Pricing the product – Facebook

Pricing is a complicated factor in most businesses.  In a field like real estate, the seller usually tries to get the current market value.  In retail an opposite strategy is often at play – underselling the competition – the lowest price at which a profit can be made.   As consumers we think more simply, how much does it cost to produce the product or service and deliver to me?  You are entitled to a profit for you efforts, but there should be some relationship between the cost and the selling price.   Good luck on that one; the connection between the two is often very difficult to see, at least for me.

Take newspapers for example, in the old days of print, printing press, deliver boys and a network of reporters and editors, producing a newspaper was expensive; that is why advertising became such an important factor, indeed without the advertising newspapers found it very difficult to make a profit – even before the internet.  Even with the advertising the price of newspapers has had to increase with the cost of producing and delivering the news.

Telephones is another industry where producing the service was very expensive – after all every telephone was connected to every other telephone by a wire – besides stringing those wires, someone had to maintain them.  It also required huge switching stations.  Today most telephone conversations are not carrier by wire, but rather float as waves through space.  However, neither an online newspaper subscription or cell phone service is cheaper in an era that requires no wires and no print.   The Reno Gazette-Journal has reduced its staff by over 50 percent, its online version is composed mostly of wire service stories and yet it thinks its online version should be valued the same as the print version.  Why is that?

There are many other examples where industries have changed and yet pricing policies have not changed.  Equally there are new businesses and industries that price their products in interesting and confusing ways.   Sometimes I think the pricing principle is simple: “I want to be rich and I want you to pay for it.”  So the price is set as high as the seller thinks he can get away with.  Consider this, Facebook needs to make money, but has not found a very good way to monetize its billion user database.  It sells advertising and it sells interests and connections, but neither satisfies the company’ executive or Wall Street. So Facebook is trying a new plan, charging for messages.

Yesterday, I wanted to message a person on Facebook. The person was not my Facebook friend, but there is a mechanism for sending a message to non-friends – actually there are three ways.  First, you can “friend” the person; second you can send a message the “old way” – whatever that means – or you can send a special message for a dollar.  A DOLLAR – you have to be kidding me.  Just what does it cost to produce that service?   Facebook apparently has never studied Wal-Mart; Wal-Mart learned long ago, and by now has taught every other retailer the same lesson, if you sell for the lowest price possible you get many more customers.  Facebook has a billion users – Wal-Mart is the largest and most profitable retail business in the world.

I wish Facebook lots of luck, but I know they will never get a dollar from me for a message – postage is half that and picking up and delivery mail anywhere in the country for one price is far from inexpensive.  It may be slower, but I trust the post office more and I trust its motivation more; but like the greedy piggy that I am, I still use Facebook and its free services.  Would I have been willing to pay anything?  Yes, I would a penny, a nickel maybe even a dime – and at those prices I would willing have sent messages to a hundred of people – well, maybe I am exaggerating.  But you get my point.


1 Response to “Pricing the product – Facebook”

  1. 1 Product Launch Formula bonus September 19, 2013 at 4:26 am

    Hi! I could have sworn I’ve visited this blog before but after browsing through some of the posts I realized it’s new to me.
    Regardless, I’m certainly happy I discovered it and I’ll be book-marking it and checking back frequently!

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