Price is what you pay, value is what you get

Classic Ben Graham quote, by way of Warren Buffett. ConversionXL walks through this concept, hitting on several challenges of effective pricing strategy:

Asking people what they’d pay for and how much rarely works. For one thing people will tell you what they WANT to pay—which is obviously much less than what your product or service is actually WORTH. Second, what people say and what people do are very different things.

The post covers experiments related to decoy pricing and other psychological techniques used to affect the perception of value. It’s a fascinating domain with no exact formulas for success.

At uShip, we spent a lot of time thinking about (and testing) pricing ideas. With a marketplace model, our opportunity was two natural streams of fees (demand and supply sides of the auction). But opportunities are sometimes challenges in disguise. What worked in one vertical, would not necessarily work in another. What worked one month, was less effective than the next. It was a constant balance that, over time, caused the fee schedule to take on necessary complexity as we sought to profitably maximize marketplace volume. The fee schedule category and geography selectors illustrate this point well.