I was checking out the price of Windows 7 Professional for my new laptop, and I was pleasantly surprised to see that Microsoft has put some nice thoughts into Windows 7 pricing. Microsoft has listed the following options for Windows 7 Professional on its website:
Do you think Microsoft is making some mistake here and selling the Windows 7 Professional and a 4GB pen drive for the same price as it is charging for just the standalone Windows 7 Professional? I am sure that's what Microsoft wants people to believe!!
A 4GB pen drive costs around Rs. 250 (~ US$5.6). So on a purchase of Rs. 10,690 (~US$237), it represents a small discount (2.3%). Although the discount is so small, I can guarantee that majority of the people looking to buy Windows 7, after looking at these options will opt for the fourth option, which is Professional + Pen Drive.
Microsoft is doing an amazing job of putting the pricing best practices at work. By striking off Rs 14,760, and putting Rs 10,690 instead, Microsoft is implying huge discount. Notice, they are not using the term 'Sale' or 'Discount' anywhere, but this option gives an impression of discounted price. Did you notice the Red color and the bold font? Did anyone get an impression that this must be a limited time option, although Microsoft is not saying it is?
Next, Microsoft is using the powerful term 'FREE' in the best possible manner. 'Get a 4GB pendrive, absolutely Free'. Also in the display, the pendrive's size has been zoomed to make it appear big (if you are using the box size for reference). Although, a free 4GB pen drive represents a very small price discount, but here this discount will appear as big enough for customers to spend Rs 10,690 vis-a-vis spending Rs. 6,590 on Home Premium, or Rs. 5,690 on Home Basic. Prospect Theory too is at work here. Prospect Theory says that customers have a tendency to exaggerate, be it rewards (as with lottery tickets) or penalties (which makes them spend money on insurance).
Customers have a tendency to purchase between the top (advanced) two options available to them. By creating a variation in the top option, making one variant of the top option appear markedly better, Microsoft has increased the customer likelyhood to purchase the top option.
Nice job Microsoft!!
Do you think Microsoft is making some mistake here and selling the Windows 7 Professional and a 4GB pen drive for the same price as it is charging for just the standalone Windows 7 Professional? I am sure that's what Microsoft wants people to believe!!
A 4GB pen drive costs around Rs. 250 (~ US$5.6). So on a purchase of Rs. 10,690 (~US$237), it represents a small discount (2.3%). Although the discount is so small, I can guarantee that majority of the people looking to buy Windows 7, after looking at these options will opt for the fourth option, which is Professional + Pen Drive.
Microsoft is doing an amazing job of putting the pricing best practices at work. By striking off Rs 14,760, and putting Rs 10,690 instead, Microsoft is implying huge discount. Notice, they are not using the term 'Sale' or 'Discount' anywhere, but this option gives an impression of discounted price. Did you notice the Red color and the bold font? Did anyone get an impression that this must be a limited time option, although Microsoft is not saying it is?
Next, Microsoft is using the powerful term 'FREE' in the best possible manner. 'Get a 4GB pendrive, absolutely Free'. Also in the display, the pendrive's size has been zoomed to make it appear big (if you are using the box size for reference). Although, a free 4GB pen drive represents a very small price discount, but here this discount will appear as big enough for customers to spend Rs 10,690 vis-a-vis spending Rs. 6,590 on Home Premium, or Rs. 5,690 on Home Basic. Prospect Theory too is at work here. Prospect Theory says that customers have a tendency to exaggerate, be it rewards (as with lottery tickets) or penalties (which makes them spend money on insurance).
Customers have a tendency to purchase between the top (advanced) two options available to them. By creating a variation in the top option, making one variant of the top option appear markedly better, Microsoft has increased the customer likelyhood to purchase the top option.
Nice job Microsoft!!
Sir, I beg to differ in this regards. I believe that this scheme will only pull people who were looking for Windows Professional and max to max People looking out for Home premium which again I doubt. I believe the customer is smart enough to understand that a free pen drive does not really mean a great deal. Everyone is aware of the prices of Pen drive and would not like to shell out almost Rs 4000 extra for a Rs 250 pen drive which has become more of a commodity these days. Having said that, I feel that yes it might just attract people who are in two minds whether to buy Home Premium or Professional(Mostly working class). People who are absolutely sure of buying a Home basic or premium won't be lured by this prospect. As far as red colour, bold font and size of the Pen drive is concerned, I believe almost every online offer does that to stand out and make people notice it.
ReplyDeleteThis is what I feel about the scheme and I may be completely wrong. Sir, it would be really nice if u shed some light on my views.
Dear Dipesh,
ReplyDeleteThanks for sharing your views. I agree with several of your comments. I am not expecting every Windows 7 customer to now buy Windows 7 Professional (+ pendrive), neither am I expecting people who are not looking to buy a new OS to now buy Windows 7 Professional. My hypothesis is that this pricing scheme will lift the share of Windows 7 Professional's sale, and I would give the credit to price presentation.
You are correct, if one puts a logical hat on, Rs 250 discount on a purchase of Rs. 10,690 is a very small discount to motivate people to spend substantially more. Well, here the beauty lies in the way this offer is being presented, making the offer look more powerful that what it is. Ofcourse, another product of higher worth offered for FREE might work even better. As you have also mentioned, probably some people looking to buy Windows 7 home will buy up and purchase Windows 7 professional. That's what Microsoft would like to happen too, because Microsoft makes more money this way. Even a 1% mix shift from home to professional will lift Microsoft's Windows 7 revenues by a minimum of 0.4% and profits by 4%. That's a lot!!
To stress on the power of presentation, let me share another similar example from an experiment I did with my Marketing students. I gave my students few gymnasium membership options. To half the class I gave three options to chose from (a. Rs 1000 per month for weights only; b. Rs. 2000 per month for classes only; c. Rs 2000 per month for weights and classes). 84% of the students opted for option c, while 16% opted for option a. No one opted for option b. Fair enough!
To the other half of the class, I gave two options to chose from (a. Rs. 1000 per month for weight only; c. Rs. 2000 per month for weights and classes). Since no one in the first half had opted for option b (classes only), I removed that option from the consideration set here. Now rationally speaking, I should get similar results here as I got with the previous set. However, with this group of students, 64% opted for option a. (weight only) and only 36% opted for option c. (wegiths + classes). What happened to the rational decision making?
Since this pricing scheme has been running for some time now, I would like to believe that it's working well, otherwise Microsoft would have taken it off. Microsoft will not publish any results in support or denial of the power of pricing here. Ofcourse!!