Cost-based vs value-based pricing
Hiyo from Bangkok!
A few yays in the past weeks. Yay, US election! Yay, vaccines! Keep them coming. :)
Cost-based vs. value-based pricing
I saw this tweet on pricing machine learning products. The gist is that the current pricing focuses more on the cost of the products than the value it generates for the customers. For example, pricing based on the model's size instead of the value the customers will get from using the model.
Pricing your products based on the value the customers received sounds like common sense. After all, people don't buy things to pay sellers. They buy things to satisfy their needs. We buy a painting based on how much we value, not how many hours the artist spent painting it.
Yet, the cost-based model is prevalent. Many freelancers bill their customers by hours (cost). Taxi drivers charge their passengers based on the distance.
One rationale for cost-based pricing is its simplicity. In many cases, it is easier to measure cost than value. Hours worked, prices of ingredients, distance driven are easy to quantify. Customer's revenue from the graphic work, the satisfaction from trying the dishes, and the value of making the trip on time are not. Plus, you can, to a certain degree, make sure that you will make some profit as long as you charge more than it costs you.
However, with the cost-based prices, the best offers undercharge. Why would you want to set the price lower if your customers (buyers, employers, etc.) are willing to pay more for the higher quality of your work/products/services?
Is your pricing (salary, the price per unit, tiered subscription fees) based on costs or values? If it is based on cost, is there a way to shift to the value-based model to capture more from what you do?
Parents bully me (父母欺负我) in a parallel universe
A ROFL sketch comedy by Salmon House. It peeks into a parallel universe where parents encourage their children to pursue a career in what they love instead of what society considers prestigious. There are no English subtitles yet. Here is one with Chinese subs.
Not sure folks with a western upbringing would get it. I vaguely recall an iconic scene in a movie where a father smashes his son's guitar into pieces because the son doesn’t want to become a doctor. Not in this one. (Poor David! lol see 1:40).
"Parents bully me" comes from a tale of a spoiled son of a rich merchant. His parents loved him and made sure that he had everything he ever wanted. They never forced him to study or work. After his parents passed away, the son who didn't know how to work spent all the money and became a beggar. When people asked why he became a beggar, the son decried that his parents bullied him.
In the modern world context, some parents push their children to pursue stable, prestigious careers, regardless of their children's preference. Hence, the classic scenario where children were forced to study when they don’t want to.
The comedy sketch asks, what if they switch the roles? Here, the parents want their children to pursue the dream while they sneak around pursuing traditional career paths. It might actually become the norms in the next decades. Who knows? :-)
Fun finds
Debit card for gamers Mythra launches a debit card targeting gamers. It sports in-product gamification systems too.
Moving a building One way is to give it some legs. I wonder whether they got inspired by Howl's Moving Castle.
Ipaidabribe A website where you can report paying a bribe (or not paying a bribe). The incidents will be reported to the media and government officials.
Until next time!