
My 2 Bucks on Pricing - kes
http://chrisashworth.org/blog/2010/06/09/my-2-bucks-on-pricing/
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biggitybones
This is one of the best (and easiest to read) articles on pricing I've ever
come across. No formulas, no complexities explaining A/B tests and other
scientific research, just a story of a guy who made some software and heavily
underpriced it.

I also found the link to indie theatre incredibly interesting as well.

~~~
emef
100% agree.

The article was actually inspiring, it's nice to see such a supporting user
base.

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rauljara
Excellent article, but I think it's important to point out that in both his
examples (his own sales and the theater) the products/shows are being compared
to products/shows that are vastly more expensive. Even after raising his
price, qlab sounds pretty cheap next to other similar programs prices at
$1000+. Even if the theater tripled their prices, they'd be pretty cheap
compared to broadway.

If the standard price for an audio suite like his was $50, I bet the increase
in price to $249 would not have been as warmly received (to put it mildly). I
don't think this works if your product isn't comparable to some other product
that costs an awful lot more than what your charging.

~~~
Periodic
I think that is part of the point. Your customers know your market (them)
better than you do and they will point out if you're way off.

This article assumes someone is coming from the position of pricing cheap
because they are afraid they won't get enough sales.

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gr366
I like that the title of his post reinforces his point, using "2 bucks"
instead of the common "2 cents." It suggests that this information is worth
more than a typical opinion (and given the detail and outcome of the post I
think he's right).

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kes
(I submitted this story.)

I would really like to see Chris Ashworth interviewed on Mixergy. I think he's
got a great story on niche marketing, problem solving, and pushing things
forward.

(Edited for grammar.)

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Tawheed
I wouldn't have even bothered to click on this article if it said "My 2c on
Pricing" -- but somehow, "2 bucks" made it seem worth it.

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pedoh
If you're doing SaaS and discovering your price is too low, do you raise your
price grandfather in your current users for a certain period of time?

Conversely, if your price is too high, do you lower your price give your
current paying users freebies (an extra month or two) for paying at the higher
price?

I know at the very least I'd want to avoid another ZenDesk situation
(<http://news.ycombinator.com/item?id=1357592>); having happy customers seems
very important. Obviously there's a certain point where one needs to cut bait,
though.

~~~
jasonkester
I'm in the "Grandfather Everybody in at their current price" camp on this one.
It gives you a ton of upside, and not much downside.

Grandfathering somebody in at a low price messes with their head in a good
way. Suddenly, they're getting a better deal than everybody else. They're
saving money. Hell, they're _making_ money every month they keep that thing.
No way anybody's going to make them give it up. They _earned_ it by being an
early adopter.

I did this with S3stat when I raised the price from $2/month to $5/month. Here
it is a year later, and most of those two buckers are still around. Attrition
is fairly high among the five dollar camp, but the early guys are holding on
to their cheap subscriptions like they were gold.

Better still, when their credit card expires or they accidentally cancel their
account, I get to send them this email:

    
    
      Looks like your card expired.  Head over to S3stat.com when
      you get a chance and reactivate your account.  It looks like
      you were on our old $2/month pricing model, so that's what
      we'll set you back up with when you reactivate.
    

... Six hours later, I generally get a little ping in my inbox telling me I've
gained a new "Legacy" subscriber.

So sure, there's a downside, in that you miss a chance to convert those folks
to the new pricing model. But in doing so, you'd need to factor in the
immediate loss from a percentage of them simply saying "No. It's not worth
that much to me", plus the even scarier "What? I'm still paying for that???
Thanks for reminding me to cancel", as well as the long term higher attrition
rate from people who aren't eternally grateful to you for giving them such a
good cheap rate while you're charging everybody else more.

I think that about sums it up. Grandfathering: good. Not Grandfathering:
possibly bad.

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mkramlich
I wonder if this effect applies to games too? I sell games and unfortunately I
don't think it does. I would love to be proven wrong however.

~~~
houseabsolute
I can think of two big differences:

1\. Few gamers make a living out of doing it.

2\. There is a much wider selection in the number of video games they can
choose to play.

So you have two forces working against you. First, if you raise your prices,
there are a lot of other games people can play. Second, if you raise your
prices, people can simply choose not to play at all.

Not so with audio engineers. They must have the software to make a living,
giving them a lot less choice in the matter. They also probably become more
intimately familiar with the software than most gamers become with video
games. Finally, the context encourages a level of maturity that recognizes the
impact of freeloading and fosters good-customership.

So, that's why you probably won't be able to charge more for a video game.
Although they do get away with it in some contexts (rock band, some racing
games).

P.S. as much as you would like to believe gamers will pay for quality wherever
they find it, there's also this issue that in your industry (apparently
roguelike games) there's this huge norming influence toward free-to-play
games. That probably doesn't help you much.

~~~
chops
Also, gamers are notoriously cheap. Consider WoW players who whine about the
servers being down, and their justification: "I pay 15 bucks a month, and they
can't even keep the goddamned servers online!? WTF!"

Frustrating, to say the least. $15/mo for (in many cases) 60-80 hours of
entertainment per month, if not more for the extremely hardcore.

~~~
dagw
I don't agree that gamers are cheap as a group. Most gamers I know not only
own several consoles and a graphics card that cost more than many peoples
computers, they also happily buy $60+ games on the day of release several
times a month. If you try to tell them that by waiting 6 month they can get
the same games for half the price, they'll look at you as if that was the
stupidest thing they've heard in their entire life.

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wingo
Remarkably well-written. Wordy, yes, but entertaining, and insightful.

I'm inclined to agree with his points; and, I wonder how it relates to free
(libre) software. Maybe not at all, but it would be really fulfilling to have
that kind of user.

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tjmaxal
oddly enough I have heard managers at my own company deride a product for
being too cheap.

~~~
percept
Interesting, and I think that might identify the dividing line--if your
customers are managers then they're probably using Other People's Money, and
may not be as frugal as founders, freelancers, and direct consumers.

~~~
brc
..and they're the ones you want to be selling to. The easiest sales are to the
people who aren't spending their own money.

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dchs
Articles like this are why I love HN.

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danielnicollet
Great article. I think the importance of starting with a low price point to
generate a customer following remains key in this story however. So raise your
price but don't expect all customer groups to react like the Qlab ones did!

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moolave
Like my co-founder said, "if you price it too low, customers would think it is
worthless." However, this is totally different from the micro-pricing
ecosystem so don't get me wrong.

~~~
gnubardt
Like Joel said, pricing sends a signal
<http://www.joelonsoftware.com/items/2005/11/18.html>

~~~
moolave
Works both ways then. Thanks.

