While watching Rory Sutherland’s Zeitgeist presentation for the 20th time, I was struck (finally or again) by his story about Spotify and how they have not gotten much traction with their offer of unlimited downloads per month. He suggests that they change it to some absurdly high number like 180 songs a month.
Sutherland reasons that unlimited provides no context to the offering. As he put it, “Nobody knows what unlimited music is worth. It is a bit like asking, ‘Would you like to buy my unicorn?’”
The 180 song per month limit would give the price context in that it could be compared to iTunes at $0.99 per song. So for $9.99 a month you could enjoy $180 worth of music.
This got me to thinking.
Perhaps access level agreements should have a similar notion. Instead of saying unlimited access, perhaps it should be changed to 30 contacts (phone calls or emails) per month. Now, this would be more than anyone could possible need, and would therefore it would not be a barrier to any customer in terms of being worried about wasting a call on their particular issue. It would, however, allow them to compare it to other plans where there is a per call fee, thereby increase the perceived value of your offering.
What are your thoughts?
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I think it’s a great idea – in a vacuum – and something to think about.
I’m a bit concerned with all the “unlimited data plans” suddenly becoming 2GB that customers are somewhat jaded by the notion of both – meaning they know these can shrink at any time with adequate notice.
I’m also curious what the factor of competition does to this thinking. Is a 180 per month song limit for Spotify competitive to Unlimited on Rhapsody?
In the realm of consulting there’s also a HUGE subsection of customer who is used to squeezing partners for 1/10th of an hour at $75/hr (shame on the partner) and therefore might (under)value a call at roughly $8/each….
Yeah, I share your concerns Wayne, but I think there is a difference between setting the upper limit to a place that is just not reachable. For example, instead of unlimited data, it would be 1TB a month.
Also, most partners have a 15 minute minimum, so let’s go with $15 per call at the low point. At 30 per month the framing effect is still a value of $450.
Ed – my platinum plan already has unlimited training, unlimited help desk, unlimited diagnostic issues. No one has ever taken more time from me than they needed. What are they going to do, have someone sit in training sessions all day 365 days a year? They’d be out of business and so would I. It works great for me to do unlimited.
Karen, I agree with the idea of unlimited from a provision point of view. The question I am looking at is when pricing it, is it better the put an artificial limitation on it. That is, something so big they won’t possibly use or worry about.
This limit would then create (potentially) a better frame of reference for value.
Ed – true but you’d have to know specifically what your competition is offering and in most cases we don’t. So in our industry is it reasonable to suggest? I think not.
I know what you’re saying, but I respectfully disagree. I think it’s completely antithetical to the value concept. By quantifying it, you’re suddenly throwing in the notion that you’re charging by the hour – or the contact – same thing.
The beauty of unlimited access is that it’s (in my opinion) really easy to wrap your mind around. You need me, I’m there. See? Easy.
For many people, unlimited access is priceless, and the customers are making decisions based on how they feel. Do they trust me, like me, believe in my “Why?” Then who cares about others who are charging by the call? They aren’t my competition anyway. And if they are, the customer probably wouldn’t be a good fit with my company.
And finally… I don’t want to quantify customer touch. I just want to build the relationship.
Great comments, this is what I hoped would happen.
Patti – I do see the danger in quantifying, but I am curious if it would be outweighed by it giving context to pricing. I don’t think there is a right answer here, just tradeoffs.
With regard to quantifying customer touches, I wanted to point out that my 30 was a first attempt to toss a number out there. Maybe it should be 50 or 100. The point being that it would be so high as to not interfere with a customers decision to contact you, but it would help provide the frame of reference for the price. (I would image that they would never be tracked by either party.)
Your point about your “Why” is spot on. Ultimately, it is about you doing business with people who believe what you believe. I am just wondering if this might help attract more (or less, I guess) of those people.
Even with the idea of unlimited there is still a unit price; that unit price is per day, month, or year. So defining an unreachable maximum, in my opinion, wouldn’t help. Maybe other people need to be tricked into things though,
The other difference here is that in the Spotify example, the customer is specifically looking to download music. That’s what they’re buying, and they need a frame of reference. I get that.
But in our case, unlimited customer contact is basically an add-on for the core services we’re providing. No one is paying me exclusively for the privilege of talking to me whenever they want for a flat monthly charge. They are paying me first and foremost to design cloud accounting systems, be their accounting department, etc. The unlimited access is the cherry on top. I’m not convinced that framing a value for that one particular piece of the package is going to make any difference whatsover in the final price.
Ultimately, potential customers will look at the whole package, do a gut check, and make a decision. I don’t think what other people charge for each call is going to make any difference at all except perhaps as a way for them to justify the decision they already want to make. And in that case, they’d probably just say, “These other guys charge in 6-minute increments, but *these* guys don’t nickel and dime me. I can call whenever I want.”
The value is the peace of mind, and that number should be up to them in my opinion.
Thanks for the comment. It is not really tricking, so much as framing. One of the neat outgrowths of Austrian Economics has been the recent development of behavioral economics. E.g., Dan Ariely, author of Predictably Irrational.
The other example Sutherland gives is that it is better to give an additional $3k on the trade-in of a vehicle versus an additional $3k off the sticker price of the new car. When confronted that there was no difference, he quips, “That is true if you are an engineer, just not if you are a human being.” As much as we hate to admit it, we are sometimes more Homer Simpson than Mr. Spock.
$3k on $7k somehow feels better than $3k off $30k, again this is framing, not manipulation.
I’m a project conrols engineer – I handle time and cost…. so this concept gets a little lost on me.
Oh dude, than you have to watch the whole video! Sutherland is speaking before a group of engineers from Google and he is ripping into them.
I’ll have to find it. I’ll try to watch it over the weekend if I have time.
It is in the original post, but here it is –> http://youtu.be/P1mOsHFXZFA
I was thinking about this again last night. Ed – if my competition is already stating on their support agreements that a client receives 10 issues and 5 (1) hour training sessions for $1,500 the customer can deduce that their agreements works out to possibly $100 an hour. If my agreement has an unlimited plan for $2,500 then my competition is setting the price context and I don’t need to and the customer will spend an extra $1,000 to go with my unlimited. Thoughts?
The antithesis is the ‘grinder’ who now doesn’t feel he’s getting his “money’s worth” because he only contacted you 10 times; paid for 30; and now wants a reduced fee or refund.
We have a ‘clean your plate’ mentality in the US.
Karen, perhaps, but if you say 30 contact per month you could possible increase the perceived value to $3,000. This is the point.
Mark, yes, but that is a (poor) customer selection issue in my view. If they are weasels, they are weasels, no matter the pricing method.
The word “unlimited”does to my perception devalue the access so I have removed the word unlimited from our agreements but do not have a solution to the limit issue as I agree we want to be there for our clients
However rethinking the issue I realized unlimited access only deals with one half the problem. Access is useless without a response on a timely basis so we are rethinking both our access and response to cover the complete picture Unlimited access combined with a guarantee relating to response may address the value issue?
Absolutely, I have always thought a response time to be a necessary component of any access level agreement.