
Pricing Your Product: it Doesn’t Have to Be so Complicated - iSimone
http://joel.is/post/30167827294/pricing-your-product-it-doesnt-have-to-be-so
======
eps
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.

~~~
bpatrianakos
I very much appreciate his self promotion tactics. This isn't disingenuous at
all. He's simply sharing his own experiences and giving advice to others who
were in the same boat as he was. There's more than one way to skin a cat. What
I mean by that is Joel's advice may work great for many people but he's
definitely not the final authority nor does he ever claim to be. My totally
unprofessional and uninformed opinion of your comment is that it seems to
maybe stem not from Joel's writing but probably from seeing a ton of blog
posts just like it on HN from others. I get it. I've had HN burnout before too
and when it happens you just look at everything on the front page and think to
yourself "what a bunch of bullshit. I think we've beaten all these horses to
death already". When the balance of reading to to doing tilts toward reading
far more than doing this kind of attitude comes about or at least it does for
me.

So lay off. I believe you're annoyed but you're not the only one Joel is
writing for. The guy is doing a good Jon and a lot of us really appreciate the
documenting of his experiences. I personally can really relate to everything
he talks about. I'm smart enough to know not to take is as gospel but it's
damn helpful nonetheless. Joel isn't running a product pricing blog. It's a
blog about his own experiences running a startup so be prepared to read about
those types of experiences including how he approached pricing Buffer when you
click the link.

It's one thing to disagree with everything he's saying and back it up and
another to just accuse him of being disingenuous and self promoting because
you've read one too many posts on HN today.

~~~
larrys
"I very much appreciate his self promotion tactics."

I agree the self promotion is good for Joel. I know who he is because of what
he has written even though I've been critical along the same lines as the
parent. But the parent's thoughts are important also in pointing out to anyone
reading this (who is green) that isn't aware of what is going on here. Then
they can decide for themselves how they want to listen to or use the advice.

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bdunn
I doubled the price of my B2B product about a month ago, and the results have
been fantastic.

Profit has doubled for new accounts, conversions have gone _up_ 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.

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.

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.

~~~
BryanB55
Pre-purchases sounds like an ideal situation. That's awesome if you can get
people to do that. Mind sharing more on how you sold them on prepurchase? What
is the book you mentioned?

~~~
bdunn
The book: <http://doubleyourfreelancingrate.com>

Blog post about it: [http://planscope.io/blog/selling-2000-worth-of-my-
unfinished...](http://planscope.io/blog/selling-2000-worth-of-my-unfinished-
book/)

HN discussion: <http://news.ycombinator.com/item?id=4422151>

Feel free to drop me a line (email's in profile), I'd be more than happy to
answer any and all questions.

~~~
Swizec
Oh hey, I almost bought that book a few days ago when it first surfaced on HN!

Shame my credit card is kaput until the end of the month. There's a high
chance I'll forget the intended purchase by then :(

~~~
bdunn
There's a free announcement list you can join (below the purchase button).
Sign up and I'll keep sending you reasons you should buy the book until you do
:-)

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Swizec
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?"

Make sure you don't give them an anchor. Make sure to ask across a few income
ranges (ie. not just poor students).

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.

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.

[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.

~~~
asanwal
Pricing is def a dark art but this seems like the exact opposite of what to
do.

Asking people who are not your target customers what the price should be
should get you an answer to price it to be free. These people will not think
it is worth more or less than you're thinking as they dont need it. If they
offer a price, they're guessing since what you have is not something that
solves a pain for them.

Instead, talk to customers early and saying "we are doing x to solve y pain
and are thinking of charging $z. What do you think?". If they vomit all over
the price, then you know you're too high. If they don't get into price cuz
they don't get the product, then you got different problems to solve before
pricing.

In general, for these convos, I think going higher with this initial pricing
is better as it has price anchoring benefits and it's much easier to go down
then up in subsequent convos.

~~~
Swizec
The point is, you should ask _someone_ how much they'd be willing to pay. Even
nontarget customers will give you some sort of ballpark value that's better
than guessing in a vacuum.

But of course, target customers are better. I have a feeling most people when
starting out, don't even ask those, but just take the "expenses plus a bit of
margin = price" formula.

~~~
asanwal
I agree with second part being a pitfall, but re: ask someone/anyone, let me
illustrate why this is problematic.

A friend of mine was starting a subscription ecommerce site targeted at women
(clothing & makeup primarily). She asked me about pricing (I'm a guy) I used
all my "knowledge" to offer up my thoughts on price and then she asked "would
your wife or sister use it at that price?" and I couldn't say. At that moment,
it became apparent to both of us that although my pricing logic seemed ok in a
theoretical, consulting-esque way, I was actually a pretty useless windbag in
this circumstance.

I fear asking non-customers just risks getting at very wrong pricing - garbage
in, garbage out. And also risks you missing out on great product feedback as
well.

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deepGem
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:

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.

Pricing, especially for consumer apps is a pretty complicated issue and not as
simple as the author makes it sound like.

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laironald
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 >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...

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larrys
Just a little side tip on something that works for us.

We have a service that we price at $120.

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.

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).

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.

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shankar1221989
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!

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orangethirty
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.

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

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

