(I knew this philosophy degree would come in handy)<p>The author may not know it, but part of this article is describing something occasionally known as the <i>judgement-action gap.</i> It's a point in psychology/philosophy typically brought up in moral reasoning, specifically because there's very often a massive discrepancy between what people say they will do and what they end up doing in any moral situation.[1] This is no doubt true for saying they would pay X for Y.<p>I think the judgement-action gap is an extremely important thing to remember at all times, especially in the realms of business deals. If a commitment isn't on paper, it's not really a commitment. (Money counts as paper, too.)<p>Alas while I think the gap is a neat principle, I'd rather read an article just on that principle than one titled "How to price something" that culminates in the advice "make up a price, actually sell it and see." If that's all the advice you have, then even asking for people's opinions of what they'd pay for it is more useful than a 100% arbitrary number. It seems odd the article would offer no <i>real</i> solutions.<p>~~~~~~~~~~~~~~~~~~~~~~~<p>Hey! Wait a minute!<p>I hate to be the typical HN cynic but the last line reveals that this is not an article at all but a thinly veiled advertisement.<p>While the article doesn't <i>actually</i> say how to effectively price something, I had no idea what Basecamp Breeze is and now I do. 37 signals blog, you've got us again![2]<p>[1] My favorite example of this, though a bit dour, is "the only moral abortion is my abortion", a long list of stories of people who are morally opposed to abortions, yet still getting them: <a href="http://www.prochoiceactionnetwork-canada.org/articles/anti-tales.shtml" rel="nofollow">http://www.prochoiceactionnetwork-canada.org/articles/anti-t...</a><p>[2] I'm always surprised that 37signals posts get upvoted extremely quickly, seemingly regardless of content. It's not a bad thing per se, just a surprising thing.
This one is quite the useless fluff piece. Not a single mention of even covering your hard costs. Just guess, be wrong, and try it out. Gee, thanks. Obviously I'm not in the subset of HN that finds "pull a number out of your ass, rinse, repeat" to be worth submitting and upvoting. Isn't the reason to ask about pricing to avoid this kind of crude guesswork in the first place?<p>If you want something of more substance, read this: <a href="http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html" rel="nofollow">http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...</a> Ultimately, you'll still have to pick a number and try it out but at least you can do so somewhat intelligently.
Various pricing schemes:<p><pre><code> Price what everyone else is charging ($5, $10, $20 per month)
Price according to value (you're saving people 200 labor hours per year, price it
at 200 * hourly wage)
Price at the ideal price (good luck finding it, and if customers catch wind
you're playing a/b games with them, barricade your doors)
Price discriminate (create different pricing options for basically the
same product with different features and attributes, maybe based on amount
of use, maybe based on premium features)
</code></pre>
Another real world tactic: create competitors or offbranded versions of the same service. This can help support your branded cost by allowing unbranded seemingly less good products be sold at lower prices to price discriminating consumers. It can let you sell to two groups of customers as well, including those customers your competitors might steal. It can make your entire market seem that much more of a real thing since now there seem to be competitors in it. In can drive up barriers to entry since there are competitors, and since you have the various pricing schemes already covered.<p>The article mentions that you can't ask people how much something costs, what matters is their behavior. And that's true. But I think you can ask people to compare products and services with known prices to your new product. Do you pay for Evernote at $5 per month and Spotify at $10 per month? If you could only pay for one at $7 per month, which one would you pay for? If you could only pay for Evernote at $5 per month, or my new site that does X at $5 per month which would you pay for? And you can do A/B testing on those prices.
Warning: this post is an ad for an email list service.<p>Secondly: how do they get away with charging people for an email list service? Is this for an Apple-like cult of Basecamp users?
Allow me to recommend the free ebook that I found massively useful on this exact topic.<p>"Don't just roll the dice" by Neil Davidson<p><a href="http://neildavidson.com/download/dont-just-roll-the-dice/" rel="nofollow">http://neildavidson.com/download/dont-just-roll-the-dice/</a>
If you are already selling, here's a piece of actionable advice if you want to test whether a user will pay more for your software than you are currently selling it at - Advertise the software at the higher price point, then when the user buys it charge them at your current price point. This is good on a number of levels:<p>- You have data points that tell you users will pay more for your software (to the point of giving you their credit card details)<p>- The users will think they are getting a bargain when they realise they've been charged at a lower price point.<p>- You can probably perform this test in <5 minutes by tweaking your advertised price in HTML and deploying to live.
Of course you can make up a number and try it. But what if your wrong, how do you properly handle increasing your price on existing customers? Also, how do you know if it would be better to increase the price and maybe get more per customer, or decrease and maybe get more customers? How do you test that?
This was useless navel-fluff. Pricing is a sufficiently difficult task that entire books -- not short ebooks: fully dressed textbooks -- have been written about the topic. You can honest to god hire consultants with <i>pricing laboratories</i> to work out what to charge.
So I know next to nothing about this, and I've never shipped a product of my own, but why can't you just do something like:<p>1. Price it at price $X, record number of buys/month over a few months.<p>2. Price it at price $Y, record number of buys/month over a few months.<p>3. Now with the assumption that you have a linear demand curve, you can extrapolate the buys at any price, which would roughly follow the equation B = (X-Y)/(P1-P2) x P, where B is the number of buys and P is the price in dollars. Obviously this equation will only work (if at all) for values in a certain range.<p>4. You want to maximize B x P, which is the total money made per month. That is, assuming costs are always the same regardless of the number of sales.
This reminds me of the "Tracer Bullets" tip from The Pragmatic Programmer. The idea being that tests help you see where the code <i>should</i> go and how far off you are, so that you can aim a little better and try again.<p>This is just tracer-bullet pricing.
How to price something:
- Based on your competitors' offering & pricing. Higher price can indicate higher quality. You also don't want to spark a race to the bottom.
- Based on what you want your revenue & costs to be. Not relevant to your customer, but very relevant to your company.
- Through testing different price points. It's generally easier to start high and go lower than the other way around.
I've heard starting with a high price can be useful. Its easier to lower prices than raise them. Your early customers are more committed. You can perfect things more easily with a small number of users.<p>And its easier to figure out the impact of price changes with multiple price changes, which are easier to do when you are going down.
Haha damnit I wish Jason had posted this a day sooner, as yesterday I created a few threads asking people how much they'd pay for a tool I haven't built yet.<p>How do you balance this with the principle of not building something people don't want/won't pay for?
not a lot of actionable information in this post. very fluffy. reminds me this comment that a poster made yesterday.<p><a href="http://news.ycombinator.com/item?id=5033493" rel="nofollow">http://news.ycombinator.com/item?id=5033493</a>
lots of theories on price, but none seem to start with the more important question. WHO WILL PAY THE MOST FOR YOUR PRODUCT.
If you sell a vitamin that improves eyesight, are you better off selling it to the mass public, or to hunters to improve their hobby, or perhaps to pilots to extend the life of their career. The value proposition here is vastly different...<p>Pricing a product should not start with what can I get away with charging, it should start with, WHO DOES THIS PRODUCT CREATE THE MOST VALUE FOR?!