by karen horton
★ A Rule of Thumb: Pricing Should Be Simple
[Via Daring Fireball]
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.
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21st Century companies understand that to succeed they must make it simple. People will too rapidly move to a competitor who is simple.
As an example, cellphone carrier have purposefully made it hard to figure out pricing, making it much harder to comparison shop. But the presence of the iPhone on both ATT and Verizon actually now makes it simple. Pricing is directly comparable. As are fees. In fact, all those people who have been waiting for Verizon because they did not like ATT are now finding reasons to stay with ATT. Because for the first time value is directly comparable.
I missed the ability to talk on the phone while data is still flowing (even though I hate talking on the phone). I missed AT&T’s extremely fast data speeds. I missed knowing that if I ever travel outside of the country, I don’t have to get a new phone (even though I hate flying — no, seriously, try me). I missed feeling like I’m in the digital age instead of the stone age.
The Apple iPhone could very well hurt Verizon sales now that people can actually compare.
Similarly, buying should be simple. One-click. Amazon gets it. Apple does also.
But the NYT does not, creating such a complex system that many will simply go elsewhere – heck, Flipboard gives me more news that I can deal with already. If something from the NYT shows up there, I can decide to click or not.
And the complexity of this system makes it even more likely that it will screw up, making it easy for hackers to get in without paying or refusing entry to people who have. Who do I call when I can no longer receive access for which I am paying?
I actually think they might have done better to use the PBS route – guilt people into subscribing. But since their real purpose is to hold onto current paper subscribers – I’d guess because that determines their ad rates – this approach won’t be used.
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