The problem of charging for things (well, one of them)

March 19, 2008

People who want to charge relatively low fees for things often make the argument that people will pay because the charge is such a small amount of money that it is easily afforded, and people get great value for it. One of the problems of charging for things is that it doesn't work this way.

When you charge, you're not competing to be a great value, you're competing to be the most attractive thing for people to do with that money. Want to get two dollars from someone? You'd better be more interesting than a cup of coffee to that person.

(Disclaimer: I don't know what a cup of coffee actually costs.)

There are two additional things worth noting:

  • enthusiasts and entrepreneurs are especially at risk of this, because of course they are convinced that their system is attractive.

  • many of the things organizations want to charge their users for are not attractive; instead they are effectively taxes. No wonder users revolt.

(Note that it doesn't matter that the things you get are a benefit. What matters is if people actually want them, or simply have to have them.)

It further strikes me that one way to make something attractive is to make it remove an irritating limitation. Of course, you have to tread carefully to make sure that users will perceive the limitation as genuinely necessary, instead of something that exists mostly to extract money from them.

(This thought has been indirectly sparked by the recent LiveJournal drama about eliminating new ad-free free accounts.)

Written on 19 March 2008.
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Last modified: Wed Mar 19 23:32:24 2008
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