The folks over at Wrox are running a pricing experiment. They’re discounting their ebooks by 50% to see how much extra volume they get, and whether they can convert people who steal ebooks into paying customers. While this is an interesting exercise, and will hopefully give them some good data, there are a couple of caveats.
- 2 points may not make for a very good demand curve, especially if one point has twice the price of the other.
- Many people may be influenced by the promotion of “50% off” as much as the change in price. They may become acclimated to the new price and require further promotions to drive changes in buying behavior.
- The variable cost is next to nothing, and they are trying to develop a category (ebooks) that could bring them higher margins even at lower prices, so even with points 1 & 2, this may be a helpful longterm promotion. However, this would NOT work in markets with significant variable costs, including physical books.
Does anyone else have examples of favorite pricing experiments that they have run or seen?