Trends expert William Higham examines pliable pricing – the move towards thinking flexibly about how business pricing models
You may have heard about a vending machine that Coca-Cola introduced in Spain for its Limon Y Nada lemonade. It looks like a standard machine, but what makes it unique is the product pricing. When the temperature falls below 26C a can costs €2 (£1.42p), but when it rises to 29C, the price drops to €1.40. At 30C, it’s just €1.
The unusual approach is a great way to incentivise purchases and an example of a growing trend for ‘pliable pricing’ – novel, value-focused ways to charge consumers.
The Limon Y Nada vending machine is a few years old, but it’s part of a growing trend. The economic downturn created savvier shoppers. Initially just cheapness fanatics, these new ‘smart consumers’ are now much more interested in value, and open to non-traditional consumption, embracing disruptive pricing methods from Uber to Airbnb.
Limon Y Nada’s dynamic approach is a popular choice. Amazon and Uber raise or lower prices depending on potential demand while e-tailers run localised ‘flash sales’. Meanwhile, Spotify (with 15 million paid subscribers), Evernote (nine million) and Dropbox (eight million) are finding success with the freemium model, where users can determine a product’s value before committing financially.
Several services offer convenience-led premiums, such as ad-free content. Some car companies bundle insurance or guaranteed buy-back schemes into their prices. Computer Exchange reduces prices of pre-used products incrementally month by month. Tinder charges over-30s premium users double. Several restaurants and a US investment company use a pay-what-you-want approach.
Companies are re-evaluating that kipper tie of pricing methods, the unfashionable paywall. A quarter of US newspapers now charge for online content. Understandable, as smart consumers will happily pay for previously free content if it’s good value, exclusive, educative, earlier or easier.
The Times paywall is now so popular the newspaper returned to profit in 2014 – its first in 13 years. Even young consumers, who many thought would never pay for anything digital, are starting to do so – from in-game purchases to Spotify subscriptions. Is it time for us all to reconsider our pricing models?