Companies have to raise their prices regularly in order to remain competitive. However, as Spotify shows, old rates continue to exist behind the scenes.
Whether in music streaming, retail, or subscriptions, companies repeatedly raise their prices to gauge customer reactions.
The reason for this is competition, which naturally drives sales prices down.
Increasing revenue potential
Companies use the economic principle of price elasticity of demand: How much do sales volumes fall when prices rise?
A current example is the music service Spotify. The streaming provider has raised its fees for premium subscriptions in several markets. In Switzerland, Spotify Premium Family now costs 22.95 Swiss francs per month.
The clear goal is to increase revenue without losing a significant number of users.
The risk: too large a price increase could lead to cancellations, while too small an adjustment leaves unused revenue potential untapped.
Slow customers pay more
In practice, however, companies try to cushion this tension. Older, cheaper tariffs often remain available – albeit less visible.
Social media is currently abuzz with the news that Spotify’s price increase notification also contains a hidden option to retain the old terms and conditions.
This option lacks only one feature that is unpopular anyway and that many customers did not even know existed.
Long-time subscribers are thus given the opportunity to maintain their previous price level, while new customers and “sluggish” less price-sensitive users accept the more expensive terms.
Netflix shows the way
From a business perspective, this is a classic approach. Companies use price tests to find out which customer groups are particularly price-sensitive and which are more interested in the offer than the price.
Digital providers in particular have the necessary data to quickly evaluate customer behavior and make adjustments.
The movie streamer Netflix does this regularly.
A few years ago, Netflix was almost free. Now, monthly subscriptions are quite expensive in many places.
Swiss tests lower US prices
Premium airline Swiss also recently conducted a similar price test for demand on North American routes, as Chief Financial Officer Dennis Weber reported at a media conference.
It was stated that ticket sales to the US could still be stimulated satisfactorily with price reductions.
Companies develop a price-sales curve and decide which combination is best for them.
Increase or maintain sales
The trend shows that it is important for consumers to compare prices carefully and check offers.
For companies, on the other hand, price elasticity remains a key management tool for balancing growth and customer loyalty.
Price times sales volume equals revenue – and the higher the sales price with sales remaining constant, the more money flows into the coffers.
Competition automatically pushes sales prices down, and companies must take action to counter this.
August 24, 2025/kut./ena.
