The New York Times reviewed a few productivity applications for iPhone. One of their recommendation is reQall. This review says,
My favorite stand-alone organizational app is reQall, which David Pogue has already praised in The Times. ReQall really does turn your iPhone into a personal assistant — you dictate all your to-dos, reminders, appointments and other ephemera, and it translates your commands into actionable tasks.
A great review that clearly conveys value to customers. But the very next line goes on to destroy that value,
(I find the free version good enough, but heavy users might want to invest in the $25-a-year Pro version.)
Clearly the application was a superior option but as the review says their free version is good enough for a vast majority of users. I am not faulting the review but rather the way ReQall versions are designed. By offering a good enough free version most customers end up choosing that version even though they might have chosen the paid version.
I have written several posts on multi-version pricing– which is about offering multiple product/service versions at different price points to serve different customer segments. There are many examples of effective usage of multi-version pricing, from CPG leader (Nestle) to a salon. The important design decision in multi-version pricing is the price-feature mix so that customers self-select themselves to the pricing option that ends up maximizing profit to the business.
Mr. Chris Anderson calls this type of multi-version pricing as “freemium” in his new book, “Free: the future of a radical price”. Please do note that multi-version pricing is not new and has been covered extensively in the economics and practiced effectively by many businesses. The freemium model is just an extreme case of multi-version pricing, when one of the version is made free. While offering a free version helps to drive customers to your business, if not done correctly and without analysis of your customer segments it ends up serving the needs of most of your customers thereby destroying the value created.
Do you know your customer segments and what they value?
Do you feel instant ownership of items you touch in stores?
Does touching objects and the ensuing ownership lead you to value the objects more than you would have had you not touched it?
Does that higher value translate into higher Willingness to pay?
A recent study by two marketing professors from Booth School and Anderson school finds that the answer to all these questions is yes. A less academic version of the research report is available in TIME magazine.
Professors Joann Peck and Suzanne Shu, posed the questions
Does holding an object and imagining that it is yours influence how much the object is valued? More generally, does mere touch influence the feeling of ownership and the valuation of an object?
The core premise that ownership increases perceived value (endowment effect) in itself is not new and the authors do state twenty years of research on endowment effect. What is innovative in this research is finding that touch as a way to increase ownership and directly relating it to higher willingness to pay.
What does this mean to you as a customer?
- As a tourist wandering the local streets for merchandise, resist the temptation to hold the item. Or have a partner and have them touch it while you negotiate.
- If you are buying a new car, do not negotiate after the test drive. In fact do your test driving with a completely different dealership and buy from another.
- If you are buying used car, do not negotiate right away or follow Tip-1.
- If you are looking to buy a house do not imagine, this will be my workspace, this will be the baby’s room etc. Be aware of your agent telling you, “imagine yourself cooking in the kitchen and your kid playing here …”. Be detached.
- At garage sales, don’t touch anything.
What does this mean to you as a marketer?
- Do not try to sell, do not talk price . Let the customers play with the items. Engage the customers first then sell.
- For new cars, make the customer test drive, take a picture of the customer at the wheel or standing with the car and give it to them.
- Same for selling used cars.
- If you are selling a house, buy Polaroid (do they sell them?) and keep them for use during showings. Encourage the showing agent to shoot pictures of the prospective buyers in the house and give the pictures to them. Make the visitors feel that they “own” it. This is the reason home staging works.
- At garage sales, encourage touching your wares.
What do you think?