

Ask HN: Do you have some advice on pricing a product? - cx42net

Hi!<p>I&#x27;m finishing the beta release of my project and one of the main question that&#x27;s bugging me is the following:<p>&gt; Am I asking for the right price?<p>In general, I would compare the competitors, see their price and adjust accordingly, but in this case, I didn&#x27;t find any competitors (note : I didn&#x27;t say there isn&#x27;t! Maybe I searched wrong).<p>The project, http:&#x2F;&#x2F;uncovr.it, aims to provide an automated reset services for theme and module sellers to their clients.
With Uncovr, my users will be able to setup and forget a basic instance of their plateform (Wordpress and Prestashop so far) and show case their work.
Those instances are resetted every few hours and I made the best I could to provide a simple interface to use.<p>Since I couldn&#x27;t find any concurrent, I stated the following :<p>&gt; How much would I pay ?<p>I sell some modules on the Prestashop&#x27;s addons site (scratch your own itch they say) and I went with this formula :<p>* The Professional plan : 1 module&#x2F;theme sold and it&#x27;s paid<p>* The Platinum plan : 2-4 modules sold and it&#x27;s paid.<p>Hence the prices.<p>What do you guys think about it? Are they too high? Not too much?<p>(by the way, what do you think about the project in general? Some inputs would be awesome ! :) ).<p>Thank you (:
======
taprun
I feel like I can speak on the subject, since I just wrote a book on pricing
software.

First, it's often a very bad idea to simply take a competitor's price - both
Timex and Rolex would go bankrupt trying to match the other's price.

Here's the short version of what I suggest:

* Write down the pain point that your product solves in 1 sentence. * Write down the types of people who have that pain. * Rank each type by their willingness to pay and their ability to pay. Willingness will be partially based upon how well you can convince them that you'll save / earn them money. Ability will be based upon how much cash is burning a hole in their pockets.

Come up with three tiers, one for each group with the highest value for
willingness*ability to pay. You may need to alter it a bit, if any of the
groups prove too small.

I have two product pricing teardowns listed at my site (
[http://taprun.com](http://taprun.com) ) that might help you think more about
pricing.

~~~
ddebernardy
> \- Write down the pain point that your product solves in 1 sentence.

> \- Write down the types of people who have that pain.

> \- Rank each type by their willingness to pay and their ability to pay.

Imho, this is not making the necessity to segment a market clear enough to OP.

Consider a wash-machine repairman as an example. The pain point is, naturally,
"broken wash machine". Which occurs each year in a certain percentages of all
households. The naive approach would be to assume that the latter is one big
market, and proceeding to rank households based on their willingness and
ability to pay a wash machine repairman.

In reality, there are a plethora of potential market segments which are based
on criteria that do not in any way relate to price.

In light of a leaky wash machine, for instance, a household's options include:

\- Calling in for the warranty if it's not expired

\- Simply putting a bucket and continuing on with the broken machine

\- Getting the leak fixed by the household tinkerer (or a friend or relative
who tinkers)

\- Buying a new wash machine

\- Going to the laundromat from that point forward

\- Etc.

\- Calling the repairman

Point being: you want to properly identify which segments are indeed a good
fit, prior to ranking them by their willingness and ability to pay.

In addition (in my experience anyway), these two steps are best taken care by
interacting (email, chat, phone, face to face) with potential clients: not
doing so introduces multiple risks, including coming up with a product that
does not match their needs, under- or overpricing it, and -- perhaps most
importantly -- missing out on opportunities to identify higher-value niches
who you can up-sell things to.

------
snarfy
* The Ultimate plan: 8-10 modules sold and it's paid.

Having a third option will increase sales of the second option. This is why
e.g. visual studio has an ultimate edition - to increase sales of the
professional edition. Next to ultimate, professional looks like a good deal.

~~~
cx42net
This is interesting, but wouldn't it make a counter intuitive result? =>
Throwing visitors away by making them think we target high sellers ?

By keeping the logic, 8-10 modules would be around 350 $ / month. But now, I
have to justify this difference!

I could offer the possibility to choose how much time per day their instance
is resetted, and even setup the service in a dedicated server ...

Well, thank you for the feedback, I'll think about it ! :)

~~~
snarfy
I read about it in this book:

[http://en.wikipedia.org/wiki/Predictably_Irrational](http://en.wikipedia.org/wiki/Predictably_Irrational)

~~~
cx42net
Interesting, I added it in my waitlist to read :) Thank you.

------
mmorris
Pricing is hard! I've found a lot of the content on the Price Intelligently
blog to be helpful.

[http://www.priceintelligently.com/blog](http://www.priceintelligently.com/blog)

They are pricing consultants, but I haven't actually used them, just read
their content.

~~~
cx42net
Thanks for the link, there is a few post that seems interesting at first look,
I'll take the time to read them :)

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debacle
Hey, I don't have any input on pricing, but I think you should try and spend a
few dollars on a copy editor. There are a lot of grammatical mistakes on your
homepage and you could get someone to proofread that for you for very little
money.

~~~
cx42net
Thank you for the remark. I'm not a native english speaker but I tried my best
to find and fix mistakes, but apparently some where missed!

I'll proof read it. Thank you again.

~~~
debacle
You could probably pay someone <$20 to proofread the site on eLance or
craigslist.

~~~
cx42net
Thank you for the names. I'll also take into consideration Fiverr.

~~~
giarc
Review these contractors though, many are not native english speakers as well.
You might end up with the same grammatical errors and less $20.

~~~
cx42net
Would you like to do it for 15$ ? ;)

~~~
giarc
Here are some obvious ones.

"Start your 15 days free trial." \---> "Start your free 15 day trial."

"We provide a powerful (yet simple) hosting service with automated resets to
showcase your work without thinking about server management."

The fact that this sentence changes font size is odd. Make it all the same or
cut it into two sentences.

"Forget users that screws your demos!" \---> "Forget users that screw your
demos!"

"We provide both email and phone support with fast reply." \---> "We provide
lightning fast email and phone support."

"Let us manage your demos instance and will only have to focus on the sales!"
\---> "Let us manage your demo instance so you can focus on sales!"

"...in order to avoid bad users to break your demo websites." \---> "in order
to avoid bad users that broke your demo websites." ???? or something similar.

"get access to the error logs (for platinums account)" \---> "get access to
the error logs (for platinum accounts)"

"Visits statistics (not yet available)" \---> "Visit statistics (coming soon)"

Stopped reviewing after this, and only reviewed landing page.

~~~
cx42net
What could I do for you in return? Do you have something in mind?

~~~
giarc
Thanks for the offer, but it's fine. It really only took 5 minutes. Good luck
with your startup.

~~~
cx42net
Thank you very much, I really appreciate.

------
ASquare
Check out this (relatively short) e-book on pricing.

I found it quite helpful.

[http://download.red-gate.com/ebooks/DJRTD_eBook.pdf](http://download.red-
gate.com/ebooks/DJRTD_eBook.pdf)

~~~
cx42net
PDF downloaded, I now need to read it :) Thanks for the link!

~~~
ASquare
Cheers!

------
jonwachob91
There are three basic methodologies:

1\. Your total costs + some profit $ = Product Price

2\. Your comparable competitors price + or - some amount = Product Price

3\. A BullShit price you pull out of your ass that you tell people to pay or
fuck off = Product Price

Explanations -

3\. Apple is a prime example of this pricing model. nuff said.

2\. Comparable competitor being the key phrase. I also suggest pricing higher
and building a better product. Undercutting can start a nasty pricing war that
can cause a lot of unndeeded revenue lost, on both sides.

1\. This seems most appropriate for you. You can't just price at what you
think the market says they are willing to pay. They may say they are only
willing to pay $1/month. That's not going to cover your labor costs unless you
have a ton of users. Figure out your labor costs associated w/ maintenance and
additional features (don't forget to account for future hires). Price at that
amount plus some profit (something like 10% or 20% if you have high labor
costs. Don't be afraid to stretch that percentage higher too.) If you can't
find a price point that covers your costs, but is in a range that users are
willing to pay for, than you don't have a business.

Entrepreneurs often forget that you can build this kickass product that every
user needs, but if the customer doesn't have a high enough ROI they won't buy
the product.

User != Customer

~~~
cx42net
Your insight is very interesting. I cannot tell exactly my total cost because
I'm missing some parameters (maintenance, working on additionnal features,
some potential future hires, etc).

Your comment made me think about something I was missing: ROI. I don't state
in the home page that this service will help increase their sales! Silly me!

~~~
jonwachob91
>>> Your comment made me think about something I was missing: ROI. I don't
state in the home page that this service will help increase their sales! Silly
me!

ROI doesn't have to be an increase in sales. It could be increased efficiency
(thus lowering the customers labor costs).

There are lots of sub-categories, such as a marketing ROI. But those sub-
categories can always be classified as either lower cost or increased sales.

>>> Your insight is very interesting. I cannot tell exactly my total cost
because I'm missing some parameters (maintenance, working on additionnal
features, some potential future hires, etc).

Best thing to do is guess. If you hire 2 additional engineers and a marketing
specialist, you could forecast an additional $325k in labor every year. Add in
your salary, so arbitrary number, lets say you have $450K in labor each year,
tack on space rent server costs and other costs at a guesstimate. This'll tell
you the minimum costs you are going to have in a year, divide that by a price,
and that tells you how many customers you'll need to break even. Or you can
divide costs by an expected number of customers and get your price.

~~~
cx42net
Well, I need many users, really many many many with this current setup :p

------
jameszol
If you have time, I highly recommend reading The 1% Windfall by Rafi
Mohammed[1].

There are dozens of pricing options in the book; however, Rafi's favored model
is: try to set a price based on the value the buyer receives.

In your case, it sounds like you are the buyer because you built something
that fixes a problem you had. If the pricing is something you will pay, then
you're probably in the ballpark with your prices.

Have you surveyed other theme/module sellers to determine the value a service
like yours would provide to them? Using your scenario, will other sellers
value (pay) for your service at the equivalent of 2 sales/month for the Pro
plan and 4-6 for the Platinum? Will you pay that much to a competitor if they
build a similar business?

Good luck with your product! If I were a theme or module seller, it looks like
something I might try because as a regular theme and module buyer, nothing
frustrates me more than to click a demo link only to find demos that do not
exist anymore. I almost never buy a theme or module that I can't demo first.

[1] [http://www.amazon.com/The-1-Windfall-Successful-
Companies/dp...](http://www.amazon.com/The-1-Windfall-Successful-
Companies/dp/0061684325)

~~~
cx42net
This post is giving me a lot of reading! All of them are interesting, I just
miss the time ;)

Your last line is a great motivation for me, thank you very much for that.

I think I'll prepare a survey/discussion about the pricing by contacting some
ThemeForest sellers, I just need to find the good introduction email for that
:)

------
freejack
I like to think of price as a reflection of positioning & strategy. If your
strategy is to aim at the high end of the market, then your price should
reflect that. If you are looking to target the mass market, then you might
want to consider value pricing. This sounds fairly niche, so if it were me,
I'd thoroughly consider a premium price backed with lots of value in the
product.

~~~
cx42net
By a premium price, do you mean a third one?

I aligned the price with what I gain from selling modules, and the platinum
one is still a bit too high for my monthly income, that's why I consider it as
premium.

But maybe you are talking to a bigger plan ? something more around 250+$ ?

I try to also take into consideration the sellers from Themeforest that starts
and doesn't earn a lot.

------
orkoden
Think about why you want different plans. Maybe you're better off with just
one plan. Then customers don't have to worry they might get the wrong plan.
Instead of having plans you could also charge by module and just give a
discount on more modules. "Pay for three, get one free". Confusing and
complicated payment options can hinder sales. You can also start with one and
then add more later depending on what customers need.

At the moment you're artificially differentiating your plans by the possible
rest times. But that's your main feature. Don't restrict that at all. It's
what makes your product interesting.

~~~
cx42net
I initially thought about charging by modules, it was even the main argument
at first.

But this was not adequate because

1\. Wordpress theme sellers doesn't care about modules 2\. This would require
a deep change in the code's plateforms (Wordpress, Prestashop) which is not
best suited (this may introduce bugs).

As you said, differentiating the plans with the reset time is a good option.
Heck, I even had an hard time thinking what frequency was the best! Not too
short (the instance would become impossible to use) and not too long :)

------
cx42net
Here's the clickable link :

[http://uncovr.it](http://uncovr.it)

(I don't know why it's not in the question).

~~~
tylermac1
You can't make clickable links in post content.

~~~
cx42net
Indeed, I just read the FAQ
([https://news.ycombinator.com/newsfaq.html](https://news.ycombinator.com/newsfaq.html))
and it's explained here :)

------
abcd_f
Obligatory link on basics of price formation, just in case if you haven't seen
it before -

[http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...](http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html)

~~~
cx42net
Thank you! :)

------
koonsolo
You have found the right price when your customers complain about the price,
but buy anyway. :)

~~~
cx42net
Exactly, I have that exact situation with
[https://www.voilanorbert.com](https://www.voilanorbert.com) :)

~~~
toong
That looks very cool. How does it work ?

~~~
cx42net
Thank you very much.

In a nutshell, the manager requests the servers responsible of rendering the
demo pages, and those servers contains generic installations that are deployed
everytime an user creates a new instance :)

In the global view, this project contains static pages (official website),
Play Framework (Java/manager), PHP scripts (cron tasks, some tools) and shells
scripts for automating installation. Everything on top of a
Apache/PHP5-FPM/MySQL/Debian stack, hosted at Digital Ocean :)

------
mbesto
Always price higher than you think. Bringing prices down is much easier than
bringing them up.

~~~
cx42net
You are absolutely right. Reading your comment made me think about a video
talking about exactly that and says the same thing (sorry, it's was years ago
and I can't remember which one ; It was a talk with some Google engineers at a
conference I believe).

------
drikerf
I think you should ask your potential customers how much they would pay for
your service before setting a price. If you havn't interviewed your customers
yet, do it.

~~~
cx42net
I plan to set up a nice message introducing the project and asking the point
of view of potential customers this week-end :) We'll see what will the
results be :)

