Setting User Expectations on Price

Great comment from Michael Powell at the Web 2.0 Conference (paraphrase): ‘My son says 99 cent songs on iTunes suck! He thinks music should be free. But his ringtone bill last month was $40! To me, a ringtone is just a bad sample of a song, but to him, it’s worth $2.99. It’s all about setting expectations.”


Boy is he right. This is one of the big challenges of every economic transition — figuring out how to set user expectations for pricing. (Incidentally, this has been one of our challenges with Safari. For our publishing business to survive, we have to set expectations for the price of an electronic book service that will support the costs of producing the content — and thus our business. If we don’t set reasonable expectations, we die. Some of the early eBook services sold publishers on the idea that this stuff was just ancillary revenue, and so they could price it really low, as gravy. But we thought that online access would one day be primary, and we’d have to live on the revenue that it provides. So we needed to set the pricing expectations much higher. And note that I said “reasonable” — enough to create a willing buyer and a willing seller. If we try to charge too much, we die too.)

Makes me think of George Soros’ comment about “reflexive knowledge” – that many of the most interesting things are neither true nor false, but become true or false depending on what people believe.