The Famous Threat In 2009, Costco’s then-CEO came to the founder, Jim Sinegal, and said, “Jim, we can’t sell this hot dog for $1.50 anymore. We are losing our shirts.” Sinegal replied with the now-famous line: “If you raise the effing hot dog, I will kill you. Figure it out.” So, they built their own hot dog factories just to keep the price down. They refused to break the $1.50 price point. ...
The Observation January is here. You walk into a premium gym. The sales guy pitches you: Monthly Plan: ₹3,500/month (Total ₹42k/year). Annual Plan: ₹12,000/year (Effective ₹1,000/month). It’s a no-brainer. You buy the annual plan. You feel smart. But the gym owner is smarter. By March, you stop going. You have effectively paid ₹12,000 for 2 months of usage (₹6,000/month). The gym wins. The “Breakage” Revenue Model In the payments and gift card industry, “Breakage” refers to the revenue gained from services that are paid for but never used. ...
The User Frustration We have all been there. You walk into a PVR or INOX on a Tuesday. You are happy because you snagged a ticket for just ₹200. You walk to the concession stand, order a regular popcorn and a Pepsi, and the bill comes to ₹650. You feel cheated. You wonder, “How can puffed corn cost three times more than a multi-million dollar blockbuster movie?” As a consumer, it feels like price gouging. But as a Product Manager, if you look at the P&L (Profit and Loss) statement, you realize it’s actually a brilliant execution of Platform Economics. ...