Which is better: Many customers at low price-point or few at high price?
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Which is better: Many customers at low price-point or few at high price?
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Re: Which is better: Many customers at low price-point or few at high price?
#2This is simply a restatement of what Philippe Kahn showed the world and more particularly Microsoft. The Borland compiler came pretty much from no where and became a serious competitor for the powers that be. While the IDE was quite impressive, the major difference lay in the price. As I remember it, Borland was very near $100 while Microsoft was much closer to $500. Details (some) here: http://en.wikipedia.org/wiki/Philippe_Kahn More elsewhere by way of Google or your favorite search engine.
Re: Which is better: Many customers at low price-point or few at high price?
#3My favorite part of this article was the first half of the summary:
"If you want happiness and fulfillment from a small company, strive for B"
$10,000/mo revenue with only 10 customers to keep happy vs. 1000 customers to service? Yes, please.
Company B could have just as much potential for growth as company A. Sure A has the potential to have more brand evangelists bringing in new customers but B has more time to devote to totally babying their 10 customers and making sure they will be likely to recommend the product/service to others in their industry. Company B only needs 1 referral to make another $1,000 per month whereas company A would need 100 referrals.
Also think about upselling down the road, if a company can afford $1,000/mo for your base product they will probably be willing and able to pay for upgrades that will make their work easier or more efficient.
I'm not arguing that B is better than A, but I think that B could have just as much growth with less stress.
Re: Which is better: Many customers at low price-point or few at high price?
#4I think having to please fewer customers could be great, but you run a greater risk of someone undercutting you and taking them away. Though, if you have 10 customers vs 1000, it's a lot easier to personally try convince those 10 to stay.
Re: Which is better: Many customers at low price-point or few at high price?
#5My favorite part of this article was the first half of the summary: "If you want happiness and fulfillment from a small company, strive for B" $10,000/mo revenue with only 10 customers to keep happy vs. 1000 customers to service? Yes, please. Company B could have just as much potential for growth as company A. Sure A has the potential to have more brand evangelists bringing in new customers but B has more time to dev…
On the other hand you need just one cost-cutting round or one unforgivable support foul-up to lose 10% of your revenue overnight. Model A likely won't see that kind of volatility.
Re: Which is better: Many customers at low price-point or few at high price?
#6Strive to get many customers paying a high price for your product. Apple computers and IBM mainframes are two of the most profitable product lines in IT history.
Personally, I love the high stability of a broad consumer base. However, you can architect a successful business either way.
Re: Which is better: Many customers at low price-point or few at high price?
#7My favorite part of this article was the first half of the summary: "If you want happiness and fulfillment from a small company, strive for B" $10,000/mo revenue with only 10 customers to keep happy vs. 1000 customers to service? Yes, please. Company B could have just as much potential for growth as company A. Sure A has the potential to have more brand evangelists bringing in new customers but B has more time to dev…
On the other hand you need just one cost-cutting round or one unforgivable support foul-up to lose 10% of your revenue overnight. Model A likely won't see that kind of volatility.
I disagree. People who are paying $5/month have a much lower threshold before they leave than an enterprise paying $20,000/month. Also larger more expensive services tend to end up with more business integration and the cost of moving to another service is typically substantial.
Re: Which is better: Many customers at low price-point or few at high price?
#8Just tossing it out there, but isn't the price point of a product also a big director in consumer expectations? Not that I support making a crappy product, but consumers who pay a lot more generally have higher expectations about what they're spending their money on (rightly so, at times). If you have a 1000 people who figure it's the price of a soda so who cares vs 10 people who won't get off your case about some pet feature they want. It's all hypothetical, but maybe something to keep in mind.
Re: Which is better: Many customers at low price-point or few at high price?
#9This is simply a restatement of what Philippe Kahn showed the world and more particularly Microsoft. The Borland compiler came pretty much from no where and became a serious competitor for the powers that be. While the IDE was quite impressive, the major difference lay in the price. As I remember it, Borland was very near $100 while Microsoft was much closer to $500. Details (some) here: http://en.wikipedia.org/wiki/…
What is even more impressive was that while Borland began its rise without venture capital to 500 million dollars in sales Kahn himself was an illegal alien.
http://www.fundinguniverse.com/company-histories/Borland-Int...
Re: Which is better: Many customers at low price-point or few at high price?
#10I think having to please fewer customers could be great, but you run a greater risk of someone undercutting you and taking them away. Though, if you have 10 customers vs 1000, it's a lot easier to personally try convince those 10 to stay.
Welcome to HN.
In general, people (especially businesses) do not make decisions based on price. This is one of the most common misconceptions of new software/startup founders. Indeed, for higher paying customers, they are often shockingly price insensitive, assuming you are genuinely delivering value to them.
More on this topic in my Microconf speech in, oh, 7 hours or so, but I'll try to hit the highlights in a blog post or something in the coming week.