Comments on: Consumer-based web applications http://www.fusionbay.com/2007/03/12/consumer-based-web-applications/ Web application technologies and development Sat, 17 May 2008 01:53:11 +0000 http://wordpress.org/?v=2.5 By: ChrisM http://www.fusionbay.com/2007/03/12/consumer-based-web-applications/#comment-17 ChrisM Mon, 12 Mar 2007 19:59:27 +0000 http://www.fusionbay.com/2007/03/12/consumer-based-web-applications/#comment-17 How the price of a product/service affects its demand is what economists call the elasticity of demand. Some services are vital for the consumer and they are willing to pay whatever price necessary to get the service. (inelastic demand) There are other services that folks would find discretionary and would be more willing to drop the service if the price became to high. (elastic demand) The consumer would see if there are alternative supply channels that can service there needs. Is the product/service being offered a commodity or a niche product/service? If it is a commodity then you will be competing based on price and make revenue through volume sales. In the case of niche product folks are willing to pay more for it because of its exclusiveness and you can charge a premium price. The online Wall Street Journal is an interesting example as over a million subscribers are willing to pay for the content and the price is for the most part irrelevant. How the price of a product/service affects its demand is what economists call the elasticity of demand. Some services are vital for the consumer and they are willing to pay whatever price necessary to get the service. (inelastic demand) There are other services that folks would find discretionary and would be more willing to drop the service if the price became to high. (elastic demand) The consumer would see if there are alternative supply channels that can service there needs. Is the product/service being offered a commodity or a niche product/service? If it is a commodity then you will be competing based on price and make revenue through volume sales. In the case of niche product folks are willing to pay more for it because of its exclusiveness and you can charge a premium price. The online Wall Street Journal is an interesting example as over a million subscribers are willing to pay for the content and the price is for the most part irrelevant.

]]> By: Jason Lancaster http://www.fusionbay.com/2007/03/12/consumer-based-web-applications/#comment-15 Jason Lancaster Mon, 12 Mar 2007 18:55:19 +0000 http://www.fusionbay.com/2007/03/12/consumer-based-web-applications/#comment-15 I remember reading an article on a SOP application a while back, perhaps <a href="http://fogcreek.com/FogBugz/" rel="nofollow">Fogbugz</a> or <a href="http://www.haveamint.com" rel="nofollow">Mint</a> (I'm not quite sure) where an increase in price helped the product out tremendously. Their conclusion, as you mentioned above, was that the extra cost added to the "higher quality" illusion of their product. My gut tells me that products will normally work this way, yet services will not. I think the main reason is that big bucks usually comes from big companies, who will often look at the service and scoff at the idea that <i>they</i> don't ultimately control the data. We're slowly bridging this gap but it might always remain. My mindset usually goes like this: Enterprise:Product Consumer:Free Service Small-Mid Business:Depends on application I'd love to find that article I read and reference it here... drats. I remember reading an article on a SOP application a while back, perhaps Fogbugz or Mint (I’m not quite sure) where an increase in price helped the product out tremendously. Their conclusion, as you mentioned above, was that the extra cost added to the “higher quality” illusion of their product.

My gut tells me that products will normally work this way, yet services will not. I think the main reason is that big bucks usually comes from big companies, who will often look at the service and scoff at the idea that they don’t ultimately control the data. We’re slowly bridging this gap but it might always remain. My mindset usually goes like this:

Enterprise:Product
Consumer:Free Service
Small-Mid Business:Depends on application

I’d love to find that article I read and reference it here… drats.

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