Pricing model trends | Director


I read recently about a vending machine Coca Cola introduced in Spain for its Limon Y Nada lemonade. On the outside a standard machine, what makes it unique is its pricing. At temperatures less than 26°, a can costs a regular 2 euros. But when they rise to 26-29°, the price drops to 1.40 euros. At 30°, it’s just 1 euro. An unusual approach, but a great way to incentivise purchase.

And an example of a growing trend for ‘Pliable Pricing’: novel, value-focused ways to charge consumers.

The trend is well timed. The Economic Downturn’s created savvier shoppers. Initially just cheapness fanatics, these new ‘Smart Consumers’ are now much more interested in value. They’re also less worried about non-traditional consumption: openly embracing disruptive methodologies, Uber to Air B’n’B.

Limon Y Nada’s dynamic approach is a popular choice. Amazon and Uber raise or lower prices dependent on potential demand. Retailers run localised ‘flash sales’. Meanwhile Spotify (15m paid subscribers), Evernote (9m) and Dropbox (8m) are finding success with the Freemium model, where users can determine a product’s value before committing financially.

Several services offer convenience-led premiums, like ad-free content. Some car companies bundle insurance or guaranteed buy-back schemes into their price. Computer Exchange reduces the prices of its pre-used products incrementally month by month. Tinder charges users double if they’re aged over 30. Several restaurants and a US investment company use a pay-what-you-want approach.

Companies are even re-evaluating that unfashionable approach, the pay wall: the kipper tie of pricing methodologies. A quarter of US newspapers now charge for online content. Understandable: Smart Consumers will happily pay for previously-free content if it’s good value: exclusive, educative, earlier or easier. The Times’ pay wall is now so popular it drove profits at the paper last year: the first in 13 years. Even young consumers, who many thought would never pay for anything digital, are starting to do so: in-game purchases to Spotify subscriptions.

Is it time for us all to re-consider our pricing models?

Article by William Higham, The Director
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