

Ask HN: Charging - When, how, and how much? - matt1

I've been building a web-based mockup tool called jMockups for the last several months and I'd like to get your thoughts on when and how to charge for it.<p>I've asked several experienced members of this community whether I should charge from the start or wait and charge down the road and I've had mixed feedback. Those that say charge now say that I should establish from the get go that this is a high quality product worth paying for and that transitioning from free to paid is a pain (which from my own experience with previous sites is true).<p>Those that say charge down the road say that I want to get as much feedback as possible right now to make it a better product, that I'll get more inlinks and buzz because more people will try it, and that I'm in this for the long term so its not a big loss if I don't charge for the first few weeks.<p>The second issue: how much? Balsamiq is the clear leader in this space and their main product sells for $79. We don't have identical products -- theirs focuses on low fidelity whereas mine currently focuses on high fidelity mockups -- but there is a lot of overlap. I plan to charge per month and offer a free option for folks to try it. I find myself basing my pricing off of this $79 number ($7/mo = $84/year) and while I think thats something that a lot of folks would pay, some of the feedback I've gotten is that I'd be better off charging much higher... $20/mo on the low end.<p>I don't have enough experience to decide with certainty on either issue which is why I've been asking for feedback and I'd like to get yours too: charge now or wait and how much?
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michael_dorfman
The last time this issue came up, I recommended the following free e-book on
software pricing, and I still stand by the recommendation:
<http://www.neildavidson.com/dontjustrollthedice.html>. That should get you
thinking about the right issues.

Now, as to your specific questions:

1) I'd start charging right away. If you can't get enough users to get good
feedback, then that's feedback of a different kind. I don't see any serious
upside to getting lots of free users, if you don't already have a business
model built around that.

2) My gut is telling me that $7/month sounds low for this kind of product. If
you've got compelling advantages over Balsamiq, and a good way to induce trial
(i.e., the "free option" you mention), then I'd be thinking in the
$15-20/month ballpark. I say this because as a business user, honestly, when
evaluating a product that will help my business earn money more efficiently,
the difference between $7/month and $20/month is basically a rounding error.
They both fall into the "pocket change" bucket.

~~~
patio11
Plus, the easiest way to communicate with a business user that you are better
than Balsamiq is to charge three times what they do. You and I know that Peldi
is the thought leader in this space. Your customers, overwhelmingly, _do not
know who Peldi is_.

They have two data points: 1) what was on the 5 minutes of Google searching
they did (and I'm overestimating by a factor of 10 for many customers) 2) what
you are charging. If Balsamiq charges a third of what you do, well, clearly
that must be the inferior knockoff which is only used by ramen-chomping MIT
students, not what we'd trust our client relationships with.

(Balsamiq is, obviously, _not_ an inferior product and I make lots of money
for my clients using it. But if you put a gun to my head and said "Compete
with it", I'd start by charging a lot more.)

~~~
matt1
Thanks. You have an amazing ability to explain things clearly and
concisely...you should write a blog or something (jk!).

FWIW I intended to supplant Balsamiq as the mockup tool of choice within the
next two years. Wish me luck :)

~~~
patio11
If N is Balsamiq's current revenue, two years from now you could be making 2N,
they could be making 10N, and both of you put together wouldn't have a
twentieth of the share of "not doing mockups despite a clear path to
benefiting from doing them", to say nothing of the number using inferior
solutions such as "sending Excel files around".

The true enemy isn't another company. It isn't even the back button, though
that is closer (and that pernicious bastard is still costing me 97% of sales).
It is the need going unfilled.

~~~
matt1
How do you make sure you're filling the need?

~~~
petervandijck
DO whatever you can to understand the need, first. (Sidenote: I checked out
the product and it's not addressing my needs.)

------
dh
Really the first thing you must decide is that you need to charge as this is
the only real way to get validation that what you provide is valuable. Someone
needs to give you real dollars for what you do.

As for the actual price there are a number of ways to attack the problem but
the key is the price will change over time as you learn from the marketplace
and your customers.

\- Ask your most active and least active users what they would be willing to
pay and test them after they respond by asking them to actually pay what they
suggest

\- Survey the market and decide if you want to be low cost, high cost, or best
value. This will give you a range of where to start

\- Work with a pricing expert like <http://sixteenventures.com>

------
petervandijck
I am your target audience, here's my 0.02c. Give me a 90 days free trial (30
isn't enough) and then charge without apologizing. If the product isn't ready
to charge for, open a limited beta and make that free, but be very clear about
charging for it later.

"I find myself basing my pricing off of this $79 number ($7/mo = $84/year)" ->
BAD idea. Bad idea. Bad idea. For a subscription, you should charge
19.99$/month, and more for an enterprise license (399$/m). Seriously. (Again,
for real, I am your target audience.)

If this is really good, it would (finally!) be the product I've been waiting
for. Let me know if you want a beta tester.

~~~
matt1
Thanks -- let's chat.

And if anyone else wants to help test it, shoot me an email or leave a comment
below.

------
olalonde
I'm not an expert on the matter but I think it is fair to assert that the
following:

One time fee of 79$ > (79/12)$/month

That depends on lots of factors such as retention rate, conversion rate and
customer acquisition cost but as a general rule, you should take for granted
that every new customer will equal less than 12 months payout, especially in
our ridiculously fast moving industry.

PS: I might be wrong since I got no hard data to back my claim but at least
it's something you should consider in your estimates.

~~~
matt1
Good point -- its definitely not that simple.

As a data point, note that Mockingbird, which is transitioning to a paid
model, offers a $9/month option as a starting point:

<http://gomockingbird.com/launchinfo/>

Similar mockup tools are in the $9-$15/mo range on the low end.

------
gacba
Don't just guess, setup a sales site for your product (a test one) and do some
A/B testing on pricing. Find out what the maximum threshold is for people on
the product. Use an AdWords campaign (with a $100 budget) to drive traffic to
it). That assumes you have a list of keywords you'll be using for SEO (you
have that list already, right? RIGHT? Well, if not, you should...)

~~~
petervandijck
Or better: talk to a few people in your target audience. I can tell you right
now that they are not (much) price sensitive. They are "impress my clients"
and "make my job easier" sensitive.

------
joshuacc
I don't have any personal experience to draw on, but why couldn't you do some
combination of free and paid?

Freemium model is an option. There's also the possibility of just giving away
full version trials to a lot of people when you're getting started. This
approach also has the benefit of generating publicity if you give the free
versions to the right people.

~~~
olalonde
A lot of companies are abandoning the freemium model lately
([http://news.buzzgain.com/freemium-is-dead-long-live-
freemium...](http://news.buzzgain.com/freemium-is-dead-long-live-freemium/)).
It's not the de facto choice that it used to be.

~~~
joshuacc
I agree. Just wanted to point out that it is still an option.

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gte910h
If you were 7 a month, and it supported mobile, it would be a no-brainer for
us.

If you were 20 a month, it is a measured decision.

~~~
matt1
What do you mean supported mobile? You want to design mockups on your iPhone?

~~~
gte910h
Nope, display mockups of mobile apps produced elsewhere, via the onboard web
browser.

Even mobile websites would be a start.

(We're pretty exclusively doing mobile development at the moment, mostly
native, but some web).

Basically: be balsamiq mockups, except export to a website to show clients and
don't look so cartoony.

~~~
matt1
Oh, definitely--that's already done, though I'm not explitly offering mobile
web widgets yet. Shoot me an email and let's talk more.

------
rakkhi
There was a good discussion here on this topic:
<http://news.ycombinator.com/item?id=1671599>

~~~
sw1205
And also here: <http://news.ycombinator.com/item?id=1659156>

