I'm dealing with this right now in the worst way. My product actually depends on a subscription to another service, which is massive and priced ridiculously (JIRA). It's a hard sell to say that my service is worth as much as the platform its built on, but it works out that way for some customers.<p>I was considering dropping the price and making it a long-tail type of service, but I'm still excited about plowing lots of development effort in. This just reminds me that for businesses, the difference between 5 and 10 dollars is minimal, but for me, it's enough to keep the lights on (metaphorically, my office/apartment is very dim). I'd rather try to grow the customer base the hard way and then keep giving them more value for money.<p>Edit: my app is FocusTi.me, at <a href="http://start.focusti.me" rel="nofollow">http://start.focusti.me</a>. I welcome any feedback, I haven't really started promoting it yet.
<p><pre><code> The Book ($39) – 226 copies sold
The Book + Videos ($79) – 137 copies sold
The Complete Package ($169) – 100 copies sold
</code></pre>
In my experience real price elasticity only exists in business books. The author's example illustrates what tends to happen in real life: something that is 1/4 of the price rarely sells 4x better than the 1x-priced product. This generally means that you are leaving money on the table. The problem is that testing pricing can be a difficult art to master.<p>In some market segment selling a cheaper product in exchange for volume can actually cost you a ton of money. In hardware, for example, the customer looking for rock-bottom pricing will often be the most demanding in terms of support requirements as well as the expected value delivered.
The "charge more" advice should be common sense in this day and age. I'm very surprised it doesn't get taught in college marketing 101 courses. I read a book on salesmanship published in 1929 teaching the same exact thing to salesmen and Cialdini wrote at length about this phenomenon in his book Influence.
Some advice from a prospective customer: if you can't/don't want to offer free plan, at least give me a trial that's long enough to actually try out your product. Two great examples that come to mind:<p>1. Mixpanel vs. Kissmetrics: Mixpanel gives me a free account that I can use for as long as I want to evaluate all the stuff I can do with it. KM gives me a 14-day trial. I'm the only developer working on this project which means that 14 days is not enough time to implement the changes I need and actually start to see the results. Going with Mixpanel for this one was obvious. I will reach their free 25k data points way before the first month so I have to get a real paid plan or put a banner on my website. In any way, they won already. Even if I wanted to switch to KM for the lower prices, exporting the data I currently have would be a hassle.<p>2. The New Basecamp: Although they don't offer a free plan anymore, they do have a 60 days trial. They don't really lose much by offering those extra days and after two months I'm already hooked to their service, I know how everything works, and most importantly, they have my projects tied down. The work of those 2 months is already there so even if I don't like the product, I'll probably pay for it so I don't have to export it. Joel Spolsky has a great article that talks about this retention thing (his specific example was with email providers) but I can't find it right now :(
I'm surprised to see no mention of the Decoy Effect..<p><a href="https://en.wikipedia.org/wiki/Decoy_effect" rel="nofollow">https://en.wikipedia.org/wiki/Decoy_effect</a>
Contacting customers with invalid billing information is definitely a good tip. I was surprised to find out at 17% of our subscribers for StartupThreads were delinquent. Some had cards stolen, numbers changed, expired, etc. Wish I had taken their phone numbers to reach out easier, but sending a few friendly reminder emails will help.
This list is just a starting point. I would love to hear what all of you have found works for increasing revenue. Stories are good, specific numbers are even better!
Please do not substantially raise your prices all in one shot.<p>I watched in horror as the old marketing manager jacked our prices 50% one day. Everyone complained. He had to drop them back to their original levels.<p>Do it in baby steps.