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May 19, 2003

MARKETING ANSWER....Answer to yesterday's marketing question: revenue went down. A lot of people bought the unlimited license just because they didn't want the hassle of worrying about how many pages they were going to print, not because they actually thought they were going to print more than 200,000 pages per month. For many large customers, this was worth paying an extra $5,000.

The million-page-per-month license didn't provide this advantage, so nobody bought it. They just bought a 200,000-page license instead. In the previous year, the company had sold several hundred unlimited licenses, but this year, after the change, they sold less than a hundred of the million-page licenses, while sales of 200K licenses went up. The revenue loss was substantial.

Posted by Kevin Drum at May 19, 2003 10:58 AM | TrackBack


Comments

Another example of being to strict on IT, in a way that inconveniences the end user, harming revenue and profit is Intuit's Turbo Tax. They tried selling at a single machine install only (i.e., not on your laptop and desktop). Results were, of course, similar to your example.
See http://business20.com/articles/web/0,1653,49577,00.html
AB

Posted by: Angry Bear at May 19, 2003 11:39 AM | PERMALINK

This is interesting. From your description, it seems as though it's not that the customers were forced to reassess their needs, but that they were actually behaving rationally all along. The cost of keeping track of sheets printed outweighed the extra cost of the unlimited license.

Have I got that right?

Posted by: Matt Weiner at May 19, 2003 12:17 PM | PERMALINK

Is Company X going to reinstate the unlimited licenses?

Posted by: David Phillips at May 19, 2003 01:02 PM | PERMALINK

See, I was going to say that you diminished the value of the "unlimited" license by limiting it, and therefore would sell fewer, because, like, I'm a genius and stuff.

(Just kidding of course, I had no idea but I was interested in the answer).

Maybe this is a good illustration of how us conspicuous consumers are programmed to buy more capacity than we need (unused celphone minutes, 20hp lawnmowers, 1000 watt stereos, 1200 calorie fast food burgers, SUVs). That's how I operate anyway. Better to have it and not need it, etc.

Posted by: skbubba at May 19, 2003 01:59 PM | PERMALINK

Matt: no, the software keeps track of usage, so that's not a problem for the customers. It seems to be mostly a psychological thing: what if I happen to need more than 200K pages in a month? Then what do I do? Oh no!

Even if that's not really very likely, people are willing to pay extra just so they don't have to worry about it.

David: I believe that they are about to switch to a concurrent use license anyway, which requires a completely different pricing model. So the question of going back to the old model has never come up.

And one other thing: ironically, as you recall, Co. X was prompted to change their licensing by fears that customers could use "virtual printing" to print huge numbers of pages with a single license. But it turns out that virtual printing is actually slower than the highest speed printers, so this isn't even a problem. Basically, these guys blew it on so many levels it's hard to know where to begin.

Posted by: Kevin Drum at May 19, 2003 03:39 PM | PERMALINK

At our shop, it would have been more like "how much hassle would it be if our license ran out at 9PM on a Friday night while were running weekend jobs". We would know what to do - the real question is how fast an upgrade could be bought and installed - hours? days? weeks? We would have bought the unlimited license just to avoid that problem.

It seems the company didn't find out the actual customer usage patterns of the licenses before they made their decision. I assumed they knew, but it sounds like they were surprised. Surely they would have made a better decision if they knew that those several hundred licensees printed less than 200K pages per month.

Virtual printing is actually slower than the highest speed printers

What this tells me is that the company let its fears get the best of them. Certainly a company could have bought one unlimited license with the intent of using it on multiple printers, but this is not very practical if the computer can't keep up with even one of them, let alone multiple printers. An expensive lesson here, that's for sure.

Posted by: David Phillips at May 19, 2003 05:39 PM | PERMALINK

Yeah, that's the way it goes.

Actually, the TurboTax quoted misses another big point: The software was useless to anyone without a PPP/IP internet connection. You couldn't activate it.

I stood in a line to exchange a memory module at my local Fry's earlier this year and watched as half a dozen people returned copies of the program, as it wouldn't work for them.

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