Social Machines: How to Develop Connected Products That Change Customers' Lives

Chapter 13

The Art of Social Pricing

Traditionally, when you make a thing, your goal is to sell that thing on the market. You figure out your cost of goods, determine what you want for margins, look at the competition, and set your price. It’s pretty straightforward. But if you are a social machine developer and your device can share valuable data that could be useful to others on the network, then the revenue-generating opportunities expand. You can start to develop pricing models that take into account that users may buy additional services from you. I’ll return to the Amazon Kindle as a good example. The price of the device is so attractively low not because Amazon has figured out how to significantly lower its manufacturing costs. It’s because Amazon anticipates that you will load up your Kindle with content from the Amazon catalog, which, of course, it makes money on via each download. Amazon even covers the cost of 3G wireless airtime in this fashion, cutting the carrier into the revenue streams coming from these downloads.

Social machine designers have the same opportunities to price their products creatively. In the HighlyCool example from earlier, access to the product’s application programming interface (API) was free, but that doesn’t have to be the case. You could charge a licensing fee. Or you could make it available for no charge but limit the access to only a subset of the machine’s available data. More comprehensive data sets could be accessed for an additional ...