Tuesday, April 12, 2011

Price isn't the same as Value

From Seth Godin recently:

Compared to perfect: the price/value mismatch in content

"How's the wine?"

You really can't answer that question out of context. Compared to what? Compared to a hundred dollar bottle? Not so good. Compared to any other $12 bottle... great!

"How was the hotel?"

"How's the service at the post office?"

In just about all the decisions we make, we consider the price. A shipper doesn't expect the same level of service quality from a first class letter delivery than it does from an overnight international courier service. Of course not.

And yet...

A quick analysis of the top 100 titles on Amazon (movies, books, music, doesn't matter what) shows zero correlation between the price and the reviews. (I didn't do the math, but you're welcome to... might be a good science fair entry). Try to imagine a similar disconnect if the subject was cars or clothing...

For any other good or service, the value of a free alternative that was any good would be infinite--free airplane tickets, free dinners at the cafe... When it comes to content, though, we rarely compare the experience other content at a similar price. We compare it to perfect.

People walking out of the afternoon bargain matinee at the movies don't cut the film any slack because it was half price. Critics piling on to a music video on YouTube never mention the fact that HEY IT WAS FREE. There is no thrift store for content. Sure, we can get an old movie for ninety-nine cents, but if we hate it, it doesn't matter how cheap it was. If we're going to spend time, apparently, it better be perfect, the best there ever was, regardless of price.

This isn't true for cars, potato chips, air travel, worker's comp insurance...

Consider people walking out of a concert where tickets might be being scalped for as much as $1,000. That's $40 or more for each song played--are they considering the price when they're evaluating the experience? There's a lot of nuance here... I'm certainly not arguing that expensive is always better.

In fact, I do think it's probably true that a low price increases the negative feedback. That's because a low price exposes the work to individuals that might not be raving fans.

Free is a valid marketing strategy. In fact it's almost impossible for an idea to have mass impact without some sort of free (TV, radio, webpages, online videos... they're all free). At the same time, it's not clear to me that cheaper content outperforms expensive in many areas. As the marginal cost of delivering content drops to zero (all digital content meets this definition), I think there are valid marketing reasons to do the opposite of what economists expect.

Free gets you mass. Free, though, isn't always the price that will help you achieve your goals.

Price is often a signalling mechanism, and perhaps nowhere more than in the area of content. Free enables your idea to spread, price, on the other hand, signals individuals and often ends up putting your idea in the right place. Mass shouldn't always be the goal. Impact may matter more.

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