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I wouldn't worry too much about people thinking the price is too cheap. I'd wonder how many of those people paying $2.95/month would also be willing to pay $9.95/month, $19.95/month, etc.
I would think it depends not so much on whether your users can afford it, but whether you can sustain development on $2.95/month. The price difference between 0 and 0.01 is huge, but between $2.95 to $8.95 is minimal. If you are going to charge for it, charge for it so you can keep supporting it.
It's hard to start low and then raise the price, w/o a substantial increase in the number of features. Psychologically, a better approach is to start high (i.e., at the highest per month you think people will pay), and only drop the price over time if you're not getting enough subscribers. If you do stay in the $2, $3 per month range, though, then definitely make it one charge of $24 to $36 per year.
Thanks for your response. Hmm... see, I used to think starting with the higher price was better, but now I think it definitely depends on the feature set at the beginning. Right now I'm planning on launching it mainly as a Minimum Viable Product, so I'm thinking of starting at the lower price and raising it as features are added. I think that waiting to see if people buy at the higher price may take too long, since I…
It's more subtle than that: you need to discover what the current features are worth to people.
You might be surprised to find that value is higher than what you would think, regardless of the number of features.
It's possible that even one (great) feature is something you can charge a lot for.
As for the psychology of it, people are ok with paying less for something that used to cost more, but the opposite situation can create resentment.
Are people more likely to spend $24 or $36 upfront than $3/month?
There's some research I've read about the psychology behind the failure of web-based micropayment systems you should read (I can't find the reference now, but I think Shirky wrote it).
Anyway, the gist of it was: at too low a price (e.g., $1, $2) people just don't bother getting out their credit card to pay for something.
So you're much better off bundling it in a larger package, or in your case, for a longer time period.
is the service very specialized?
when a/b testing, interpreting the data correctly is key.
take your time and try stuff...
Earlier quoted context omitted.
Thanks for your response. Hmm... see, I used to think starting with the higher price was better, but now I think it definitely depends on the feature set at the beginning. Right now I'm planning on launching it mainly as a Minimum Viable Product, so I'm thinking of starting at the lower price and raising it as features are added. I think that waiting to see if people buy at the higher price may take too long, since I…
I used to think starting with the higher price was better, but now I think it definitely depends on the feature set at the beginning. It's more subtle than that: you need to discover what the current features are worth to people. You might be surprised to find that value is higher than what you would think, regardless of the number of features. It's possible that even one (great) feature is something you can charge a…
Very, very good points, thank you again! Wow, it looks like I've got some thinking to do.
Anyway, the gist of it was: at too low a price (e.g., $1, $2) people just don't bother getting out their credit card to pay for something.
Hmm... interesting. Thanks, I'll look into this.
Offer it for $36/year, as a customer I'd go nuts about receiving a monthly bill about a lump sum. And offer a premium version with a little extra and quicker support for $36/MONTH :)
i think that depends on your product. what is your target group? is there a pattern on how wealthy this group is? is the service very specialized? when a/b testing, interpreting the data correctly is key. take your time and try stuff...
I'll certainly be doing a/b testing, but could you elaborate a bit on interpreting the data correctly please? I know I shouldn't just look at the numbers, but I get the impression that you may have some specifics on interpreting the data that I'd love to hear.