Anchoring? Exactly. I noticed my wife and daughter’s tendency to remark how something they bought for 25% off was a bargain. Perhaps, but was it a value? I tried to walk them though the process merchants use to price their goods, setting an anchor value in our minds. If the ‘sticker’ price of an item is $200, it surely must be a great deal at $100, no? Well, no, not when it’s a sweatshirt that’s hardly worth even $50. You get the idea.
How did Netflix stumble? In a sense, by offering too much value, and then trying to raise their price after the fact. They recently announced that the current plan of unlimited streaming and one out at-a-time DVDs which currently cost $9.99 will be split into two plans, each $7.99, or $15.98 to keep the current features. What I find so curious is that the DVD plan has a lot of value, $30 or so, I’d say. We have a RedBox at our supermarket, but it’s 10 miles round trip, so that $1 rental pushes $5 when we get a DVD for a specific night and not during a regular shopping trip. On the other hand, I can flip the Netflix around fast enough to get 8 in a good month, just over 6 on average. Unfortunately, Netflix had me trained that the DVD plus streaming was worth the $10 I was paying, and any increase just felt like a rip-off. We weren’t using streaming that much, so by breaking out the service to 2 plans, I’ll actually pay less as I’ll drop to the $7.99 plan, now an even better deal for us.
Are you a Netflix customer? Will you change your plan after this price increase goes into effect?