[sudhirj]

AWS has what they call a cost-following strategy, where their pricing actually exposes the architecture of the system to the point where you can understand how it's implemented and the data structures used if you look at the pricing.

I've heard it being described as an alternative the kind of speculation and navel gazing that precedes all other kinds of pricing and is ultimately useless anyway. However you choose to paper over your costs with pricing schemes, some customer will have a use-case or hack that blows through it and gives you grief. Or a competitor will do cost-follows and give everyone a reason to switch to them.

The idea is that you figure what your costs are to provide the service, and then add your margins and just charge that. Add as many axes as your customers will bear, and let them make the decision on how to use the tool, even if it seems complex.

Works great for technical tools, but I've always been skeptical about how consumer pricing is done. The Amazon Prime membership itself goes against this principle, of course. Consumers will usually value predictability over analysing ROI, so flat rates might just make more sense there.

[ghaff]

>I've always been skeptical about how consumer pricing is done

Consumers seem to mostly favor memberships/subscriptions. Even utilities like electricity and water and pretty much predictable in practice. Pair per view/pay per listen/pay per read seem a lot less popular in general for media. The counterexample may be books, but then most people don't read a lot of books per month/year.

Which makes sense. A lot of people want to budget fairly tightly and subscriptions are better for that.

[gregmac]

> Pair per view/pay per listen/pay per read seem a lot less popular in general for media

There's lots of reasons for this.

Spotify is $9.99/month. Average listener streams 25 hours of content [1], and the average song length is 3.5 minutes [2] -- this means most people pay about $0.023 per song.

For one thing, by charging per song you now force someone to make evaluations of their use. I'd be much less likely to just leave music streaming in the background (which I sometimes do) -- even if I walk out of the room -- if I have to think about that constantly increasing bill. You could also get into runaway costs, if it was accidentally left on (but muted) overnight or longer, for example.

I can't find data on it, but I'd bet there's a long tail of users who stream significantly fewer songs, and a small handful of users that stream significantly more. Spotify makes a lot of money on that long tail due to low usage.. why would they sacrifice that? Alternatively they could jack up their price-per-song, but that would dissuade all but the lowest-usage users.

And honestly as user, I don't want the cognitive overhead of thinking about this.

[1] https://www.businessofapps.com/data/spotify-statistics/

[2] https://fortune.com/2019/01/17/shorter-songs-spotify/

[ghaff]

I'm certainly part of that long tail. I tend not to have music on background most of the time.

You're absolutely right. Literally a couple decades ago Clay Shirky coined(?) the term mental transaction costs in the context of paying for articles, etc. It would be absolutely exhausting to have to decide whether it's worth a nickel every time you read something or listen to a song--especially, as you say, with music where it might just be on in the background.

[alisonkisk]

Amazon offers cost-follow pricing by default. Prime is the unlimited override.

Also, shipping costs are largely included in the price, and the shipping price / prime thing is just an economic game on top.