I'm working on a business model that requires charging something for a web-based service (not consulting/nothing hourly). I've never known where to begin the process of arriving at the 'right' price. Clearly, there are marketing/customer perception implications to:
1) providing something on a free trial basis initially
2) increasing the cost of a service later
3) charging too little and being deemed insignificant "How could $5/month give me that much value?"
4) charging too much and being seen as a ripoff, leaving room for others to step in.
I know it's easy enough to arrive at or at least be aware of a market price (median/average) if there's enough competition in the space to do a back-of-napkin statistical analysis. I'm not sure how that carries over into concepts with a 'first mover' advantage, or markets where competition is light.
I know there must be theory relevant to this (probably volumes). Can anyone recommend a place to start? How have you dealt with pricing your startup's services?
2. Tell them it costs $D
3. Observe
4. Change D as necessary
5. Repeat until the reaction you consistently get is "Wow! That's awesome, what's your website, I'm going to buy it when I get home."
Market research is the best way to figure prices out. Alternatively, as yubrew said, comparables works. Think outside the box when you're trying to come up with indirect competitors. We are building a subscription-based web app, but an alternative to our service could be a book. That books costs a certain amount of money. Thus, we can charge at least that amount, plus a premium because, well, our service is a lot better.