As most of you know, we've recently been conducting pricing research with a few different test groups that we've selected. This test is now complete and has furnished us with invaluable data. We can now build models around the data collected and see if a reduced price would make more sense and what it would require to implement.
Not everybody agrees with the what, how, and why of us doing this. We've stated our purposes and reasons and while we don't expect everybody to agree with us, we do want people to know where we're coming from.
A lot of the suggestions and criticisms that have been posted here have been based on some simple assumptions that aren't true.
Point: If you halve the cost, you just need to double the customers to make the same amount.
Counterpoint: That's false because it ignores the incremental expenses of adding more customers. It would only be true if all our expenses were fixed but hardware, bandwidth and support personnel have to be added as the customer base grows. So the reality is, to achieve the same net revenue you have to add customers in a greater proportion than your price reduction. The higher the incremental expenses the higher the proportion of customers that need to be added to offset the cost of the price reduction.
Point: We would have been better off if we just dropped the price for everybody without conducting this test because it's obvious that we'll get more people if we lower the rate.
Counterpoint: It is obvious that we can attract more people with a lower price, but how many and at what price? All speculation on this matter is just that - speculation. That is why we have conducted this research. Speculation is not good enough for us to act upon. If we dropped our price without getting the return we needed, that would hurt things. If we dropped our price and got more return than we were prepared to handle, that would hurt things as well. It does our customers and us no good if we price ourselves out of business or get caught in a position where our infrastructure cannot support the demand.
Point: This would have been acceptable if the accounts created under the test could only keep their price for a limited duration.
Counterpoint: The purpose of this was to quantify different levels of price sensitivity in order to see if a different price would be better. Offering a reduced rate trial only tells us how many people who aren't interested in subscribing at the current rate would be interested in a reduced rate trial, not how many would actually subscribe to a lower rate. That's not collecting beneficial information that's a customer drive. Those people who are upset that this offer was limited to a test group would still be upset that it wasn't offered to them. Doing it that way would tell us little, still be a pain, and would not be worth doing. It would be the equivalent of getting half a vasectomy in an attempt to save you some pain. There's no point in doing it.
Point: We should have announced this prior to implementing it.
Counterpoint: That would exacerbate some people's reaction by turning it into an ultimatum. We feel that doing this study was essential to any serious examination of different price points. There is no decision we will ever make that will be received with unilateral agreement. To suggest otherwise is not being realistic.
The question now is what's going to become of this. We have no answer and in no way are trying to imply any outcome. HT is currently taking a well-deserved vacation and when he returns we'll begin to analyze the data we've collected. Should we find that a price reduction would be beneficial, it is still something that requires a lot of planning. It may require short-term losses to see long-term benefits. It may require significant expenditures to upgrade our infrastructure. We have to make sure we have all the bases covered before we can do anything or even talk about any plans. We will not announce or imply that any change will be made to pricing unless we are ready to make a change at that point. Right now all we can tell you is that it is something we are looking into as evidenced by our recent market research.
So that is where we are. I bring this up again because our posts on this matter are buried. As stated at the beginning of this post, we don't expect everyone to agree with us, but we do want people to at least be aware of our side on the matter and the dilemmas we face in trying to look in this direction.
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Doug "Pyro" Balmos
HiTech Creations
