I always wonder how a company can offer such a rebate without giving direct insight about how exactly their prices were absolutely outrageous and completely uncorrelated with the offered value to begin with.
People who were paying full price prior to this rebate must feel pretty annoyed right now.
First rule of pricing: price to value, not to cost.
People are used to the prices of things going down as economies of scale kick in. That doesn't mean it actually _happened_ here, but if you were already a happy customer at $100/month, when next month comes around and it's $20, you're just more happy.
It's weird how people still struggle to understand that one should always price according to what a customer is willing to pay, rather than some sort of magic formula "price = cost + socially-acceptable-profit". I thought Apple and Starbucks had made it so brazenly obvious even to the layman.
> It's weird how people still struggle to understand that one should always price according to what a customer is willing to pay, rather than some sort of magic formula "price = cost + socially-acceptable-profit".
What one should do depends on one's goals. To maximize profits, and ignoring the costs involved in doing so, one should charge each customer what that individual customer is willing to pay. Approximating this is a big motivation most market segmentation schemes.
Of course, doing so naively can maximize short-term profits while negatively affecting goodwill, which can then hurt long term profits.
Also, even ignoring goodwill, pricing to maximize returns from the current market for a good or service can limit the ability to develop new markets for it.
>What one should do depends on one's goals. To maximize profits, and ignoring the costs involved in doing so, one should charge each customer what that individual customer is willing to pay.
There you have the American university system in a nutshell, though you might have to substitute "able" for "willing".
It works the other way too. About every other week there is an article or comment posted here on HN that talks about how artists or authors should be able to charge what they want and people should pay it purely because that's what the creator values their work at.
I don't find it weird, but I do find it weird _on Hacker News_.
Especially given the rhetoric about how 'economics' drives things down to the marginal cost, it's not super surprising, as a general rule. People assume that competition won't allow prices to get too much higher than costs.
Some people here may find this ironic, but I always remember this rule because I'm (depending on the day) a Marxist.
exactly. The only reason Amazon is now lowering its price is due to competition. If not for competition they'd keep prices stable or even try to increase it. (like they're going to start doing with books)
Just one reason competition is generally good for consumers, even though on a macro level one could argue that competition is inefficient.
I always wonder how a company can offer such a rebate without giving direct insight about how exactly their prices were absolutely outrageous and completely uncorrelated with the offered value to begin with.
I think you mean uncorrelated with the underlying cost of the service. If the price were uncorrelated with the value, people wouldn't have subscribed to AWS in the first place?
People who were paying full price prior to this rebate must feel pretty annoyed right now.