Ask HN: Do you have some advice on pricing a product?
Hi!
I'm finishing the beta release of my project and one of the main question that's bugging me is the following:
Am I asking for the right price?
In general, I would compare the competitors, see their price and adjust accordingly, but in this case, I didn't find any competitors (note : I didn't say there isn't! Maybe I searched wrong).
The project, http://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.
Since I couldn't find any concurrent, I stated the following :
How much would I pay ?
I sell some modules on the Prestashop's addons site (scratch your own itch they say) and I went with this formula :
* The Professional plan : 1 module/theme sold and it's paid
* The Platinum plan : 2-4 modules sold and it's paid.
Hence the prices.
What do you guys think about it? Are they too high? Not too much?
(by the way, what do you think about the project in general? Some inputs would be awesome ! :) ).
Thank you (:
An open Ask HN community consultation from 2014 where @cx42net convened hundreds of developers and bootstrappers to share real experiences, hard numbers, and tactics.
Hundreds of active indie hackers contributed case studies, pricing heuristics, and pitfalls to avoid when moonlighting on side projects.
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
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/0061684325 ↗
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 ↗ ) that might help you think more about pricing.
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.
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.