Can you afford to set your pricing wrong?

“My only regret was how we introduced pricing in the beginning, because how did we introduce pricing? Thirty dollars and you get all you can eat,”

This is what ATT wireless CEO Mr. Randall Stephenson said about their iPhone history.

It is likely that the price and the unlimited data plan made sense in 2007 when 95% of the people consumed far less mobile content. ATT was fighting for subscribers in a market that was close to saturation. Only way to show growth was by causing churn away from competitors. They chose a price such that it brought in large number of customers with only a small percentage of them being outliers in consumption.

All you can eat was not all bad when there was not much to eat, everyone eats differently, and the amount one can eat had an upper-bound. But all that changed when the very device (iPhone) they were after resulted in explosion of content to consume and rate of consumption.

ATT was forced to rethink pricing to better align price with value delivered. But the initial low price and offering set a strong reference price that was hard to overcome.

Hats off to Mr. Stephenson for seeing their initial folly and admitting it. He sees the importance of getting initial pricing right.

What about your free webapp? How difficult is it going to be to move from free to fee?
ATT has the resources to recover from its pricing mistakes. Can you afford to make mistakes?

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s