you taking the time.

ultrasaurus|14 years ago

Assistly's pricing model ( http://www.assistly.com/pricing ) bucks that trend, but I think there's a psychological desire for some choice (to feel in control) but not too much (which might require research) and pricing tiers are a very easy axis to make that decision on.