Amazon Plays with their Prices

I shamed Amazon into lowering their prices. Just kidding.  You recall my recent posting asked why Amazon’s prices aren’t tracking the cost of hardware etc.

If you are feeling extremely generous you might say that that Amazon cut prices by half, or maybe a third.  It’s confusing.  Not surprising, that’s the way you play with prices.    Nobody every lowers prices!  Instead you play pricing games.  Coupons, sales, special offers for special customers.    You don’t lower prices you increase the options for negotiation.

The pricing game Amazon picked was to add subscriptions; which are good for increasing lock-in.  Under the subscription plans the cost per hour is lower.  It’s about a third of the pay as you go price.  Your overall cost is higher because you have to buy the subscription.  Considering the one year subscription your better off staying with pay as go if until you run a machine half time.

It’s a clever pricing move.  This should significantly increase the lock-in while making it harder for competitors to price match.  A competitor would have to buy out any existing subscription.

I just love this quote: “An allocution in such a high stakes case is closely lawyered.”    So too with pricing design.

One thought on “Amazon Plays with their Prices

  1. Steve Loughran

    It’s believed in the datacentre-apps world that AWS rents S3 space at below costs; makes their money on bandwidth. In the process it also sets up unrealistic expectations around the rest of the world as to storage costs.

    ESB pricing is on a par with RAID-on-SAN costing; you get to pay a premium over S3 storage for trying to run Oracle or MySQL on E2, instead of switching to SimpleDB. Of course, once you switch to SimpleDB, AWS owns you, in a way MS and Oracle can only reminisce of. The premium you pay with ESB storage, then, is the price of freedom.

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