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I meet a lot of founders who either don't charge, wait too long too charge, or don't charge enough for their products, so here's what I usually discuss with them and how I think about pricing:
1/ Don't be afraid of charging early. It's common to think "the product is early, it's not ready" but if your product provides value, you can and should charge for it.
+ your earliest, loyal customers are more likely to support you than you'd think.
+ your earliest, loyal customers are more likely to support you than you'd think.
2/ Early on you should be experimenting and pressure testing different amounts and pricing models.
I try to find the right mix between "is this too expensive?" and "how many people are dropping off?"
I try to find the right mix between "is this too expensive?" and "how many people are dropping off?"
3/ Some ideas for early stage pricing:
- Discounted pricing during "pilot" or "beta" period
- Locked in lifetime pricing
- Non-discounted pricing with refundable guarantee
- Deposit on the full plan with months free until pricing rolls out
- Discounted pricing during "pilot" or "beta" period
- Locked in lifetime pricing
- Non-discounted pricing with refundable guarantee
- Deposit on the full plan with months free until pricing rolls out
4/ With all of those, the goal is to figure out what's the max people are willing to pay and complain for your product. People will always complain, that's why I find it's never too early to start charging.
Pricing will also change as your core customer base changes
Pricing will also change as your core customer base changes
5/ Waiting too long to charge also runs the risk of not collecting good enough feedback to actually build the right product.
I met with a co recently that had very high churn but couldn't figure out why - none of their free users had enough "skin in the game" to give feedback
I met with a co recently that had very high churn but couldn't figure out why - none of their free users had enough "skin in the game" to give feedback
6/ In my experience, paying customers expect and demand more but will tell you exactly what they want. They will always want more so the goal is to get to them to pay and complain with low churn and high net revenue retention
7/ A smart strategy is to have a more expensive product for your hardcore, early power users, get to a default-alive state and have enough resources to build more mass-market, less pricey products.
Tesla started with the Roadster -> Model S -> Model X -> Models 3/Y
Tesla started with the Roadster -> Model S -> Model X -> Models 3/Y
8/ If you are charging, you're probably not charging enough :)
Especially with business software, you'd be surprised what people can expense without approval. An extra $5-$50/mo is negligible for companies spending 10000x that on salaries
Especially with business software, you'd be surprised what people can expense without approval. An extra $5-$50/mo is negligible for companies spending 10000x that on salaries
9/ My gripe with "free" version is that many cos have free products that are "too good." Meaning, your customers will gamify the free tier as long as possible and never convert into paid.
I can think of a dozen products I've never covered too because the free plan worked.
I can think of a dozen products I've never covered too because the free plan worked.
10/ The other nice thing about charging early is you can experiment with referral mechanisms based on the value of your product.
Refer someone and get a month free, added storage, more time in trial, etc.
Refer someone and get a month free, added storage, more time in trial, etc.
11/ And if you're charging you can start experimenting with paid sources of acquisition and payback periods. Hard to know how long it will be to make your money back on an acquired customer if you don't know how much they're going to pay.
12/ I made the mistake with my first company of trying to always keep our app free and make money through an affiliate model.
We never experimented with charging our customers so it was a hard lesson learned.
So now I tell everyone to charge and charge a lot :)
We never experimented with charging our customers so it was a hard lesson learned.
So now I tell everyone to charge and charge a lot :)
