Pay by the Drink

"Pay by the Drink" was the business model vernacular used in discussing pricing strategies. Susan always hates when I throw out one of those common business terms in normal conversation expecting everyone to automatically understand the point I am making.

Should you price your product "by the drink" or "all you can eat". As a consumer how do you evaluate the two before buying? Do you sit down and forecast usage and compute the unit cost?

My internet access/data over wireless is grandfathered in an "all you can eat" model; Ellen's itouch apps are "by the drink". Netflix creates an entire menu of subscription choices but either way you "use it or lose it". Cell phone pricing models make it critical that you don't use more than you forecast - the "I'll surprise you sometime with an outrageous bill" scenario.

Those businesses that choose "pay by the drink" hope you will not pay attention to the low cost and consume large volumes - probably more than you need (sounds like KWH). Those businesses that choose "all you can eat" hope for long periods of non-use to subsidize those consumers that abuse the servings.

Other businesses worry less about the pricing model and attempt to make the billing as confusing as possible to prevent the consumer from determining what they have spent on the product or service in the first place (just look at any Utility bill).

In all models - disguising the cost helps minimize the consumer price/value analysis.