Joel on Software - On the Pricing of Software - Fortune

Joel on Software - On the Pricing of Software

There are more subtle ways to segment. You know those grocery coupons you see in the paper? The ones that get you 25 cents off a box of Tide detergent if you clip them out and remember to bring them to the store? Well, the trouble with grocery coupons is that there’s so much manual labour involved in clipping them, and sorting them out, and remembering which ones to use, and choosing brands based on which coupons you have, and so on, and the net effect is that if you clip coupons you’re probably working for about $7.00 an hour.

Now, if you’re retired and living off of social security, $7 an hour sounds pretty good, so you do it, but if you’re a stock analyst at Merrill Lynch getting paid $12,000,000 a year to say nice things about piece-of-junk Internet companies, working for $7 an hour is a joke, and you’re not going to clip coupons. Heck, in one hour you could issue “buy” recommendations on ten piece-of-junk Internet companies! So coupons are a way for consumer products companies to charge two different prices and effectively segment their market into two. Mail-in rebates are pretty much the same as coupons, with some other twists like the fact that they reveal your address, so you can be direct marketed to in the future.

Author Joel Spolsky
Work Camels and Rubber Duckies