I've noticed this too, but the flip side of it is that there's often an inverse exponential relationship between the amount of money being paid for a product and the number of users.
I suspect that both observations can be explained by assuming that the amount of value generated by a product follows a power law. Charge a lot, and you will restrict your market to only the head of the distribution. A nice consequence of this is that the consumer surplus (the amount of value you generate in excess of your price) is highest in this part of the distribution, which means all your customers are very happy even if you're charging them an arm and a leg. When you drop your price and service the long tail, you get a lot of customers who derive only a tiny bit more value from your product than it costs them, which means they get mad at you really easily.
This is the most insightful thing I've read on HN in a while.
The beauty of this argument is that it doesn't put customers (who are less demanding while paying more) on pedestal.
I run SaaS where there is one plan only. So all customers pay the same price. One observation I've made is that customers who are the heaviest users (thus extracting the most value) are the most forgiving ones and the easiest to deal with.
It's not about the price they pay. It's about net value they extract. The more value extracted, the higher tolerance threshold.
> It's not about the price they pay. It's about net value they extract. The more value extracted, the higher tolerance threshold.
This is probably the single best way to explain the phenomenon that I've read. You're absolutely right. My boss and I talk about this a lot, and I'll absolutely be stealing this in our next conversation about it.
It is not only value to the customer, but how closely your product fits the customers needs. Charge a lot and you are selecting for a very tight customer fit where all your features match exactly with what the customer wants. As you drop down the value curve you are selecting for a looser and looser fit.
The consequence of this is more of your features don’t work the way the customer wants and hence even if the overall value of your product is high for the customer, they experience many more annoyances using your product. Annoyances seem to generate far more complaints than lack of value. If I use a product that offers me little value I almost never complain about the annoyances I just stop using it, it is the high value products that don’t work the way I want where I bother to write a complaint.
Completely agree with your thoughts on why this phenomenon seems to occur. It's just one of those superficially counterintuitive things that become apparent very quickly.
I suspect that both observations can be explained by assuming that the amount of value generated by a product follows a power law. Charge a lot, and you will restrict your market to only the head of the distribution. A nice consequence of this is that the consumer surplus (the amount of value you generate in excess of your price) is highest in this part of the distribution, which means all your customers are very happy even if you're charging them an arm and a leg. When you drop your price and service the long tail, you get a lot of customers who derive only a tiny bit more value from your product than it costs them, which means they get mad at you really easily.