Good point. There’s a subjective element to it too.
Reyali@lemmy.world 2 weeks ago
There’s an equation for value I learned from a boss of mine. Value equals:
Benefits received / Costs incurred
Costs aren’t always monetary; your time and energy is also a cost. And benefits aren’t always tangible; it can include things like peace of mind.
In order to increase price, you have to also lower other costs OR increase benefits, otherwise you lower value.
And value is a perception, not an objective measure.
Sticking to streaming services as an example since that’s what you put out there: Netflix does not integrate in the TV app on AppleTV, so I can’t search for their content and it’s a few extra steps to start playing things. All other streaming services I’ve used have that integration. If they all had the exact same price and I valued their content equally, Netflix would still have lower value for me because they aren’t offering a benefit all others have.
So did they change anything meaningful to you when they increased their price? If not, then their value decreased—at least for you.
But maybe they added some amazing kid safety controls at the same time as the price increase. If you don’t have kids, the value went down. But a parent who wants those features might have net neutral or even positive value perception.
FarraigePlaisteach@lemmy.world 2 weeks ago
mic_check_one_two@lemmy.dbzer0.com 2 weeks ago
This is the key takeaway tbh. People tend to equate “price” with “value”, but only when they’re initially looking at the price of something. This “price≈value” thing is easy to explain for anyone who has become the de facto tech support person for their family. Your aunt calls you up one day. “Hey, you work with computers. Can you come take a look at mine? It started acting up…” You, being a good nibling, agree to come take a look. You’ll even do it for free. You troubleshoot your aunt’s computer, and get it working again. You uninstall all of the bloatware, nuke all of the adware toolbars, get her browser set up with uBlock Origin, run virus and malware scans, etc… It needs a pretty deep clean, but you get it done.
And here is the tricky part… Six months later, the computer starts acting up again. And instead of recognizing that maybe she needs to stop clicking on every “hot singles in your area” banner, your aunt blames you for breaking her computer. Because “you touched it last, so it must have been you.” Never mind the fact that she is the one who touches it every day.
The reason for this is because your expertise has no value in her mind. You did the work for free, so it is valueless. If you charged her a small amount and called it the Friends & Family Discount™️ then you’d get a lot more respect when it needs to be fixed again. Because she pays you for this, you clearly do this for a living, you know what you’re talking about, your expertise has value. But the issue is that if you try to charge her for it now, she’ll balk. Because your lack of value has already been cemented in her mind, so suddenly being asked to pay for it will be an extremely hard sell.
And that’s essentially what happens whenever streaming services increase their prices. The reason for the increase doesn’t actually matter. It could be a simple inflation adjustment. It could be rising licensing costs. It could be increased technology prices making server maintenance more expensive. But none of that matters, because the value has already been locked into peoples’ minds. They’ll balk when the price increases, because they don’t see it as an increase in value.
For the inverse of this, I’m reminded of an old story about computer mice… There was a computer shop that sold several different types of computer mice. Everyone in the store knew that one specific mouse was the king. It felt good, it was so durable it basically never got returned, and it had decent features. And it was also one of the cheapest mice that the store sold. Every single POS and computer in the store used this specific mouse, and most of the employees used it at home too, because it was simply the best value out of the entire selection. But the mouse sold really poorly.
The employees would watch people buy “premium” mice that were 20x the cost, and half the quality. And sure, that may be good for commission, but the store was tired of dealing with RMAs, customer complaints about bad mice, etc… And no matter how much they tried to push this cheap mouse, customers wouldn’t budge. They wanted their premium mouse, not some cheap imitation.
And so the store manager did something a little counterintuitive… They increased the price. By a lot. They put this cheap mouse juuuuust below the price of the premium mice that sold so well. And suddenly, it started flying off the shelves. The store could barely keep it stocked. Because now customers were seeing the high (but not quite premium) price, and equating it with a high value. They started to feel like they were getting a good deal, instead of potentially getting swindled by a cheap product. The mouse got good reviews and was easily able to compete with the more premium mice. But only because people’s first impressions for it came from the fact that its price made it seem like a good value.
Reyali@lemmy.world 2 weeks ago
Thinking through how “free” things fit into the equation is actually one of the things that cemented it for me. Your example about giving tech support is so familiar, and a great example of how people don’t value free things.
Well, you can’t divide by 0; so if cost is nothing, then there’s no value.
I’ve read the book Influence by Robert Cialdini a few times because it’s a fascinating take on what persuades people at a subconscious level. Your story about mice is spot on with some principles he shares.
I think the example in the book was about a person who sold jewelry at fairs. I’m going to make up details because I don’t remember them perfectly, but it’s close: Her $10 turquoise jewelry wasn’t selling, so she told one of her workers to reduce it by 20%. There was a miscommunication and instead the price was raised to $20, and she sold out that day.
People saw it as more valuable because of the higher cost.
Humans are unfortunately easy to manipulate.