A Neat Execution of Multi-Version Pricing By AT&T

When was the last time you looked at your AT&T bill, paper or electronic? If you are a smart phone customer with unlimited data plan you will be surprised to find page after page of itemized data usage.  If the data plan is all you can eat, why bother with this data? It was  about signaling value and protecting reference price, preparing us for the future of tiered pricing.

Future is here as AT&T announced that it is moving away from unlimited pricing to three tiers of pricing. It is very similar to a pricing plan I wrote about almost an year ago. A crippled 200MB version for $15, a mid tier 2GB version  for $25 and a higher priced version that scales linearly with each GB.

AT&T says 65% of their customers use less than 200MB and 98% use less than 2GB. On the surface this would look like a price cut to a majority of the customers. Which is what makes this price change all the more effective, positioning it as price cut to majority of the current customers.

Their $15 version will find only a few takers despite the 65% claim. It is crippled so that those with high willingness to pay will not be tempted by it.

A $25 price for 98% of their customer base may look like un-captured consumer surplus. But they are not skating to where the puck is now but are skating to where the puck will be. What AT&T is looking at is how this customer mix and usage behavior is changing with our always connected iPad world and how much value we will get from a fat data pipe spewing media into our devices.

The net is they are practicing effective price management, targeting each segment with a version at a price point they are willing to pay.

If one price is good, two are better!

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