The art of pricing – and the smartest tricks in the book

Image credit: Nejron Photo |

In pricing, there was (possibly still is) a thing called a ‘simplicity curve’. In the days when telcos were selling, well, telco stuff (what we now call ‘voice’ and possibly ‘texts’) the simplicity curve started by being, well, simple.

Forty dollars a month and you can call anyone you like for as long as you like as long as they are in the country. A disruptive telco in the US did this (MCI if you are as old as the hills) and their analysts worked out that people were, on average, spending about $25 worth of actual calls.

So, they made money.

Then a competitor would come up with a plan that allowed you to make phone calls to friends and family for free (as long as it was on a Wednesday and the temperature was 19 degrees). And the small print said that if you called your enemy on Thursday it was going to cost you $2.50.

So they made money.

The point is that pricing is about perspective. Free calls, with some strings attached is more attractive than the freedom to call anyone anytime. Apparently.

And so the marketing guys got overexcited and soon there were bundles and you could shop for using a telco’s network as if you were in a supermarket. A thousand calls and three texts a month for $30. A thousand texts and three calls for…you get the picture.

And then someone would think ‘no-one understands the pricing anymore, so let’s give them anything they want for $40 a month’.

The simplicity curve.

Or – if we are being honest – the complexity curve.

All of which is a bit historical given that ‘voice’ (which we now have to put in ‘’) is basically dead.

What is fascinating is how other industries have taken the idea and driven it to levels that make what the telcos did look like kids playing ‘hide and seek’.

EasyJet was set up as a low cost airline. One fare, fight for your seat, no extras, get you there on time (or, if we miss our slot, four hours late).

Everyone started to follow suit. Even that bastion of Thatcherian Britain, BA, started in on it. No more were drinks and what looked like food free. No more were stewards pressured to feel to be polite to their customers.

The race to the bottom began.

And just when you thought they were all going to crash into the sea of debt and mediocrity, EasyJet pulled up and offered seating, premium seating, priority boarding, a ‘club membership’, nice food (OK, food that looked nice) and a free smile with anything extra.

And the others kept plummeting to earth.

What is interesting and what is yet to be fully revealed is what on earth Amazon is up to now.

They did an EasyJet. They went digital, simple, better, quick and cheap and everyone loves them and loves to hate them.

Now they are opening book shops, buying actual, real supermarket chains and stretching their competitors to the limits.

Same day delivery? No problem.

One click checkout? No problem.

Vast, almost unimaginable selection? No problem at all and would you like a discount?

So, you have to wonder.

Where are they going with this? What will it lead competitors into doing that they will regret forever (some already do)?

And what can anyone and everyone learn from this idea of leading people into pricing – and business – traps.

Clever stuff, pricing.

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