Image source: www.buzzfeed.com
On Monday, Tinder announced Tinder Plus, which charges for premium features. Usually the introduction of a premium version of an app isn't exactly big news, but the company made a lot of interesting decisions regarding this paradigm shift. Raising prices in general is a difficult task -- people find it unsavory paying for something that was once free (see: loss aversion). But, with the right behavioral economic principles, a company can effectively raise price without concurrently causing outrage. Tinder is not such a company. Tinder has not only started charging for features that used to be free, but it has also decided to employ a tiered pricing program based on age (and it is using a rather arbitrary age cutoff at that). Tinder will be charging different prices to users who are aged 30 and older ($19.99), and to those who are under the age of 30 ($9.99). Tinder justified this pricing decision with the following statement to Bloomberg: "'Lots of products offer differentiated price tiers by age, like Spotify does for students, for example,' Rosette Pambakian, a spokeswoman for Tinder, wrote in an e-mail. 'Tinder is no different; during our testing we’ve learned, not surprisingly, that younger users are just as excited about Tinder Plus, but are more budget constrained, and need a lower price to pull the trigger.'"
The first mistake Tinder made was initially charging nothing (thus, anchoring users on a free price point, and "free" holds special meaning to consumers). The second mistake it made was raising the price without directly tying it to only the addition of new/special features. The company should have left all features that were currently free as part of the free version, and only started charging for new or additional features (thereby justifying the price increase). The third mistake, and perhaps the company's worst, was charging more to older users for no good reason. It cites student discounts, but it should have then just had a discounted price relative to a standard base price that was the higher (30-and-above) price. People think student discounts are fair - we all understand that students are an income-constrained population and we generally see discounts to that group as acceptable. Plus, if this was really what Tinder was doing, the cutoff in age would be lower than 30 and they could arguably make even more profit this way. Since they didn't have pricing based on student membership, it seems that they are just unfairly "punishing" older users. Perhaps the company is trying to discourage people over 30 from using its app (maybe trying to force older users to its other platforms, okCupid and Match). So, either they are employing a strategy to get rid of older users, or they are completely out of touch with principles of fairness as they relate to consumer pricing. Either way, Tinder could have handled this announcement a lot better, and probably would find itself making a greater profit if it embraced social norms related to fairness.
In general, it seems that people are very averse to the idea of price discrimination, especially when it is based on a demographic variable. This isn't to say that companies don't get away with it -- airlines, car services, and booksellers all engage in price discrimination everyday, and we consider volume-based pricing a standard tactic. The difference is that these are policies that consumers can "select into" and thus feel are more fair than policies that are based on something that consumers have no "control" over. If Tinder wanted to price discriminate, it should have found another way to do so, or, again should have reframed the issue (the standard price is $19.99 but students can receive a discounted price of $9.99). A quick review of headlines related to this announcement suggests that the public and Tinder users find this new pricing policy outrageous and unfair (which I think any of the students in my Behavioral Economics and Decision-Making class could have predicted):
Special thanks to Eliza Coleman for sharing!
The first mistake Tinder made was initially charging nothing (thus, anchoring users on a free price point, and "free" holds special meaning to consumers). The second mistake it made was raising the price without directly tying it to only the addition of new/special features. The company should have left all features that were currently free as part of the free version, and only started charging for new or additional features (thereby justifying the price increase). The third mistake, and perhaps the company's worst, was charging more to older users for no good reason. It cites student discounts, but it should have then just had a discounted price relative to a standard base price that was the higher (30-and-above) price. People think student discounts are fair - we all understand that students are an income-constrained population and we generally see discounts to that group as acceptable. Plus, if this was really what Tinder was doing, the cutoff in age would be lower than 30 and they could arguably make even more profit this way. Since they didn't have pricing based on student membership, it seems that they are just unfairly "punishing" older users. Perhaps the company is trying to discourage people over 30 from using its app (maybe trying to force older users to its other platforms, okCupid and Match). So, either they are employing a strategy to get rid of older users, or they are completely out of touch with principles of fairness as they relate to consumer pricing. Either way, Tinder could have handled this announcement a lot better, and probably would find itself making a greater profit if it embraced social norms related to fairness.
In general, it seems that people are very averse to the idea of price discrimination, especially when it is based on a demographic variable. This isn't to say that companies don't get away with it -- airlines, car services, and booksellers all engage in price discrimination everyday, and we consider volume-based pricing a standard tactic. The difference is that these are policies that consumers can "select into" and thus feel are more fair than policies that are based on something that consumers have no "control" over. If Tinder wanted to price discriminate, it should have found another way to do so, or, again should have reframed the issue (the standard price is $19.99 but students can receive a discounted price of $9.99). A quick review of headlines related to this announcement suggests that the public and Tinder users find this new pricing policy outrageous and unfair (which I think any of the students in my Behavioral Economics and Decision-Making class could have predicted):
- Tinder's age tax is just one small piece of online dating's massive age problem
- For Thirtysomethings, It's Tinder That's Doing The Screwing
- The Price Is Wrong: Why It Doesn’t Make Sense For Tinder To Charge People Older Than 29 More
- Here's why Tinder's new paid service will cost more if you're old
Special thanks to Eliza Coleman for sharing!
RSS Feed
