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7/27/2012 | 4:42:04 PM
It's utterly stupid, but that doesn't mean that it's not true. I see reviews in the iTunes store all the time complaining because something was 1.99 instead of .99 or free-yet there's something that isn't perfect.
What happens-& this has been studied in micro-economics-is that folks' expectations are instinctively tied to percentages relative to a desired price, whether it be market rate or here the desire to pay the minimum price. Thus they scale to whatever actual $$ are involved.
MS absolutely has the right to set whatever minimum price it wants. It has to recover its up front rollout costs and there are ongoing infrastructure/processing expenses. Maybe that legitimately adds up to a floor price of $1.49.
Still, they are at ground zero. Long term profit-arguably long-term survival in the mobile market-can only be achieved by luring lots of users. Amazon has perfected the art of underpricing to gain market share. Microsoft could learn from them.
Why not offer an introductory minimum price of .99 for the first six months? Announce that it's a promo to give people a chance to see how great the new Windows 8 is, etc., etc. That way you match Apple/Android and give people an incentive to front load their phones with all their favorite apps. If you've got mindshare, you can expire the introductory price as planned. If not it won't matter.