21 Jan 2006 apenwarr   » (Master)

Choices make things worse

My company just created a new pricing combination called the "small business protection package." The idea is that it includes basically all the features we sell, with an inflated number of user licenses, along with an extended warranty, all at a price that's slightly discounted from the total of all those things put together. Now, it turns out that our resellers and customers just love it, even though actually what they would have bought before was probably less stuff at a lower price.

You've seen this before. It's the fast food "combo" model. People just hate adding up a bunch of small prices and making a big one; it makes them worry that they're not getting a good deal. But when there's one "standard" package with a lot of stuff and a simple price and they save money versus buying things separately, then everything seems easy. (The "save money" thing is mostly just an illusion. They're buying virtual stuff - software licenses - that they wouldn't have bought before anyway, so when we sell more of it and then give a discount, it's mostly the same to us, and the customer often spends more money.)

Anyway, simplicity is worth paying for. Who knew?

On a similar note is a mistake I made a couple of years ago in introducing a concept I called "dial-a-vacation" for developers. The idea is that, on top of your basic vacation allowance, you could trade away part of your salary for an equivalent number of vacation days. It's basically like taking unpaid vacation, only spreading the "cost" of it throughout the year, so you don't go broke when you're actually taking your vacation. Since "normal" vacation is obviously mathematically the same, but less flexible, I thought this would obviously be a benefit.

It's not. People like getting more vacation days because it's an employment "perk" and it's "free." Trading away your salary for vacation days just hurts: you feel like you're losing something, not gaining something, even though technically it's equivalent.

Almost all job benefit programmes work on the same principle. You can give programmers a $20 t-shirt and raise morale way more than a $20 annual salary increase would do. You can buy a $2000 foosball table, spread among 20 people, and seem like a way cooler company than one that got everyone a $100 raise. Everyone wants eyeglasses added to our health insurance plan, even after we explain that eyeglasses aren't really insurance (either you just always need them, or you just don't) and so the "insurance" overhead is just giving money - money that could be your salary - away.

Just like all those examples, "free" vacation is worth a lot more happiness than the same amount in dollars. This literally means that you can be paid less and not have dial-a-vacation, and you'll be happier than if you get paid more and do get dial-a-vacation.

Psychology is strange. Oh well, live and learn.

And I won't even try to explain my plan for buying monthly subway passes in order to feel rich. But trust me, it's exactly the same idea.

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