All things being equal — or “ceteris paribus,” as Professor Swanson, my phenomenally awesome yet brutally, infamously hard UCLA economics professor corrected us in our first Econ 1 lecture — if prices go up, demand goes down; if prices go down, demand goes up. This “first rule of economics” is pretty intuitive stuff, and I certainly didn’t need my BA in Econ to teach me that. Weird exceptions aside — like so-called “snobbery goods,” such as fancy cars and jewelry, for which inflated prices likewise inflate demand — this general rules tends to hold true fairly universally.
So you can imagine our dilemma then, when we discovered that we needed to increase our prices by a whopping 50%, to $15 per month from $10 per month. Not a small increase, then. And if indeed Prof. Swanson’s lectures held true, then surely increasing prices by 50% would result in a reciprocal decrease by 50% in subscribed customers, and we’d be exactly where we started. All was not looking well then.
And that wasn’t the half of it: this wasn’t just a problem of increasing prices for future customers; we needed to increase prices for current users, too, users who should otherwise have fairly expected to be grandfathered in at their original $10 per month price point.
Thing is though, we didn’t have a choice. The finances just wouldn’t have it any other way.
And so we did it. We increased our prices by 50% not only for future customers, but for our existing customers as well. And remarkably, inexplicably, and against all odds — never mind the beautiful laws of economics — we saw nary a dip in demand; in fact, if anything, we’ve seen a slight up-tick in demand.
This then is the unlikely story of how we increased prices, and demand, and broke economics.
