Pricing Your Product: it Doesn’t Have to Be so Complicated

Joel, this is getting annoying as hell. Again, an authoritve advice on a subject you clearly have very little experience with. I don't appreciate your self-promtion tactics and I find them disingenuous at best and damaging at worst.

I doubled the price of my B2B product about a month ago, and the results have been fantastic.<p>Profit has doubled for new accounts, conversions have gone <i>up</i> a bit (I also redid a lot of the marketing site, so I'm sure that has a lot to do with the increased conversions), and no one has publicly complained about the new prices. Anyone who signed up before the change was grandfathered in and will never need to pay more.<p>Lessons learned: When you're building an app for businesses, we usually do a poor job at gauging the economic benefits that we provide to our customers. I ended up talking to a lot of customers, and afterward was able to segment them into groups of "how does Planscope affect the operation of their business and the revenue they collect?" The resulting plans and prices I have now are based on that segmentation, though I think the top two tiers should still be charged more.<p>I also have a book (it was discussed here on HN two days ago), and the first two points of this article about motivation and validation are spot on. While I work on wrapping up this book, I've been getting a handful of email receipts a day from PayPal from prepurchases. Building a new product in a complete vacuum sucks, putting together an announcement list is better, but having people send you actual cash trumps all.

A good way to start with pricing is picking a few random people, maybe not even your target customers and ask: "How much would you pay for this?"<p>Make sure you don't give them an anchor. Make sure to ask across a few income ranges (ie. not just poor students).<p>What you'll often find is that people have a bad sense of how much something is worth and will think your service is worth more than you do.<p>You can then charge something like the median suggested value. It's what I did for postme.me[1] and it got me sales on the day of launch.<p>[1] I seriously need to reboot that project, never kill a project that's making sales, even if it's currently "not enough" - just invest more in marketing. Silly Swizec.

I'm sorry to say this - but the article tells little or nothing about the 'how' of pricing. Picking a random price point and experimenting with that won't work. Here are the issues:<p>1. The customers who you ask initially need not represent the buying majority. How do you select the set of people who represent the majority segments of your user base in order to determine pricing ? 2. In the first version of your product, how can you distinguish the issues the customers have with pricing v/s product features. As it is, mobile analytics is in such infancy. I can't even figure out my user base demographics. 'Asia' is not the demographic I'm looking for. 2. Even Apple faltered with pricing when they announced a steep price cut to the original iPhone but that's Apple, not a no-name startup. If a no-name startup pisses customers off by changing the pricing, then what's the backup plan.<p>Pricing, especially for consumer apps is a pretty complicated issue and not as simple as the author makes it sound like.

Nice article. Def just do it and see how people react. Another way to help with assessing price is to build a simple model. For a recent project, I built an excel model which is essentially a few assumptions (read: probabilities and guesstimates) which contribute to "revenue - cost = profit". Now guess what? Divide each of these by estimated quantity sold. This equals... Price to sell for - cost per item. The trick is for that equation to &#62;0. Back to my project... It turns out I calculated cost per item to be $1.70. This gave me plenty of ammo to tell my partners.. Hey, we should sell it for more than $1...

Just a little side tip on something that works for us.<p>We have a service that we price at $120.<p>When you purchase that service you are told that it takes about 24 hours to setup. We then offer the ability to purchase 2 to 4 hour setup at an additional $15 or 4 to 8 hour at an addition $10 or 8 to 12 hour at an additional $5.<p>The majority of people purchase the $10 option. Presumably for the same reason people choose to pay for overnight, two day etc. shipping instead of waiting 3 to 5 days (or whatever the offering is).<p>When we added this option a while back it was like instant money since we were typically completing the service setup in the 2 4o 4 hour time anyway.

The real value of the app that one builds is seen only when the customer uses it. And in most cases getting paid customer for a MVP is tough (unless the customer is a known person). Give the app free to the customer for a fixed time, make him use it. And if the product has value, the customer will pay you money. Once you get your initial few customers pricing will take care of itself!

A/B test the prices. Start from ridicously high, and work your way down. Why not ridicously low and work your way up? Because you can then tell people you lowered your prices. Also, it also does not anchor your price to a low starting point.

Sadly, the website is down when I try to click the link. Probably should figure out how to keep a website up first :P

So he is a full-time blogger now? It's a shame to waste all this advice :)