I like listening to music on Pandora. I didn’t like hearing an ad every few songs in their free service, so I paid $36/year to upgrade to their ad-free premium service. It’s a great deal, considering I use Pandora just about every day. It got me thinking about marketing psychology and strange price differences.
No Music Ads = $36
Only $36 to go ad-free suggests that Pandora averages only $36 in advertising revenue from each customer, right? Just $3/month per user doesn’t sound like much, even if Pandora continues to get iTunes or Amazon clickthrough revenue for selling individual tracks online.
Longer Cell Phone Contracts: Commit to Pay an Extra $1,200 to Save an Extra $70 Now
Verizon Wireless and every other cell phone company subsidizes handset purchases by giving a discount if you sign two-year contract, and a smaller discount if you sign a one-year contract. I’ve been a Verizon customer since 2004 but I never sign two-year service contracts.
Why? The $70 additional one-time discount for two years versus one year doesn’t seem worth it. Save $70 now, but commit to paying for phone and data service (about $100/month) for an extra year?
Some people would argue that they’re going to spend the money during the second year anyway, but considering early termination fees (and shifting exclusive phone options), do you really want to commit for as long as it takes an infant to learn how to walk? Losing the flexibility — committing to spend an extra $1,200 in the second year just to save $70 now — makes no sense.
Online Storage Upgrades: Dropbox vs. Gmail
Finally, prices for online storage varies wildly. I use Dropbox.com for work and for a volunteer organization. Free accounts give you 2 gigabytes of space. Upgrading to 50 GB costs $100/year. Yet for that same $100/year, Gmail will let me upgrade my Google Account storage from 7GB to 400GB.
Dropbox’s desktop integration is convenient, but why is Dropbox charging the same amount for just 1/8th the space you get with Google?
Have you noticed any other unexpected — or nonsensical — price differences?