Pricing Tiers: A Lesson from Economist Vin Diesel

Tuesday, February 9, 2016

Many businessmen mistakenly turn to economists like John Maynard Keynes and Ludwig von Mises for insights into market strategy. This is a bad idea. Both thought leaders are overrated dilettantes whose work pales in comparison to that of my academic idol. When I seek a greater understanding of pricing theory, I always turn to the brilliant economist who outshines all others: Vin Diesel.

The reasons for my admiration are obvious. His works are all masterpieces - from The Pacifier to The Chronicles of Riddick: Dark Fury. Each contains wisdom far too significant for me to describe in a single blog post.

In dire need of inspiration, I recently decided to see his most famous film of all. That's right. I decided that I would watch The Fast and the Furious. Heading to my local library, I had no time to search through the online catalog. I marched up to the head librarian and told her that I wanted to see the finest film in the library's collection. Her facial expression immediately turned serious, and (with a solemn nod) she led me to a shelf in the backroom. Slowly, she extended a finger, pointing to the object of my ultimate desire.

It was at this time that I suffered a crisis of faith. For the first time in my life, I had no idea how to proceed. I was scared.

Pricing tiers for the movie The Fast and the Furious
Crisis of Faith: Two Versions of The Fast and the Furious

Looking at the picture above, I'm sure that you understand my dilemma. There were two versions of the same fantastic film: The Collector's Edition and The All New! Tricked Out Edition. I had no idea what I should do. Which was superior? Which held more value? Hours flew by as I carefully examined each box. I searched desperately for some sign, some indication, as to which was more worthy of my attention. Despite my prayers, divine providence was absent on that day. Though both were clearly capable of firing on all cylinders, I knew not which was a mere V6 and which was the more impressive V8.

As a very successful business owner, I am always willing to pay for the best (especially when renting a movie in my town's free public library), yet I had no idea which of these two products was superior. Ultimately, I made the only decision possible. I chose to rent neither. Unwilling to risk watching the lesser of two masterpieces, I simply selected a different movie.

Upon a bit of reflection, I realized that there are two main reasons to release different versions of a product:

The decision to create the two versions of The Fast and the Furious accomplished neither. Without providing any indication as to the differences between the two versions, no one would have any reason to perceive them as dissimilar. No one who is disinterested in one would be interested in the other. Likewise, no one would pay a premium for one over the other.

I would normally counsel that releasing multiple versions of a product with no discernible differences between them is idiotic. Each additional release costs the publisher a significant chunk of change with little hope for additional profit. The act also risks alienating consumers who don't enjoy making difficult decisions.

Though Vin Diesel no doubt approved the release of the two versions of his film, it's quite obvious that he did so in order to teach us an important pricing lesson. Do not try to replicate his intentional mistake.

Though I've heard that Vin Diesel is not currently providing pricing consultations, fear not! If you'd like some help pricing and positioning your products, contact me or read The Software Pricing Handbook. Remember: small changes in strategy can lead to big changes in profit.