Prescription: Sell more by killing uncertain pricing (unless you have an inelastic good)
“Thousands of businesses – from packaged goods to retail to tech – are losing millions in sales by playing games with hidden pricing. And, they’re inflicting a mild form of psychological torture on customers, sowing the seeds of discontent. Like any bad relationship, those customers will gladly snag the first decent alternative that comes along. Below, I discuss three types of price uncertainty and lessons from companies I believe are actively irritating and repelling customers, begging competitors to step in.”
Uber is a car service phenomenon that gave Silicon Valley a $258M orgasm. The company uses “surge pricing” to raise fares during periods of peak demand – weekends, holidays, and other times you’d really need a ride. This unpredictability has upset people. As with airlines, surge pricing is economically sound, but people will harbor resentment if they felt exploited in a time of need. Uber can avoid opening the door to friendlier competitors by creating simple price tiers and assuming some of the price risk.
That fear of uncertainty is why so many people choose the devil they know, but why others are driven to try the one they don’t know, in hopes of flipping that certainty switch.
Superstars like Swift are increasingly using “dynamic pricing” that shifts ticket prices constantly like airline seats. But is it the future of the industry?
But the system can be confusing for fans. In addition to dynamic-priced tickets, Swift’s tour is offering seats on an interactive map through a menagerie of dots – yellow for VIP ($500-$900), pink for approved fan resales (which can list for thousands of dollars), blue for standard face-value tickets ($50-$450). “It’s kind of complicated,” says Alex Hodges, CEO of Nederlander Concerts in Los Angeles, suggesting that the astronomical prices may cause fans to “get skittish and back off.”
An artist like Father John Misty is very ticket-price-conscious,” says his manager, Dan Fraser. “Just because more people are willing to pay for a ticket, he doesn’t want to [charge it] … He’ll leave money on the table.”