The behavioural science behind Netflix pricing and the Facebook loading screen

behavioural science Facebook loading screen

I thought the above example was pretty interesting. And this too, about Netflix pricing:

You don’t understand prices. You don’t buy things based on anything resembling “logic.” You buy things based on, well, something else— mental “shortcuts.” And Netflix wants to hack your mental shortcuts.

One way companies use prices to trick us is to offer cheapo, inferior goods to get us hooked on a product that we’ll eventually spend more on. Time Warner Cable, for example, experimented with an “Essentials” package that offered cable without the most popular channels at a discount, expecting (and, as I’ve been told, often discovering) that customers would upgrade to full cable when they realized how much they love TV.  In a way, Netflix is already doing this: In December, it introduced a $6.99 plan ($1 discount) that allows streaming to one screen only.

The more sophisticated strategy isn’t to offer two prices, but three. In Hasting’s words: “good,” “better,” and “best” price tiering. Why three? Because of the magic of the Goldilocks effect in pricing.

It reminds me of a great talk I saw some time ago about the way The Economist packages up subscriptions, as explained by Dan Ariely here.

The behavioural science behind Netflix pricing and the Facebook loading screen

The evolving architecture of Silicon Valley


Things are changing in Silicon Valley. Where once tech companies paid little regard to their surroundings, Facebook, Apple, Google and Amazon are all in the process of opening epic purpose-built headquarters. In a new article in Vanity Fair, Paul Goldberger “explores what companies’ choices reveal about their cultures, their workforces, and the shifting relationship between city and suburbs.” Below is a brief extract, read the full piece here.

In Silicon Valley, almost every town is a company town. As Cupertino belongs to Apple and Mountain View is dominated overwhelmingly by Google, Menlo Park is where Facebook is located, and Palo Alto has the old, troubled, but still-enormous Hewlett-Packard. Yet you don’t always feel this. Tech companies tend to look inward; they seem to like campuses more than cities or even towns. Gehry’s Facebook building will be across the street from the company’s existing complex, which will be retained. Apple occupies more than 30 low-rise buildings in Cupertino, with the corporate headquarters in a cluster of modern glass buildings that bears the invented address of 1 Infinite Loop. The address tells you as much as you need to know about the company’s view of its campus as a self-contained environment, disconnected from the city around it, a goal that the new, Foster-designed building will achieve more fully, surely, than any building since the Pentagon, which it exceeds in circumference. The current Apple offices, which were originally put up by a real-estate developer in the early 1970s for the company Four Phase Systems, are notable less for anything about their architecture than for their exceptionally elegant signs in a small Myriad font, the identical typeface to that used on most of the company’s products. Oracle, the huge software company, built itself a kind of high-rise campus, a cluster of rounded, reflective glass towers beside the 101 Freeway a few miles north in Redwood Shores—more conspicuous than any of the old Google buildings, to be sure, but nearly as generic, since you could imagine these buildings sitting beside a freeway in Dallas or Houston as easily as on the San Francisco peninsula. They’re no more specific to Silicon Valley than the Alpine Inn.

The evolving architecture of Silicon Valley