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Ask HN: Charging - When, how, and how much?
27 points by matt1 on Sept 13, 2010 | hide | past | favorite | 25 comments
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.

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).

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.

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.

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?




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.


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.)


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 :)


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.


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.

This. I think I'll print that out and hang it on my wall.


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


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


Great feedback, thanks. And I'll definitely check out the book.

I think it's fair to say that $5 is too low and $30/month is too high, putting me somwhere in the $15-$20 range like you and others recommend.


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


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.


Thanks -- let's chat.

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


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.


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.


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...)


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.


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.


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


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


Thanks -- I should have been clearer:

I intend to offer a free plan that limits you on the # of mockups you can create, with paid plans that increase the # of mockups.


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.


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


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.


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.


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





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