1. I follow your logic here, and it makes perfect sense to me, but per my experience in the real world things just don't work that way. If you are trying to crack into an existing market, you have to be better on both service and price.
2. Tell this to Michael Bloomberg. He raises prices every year and is one of the richest people in America. Also, there are other methods of raising prices at a later date other than just moving the sticker price. For example, introduce new/enhanced services at higher price points. For a real world example, our company did that with API access. We kept the original web access product priced low, but priced API access as a premium product.
I can't obviously dispute your personal experience, but I think we can both agree that price is a signal.
I agree with you that you can mask your price increase and it isn't something that I'd considered when I originally posted.
However, I would argue that Bloomberg was priced high enough early on to not attract cheapskates. Again, pricing as a signal. If you're charging $15,000 and the person is making $1mm a month off of it the difference between $15,000 and $25,000 isn't very much. However, if you started out charging $150 a month and hope to get to $25,000 you're going to have a very hard time doing so even if your customers are making $1mm a month of the service because you've anchored your price so low. Again, there are probably creative ways to get from $150 to $25,000 like you mentioned, but I'm not sure I'm interested in spending my creative energy moving the needle that much when I could just start out charging a much higher rate.
Bloomberg prices increase on a two year schedule (e.g. 2010, 2012, ...) to account for inflation. It is actually a "feature" of the subscription because it has been historically stable and by tracking inflation, companies can very easily plan their costs years in advance without worrying about a rogue increase.
1. I follow your logic here, and it makes perfect sense to me, but per my experience in the real world things just don't work that way. If you are trying to crack into an existing market, you have to be better on both service and price.
2. Tell this to Michael Bloomberg. He raises prices every year and is one of the richest people in America. Also, there are other methods of raising prices at a later date other than just moving the sticker price. For example, introduce new/enhanced services at higher price points. For a real world example, our company did that with API access. We kept the original web access product priced low, but priced API access as a premium product.