Friday, March 13, 2009

The Placebo Effect ... on Pricing

OK, so here's an interesting dilemma for many businesses out there, including us here at IPOWER.

I just read this fascinating article from The Washington Post on "The Price-Placebo Effect." Most people understand the Placebo Effect as it pertains to medication studies: "control" participants are blindly administered a sugar pill instead of actual medication, and yet still experience improved symptoms, probably as a result of their belief that they have received real medication.

The Price-Placebo Effect takes the same tack, but instead of medication being the agent of change, price is strangely the culprit. The Price-Placebo Effect, according to the article, is basically the notion that people experience more pleasure (i.e. larger activation in their medial orbitofrontal cortex) when they consume a product that they pay a higher price for, compared to those who pay a less-expensive price.

While the article leads off referencing the uncomfortable Eliot Spitzer scandal, the more relevant story revolves around a study in which two groups of participants were asked to drink some wine: one group from a bottle priced at $90, and the other group from a bottle priced at $10. The participants who drank the $90 bottle not only indicated an overall higher level of enjoyment (as to be expected), but they also had experienced more activity medial orbitofrontal cortex than those who drank the $10 bottle. The catch? They drank the exact same wine.

So what does this tell us about pricing our products? Well, for one thing, Apple's got it right. The price of their notebooks is significantly higher than it needs to be, and yet they don't have much trouble (a) selling them like hotcakes or (b) cultivating a dedicated (some might say fanatic?) userbase. In fact, it wasn't until the end of last year that they even contemplated releasing a notebook under $1000. So what's the story here? Great products justifying expensive prices? People paying for the "brand"? Or is there something actually physiological going on?

It's tough to say, but notions like these definitely make us think about our strategies. The webhosting industry is a complicated one--commodization is driving prices down and requiring hosts to underprice their services. Two years ago it was ludicrous to advertise a price under $6/month. Now that price is considered expensive. And yet does our catering to the competitive nature of the hosting market mean our product is any less valuable to consumers than it was two years ago? In fact, no--our product is constantly improving and evolving and a hosting plan now is "worth" more than ever. It would be great to price our plans to invoke the "Price-Placebo Effect," but unfortunately, the likely result would be potential customers hammering the "Back" button as soon as the images start to load on

So how do we tap into this pricing enigma? Have you tapped into it?

Your Feedback, Hard at Work

We've been soliciting feedback from customers, and we've been listening to your responses. Over the past couple of weeks, we've launched a couple key changes to our offerings, which we hope will improve your overall experience.

1) The Activation Center: Activate Your Plan's Freebies in One Fell Swoop!
We recently launched The Activation Center to help customers find and activate the free tools that come in their hosting plans. Located in the top stripe of your control panel (between the "Tutorials" and "Help" icons), The Activation Center opens up a list of products that you can add to your control panel just by selecting the items of interest to you and clicking the "Activate" button. Free tools include SubmitNet, Google AdWords $50 credit, Google Custom Search box, as well as a free 60-day trial with RatePoint, and a free 60-day trial with Constant Contact, which provides email marketing tools.

Keep an eye out for more free tools in the Activation Center--we'll be adding new ones all the time!

2) ServiceCentral: New Portal for Managing Your Projects
When you purchase an SEO package (soon to be extended to a Design package or Professional Services), you'll get an icon called "ServiceCentral" in the "Marketing Services" section of your control panel. When you click on this icon, you'll be brought to a portal page, which, on the "My Projects" tab, keeps a list of your active and past projects and their statuses. From here, you can also add comments to your project and check out the latest status via comments left by your project team.

The "My Team" tab keeps track of your team members, with access to their schedules and contact information. At the moment, customers can email and call most of their team members, but shortly we'll add the ability for customers to chat with team members and schedule appointments! Plus, uploading files you'd like your team to use in the project is a cinch--just click on the "My Resources" tab, and select the directory where you'd like to upload to.

3) Akamai Quick Connect: Increase Your Site's Load Time for Visitors Everywhere
IPOWER is one of the first hosts to offer this incredibly cool service, which allows visitors from across the globe to access your site nearly as quickly as someone sitting next to our servers. Akamai Quick Connect will be available to some customers starting next week through a special promotion we're running, and we'll likely roll it out to all customers by the end of March or early April.

In case you're wondering how Akamai works their magic, here's a quick snapshot: Normal requests to see your website have to travel all the way from a visitor's computer to our servers and back. Akamai speeds up this process by caching your site's content (images, CSS, javascript) on its edge servers, which are located all around the world--so when someone in China, for instance, wants to see your site, the content will be retrieved from the closest Akamai server in China, rather than traveling all the way to our servers and back. HTML requests will still travel to our servers, but through Akamai's optimized network, which can easily locate and circumvent trouble spots in the network.

4) WebSite Creator by CM4all: Two Small Changes Based Upon Survey Feedback
We have plans to revamp the CM4all tool page in general, but in the meantime, we fulfilled two small customer requests which seem to make a big difference in the usability of the tool.
  • Numero Uno: We made the "edit" link into a button so you can see it! Derrr ... not quite sure why it was a teensy tiny link to begin with, but at least you can see it now and know where to click to edit your site.

  • Numero Dos: We made this new and improved "edit" button open a new window. Finally. Now you won't lose access to your IPOWER control panel when you want to edit you CM4all site.
We hope these small changes across the board make a difference in how you use your IPOWER hosting account. If you have additional suggestions on functionality, definitely let us know through comments on the blog, in surveys, and as always, through tickets in your Support Console.