Ask 37signals: How did you come up with pricing for your products?
1–10 of 18 posts
Re: Ask 37signals: How did you come up with pricing for your products?
#2It's crazy. Sometimes it feels that 37signals just shouldn't still be in business with how they do things. This makes it sound like they take the Cosmo Kramer school of business management, "this price just FEELS right."
But it's been wildly successful for them. I guess the point here is that all the kinds of management training you see in traditional companies pales in comparison to having smart people with great intuition running the show.
Re: Ask 37signals: How did you come up with pricing for your products?
#3I think its just from their experience as customers elsewhere.
For me — $10 for a simple service seems a little pricey, $9 is basically $10 still, $8 is still a a tiny bit high — but $7 is the sweet spot! Same goes for higher prices too — I like $37 rather than $40. I'd think less about paying $17 for a service than $20, $19 or even $15!
Not sure why, maybe its because the $7 on the end becomes my focus:- its still technically pocket change — but also in the higher end out of 10...and I think about it more than the $30?
(plus if your picking smart numbers for prices, check out the "common" exchange rate people think of without checking. For me, I think of a dollar being worth £0.50p, so $37 is around £18.50, when in fact its over £21; for some it may not make a difference, but for others, the extra few pounds to nudge it over £20 may be enough for them to pick a slightly cheaper plan. And I would imagine a similar thing happens with the euro and other popular currencies also.)
Re: Ask 37signals: How did you come up with pricing for your products?
#4It's crazy. Sometimes it feels that 37signals just shouldn't still be in business with how they do things. This makes it sound like they take the Cosmo Kramer school of business management, "this price just FEELS right." But it's been wildly successful for them. I guess the point here is that all the kinds of management training you see in traditional companies pales in comparison to having smart people with great in…
Their "intuition" and the "feels right" works because they design for people like themselves. They can put themselves in their customers' shoes and they actually fit! Sort of like how Jobs only would release a product he'd enjoy using. If the same 37s people made some other product like break pads or investment banking advice, their cavalier attitude would cause them to fail.
Re: Ask 37signals: How did you come up with pricing for your products?
#5The first time I charged for a web service the hard part was getting over the guilty feeling that I was charging for something that cost me almost nothing. That's definitely not the case of course. I had to develop it, support it, pay for hosting, etc. Still, it takes a bit of strength initially to begin charging money for little more than adding a few rows to your database.
From the inside it's really easy to undervalue what you're doing. It's a big mistake too, because if you're solving a hard problem for someone they really don't mind trading money for it.
I think 37 signals emphasis on creating products you can charge for is their very best advice. Paul Graham didn't go for eyeballs with Viaweb -- he charged something like $300/mo for an online store application.
Working on a product that makes money is entirely different from working on a free one. In a thousand little ways. As a business I definitely prefer charging users directly and probably won't ever try to create another free (to users) business again.
Re: Ask 37signals: How did you come up with pricing for your products?
#6I think its just from their experience as customers elsewhere. For me — $10 for a simple service seems a little pricey, $9 is basically $10 still, $8 is still a a tiny bit high — but $7 is the sweet spot! Same goes for higher prices too — I like $37 rather than $40. I'd think less about paying $17 for a service than $20, $19 or even $15! Not sure why, maybe its because the $7 on the end becomes my focus:- its still t…
Numerous psychology studies have found that .97 is the new .99 - you're already used to rounding .99 up to $1 but not $.97
Re: Ask 37signals: How did you come up with pricing for your products?
#7It's crazy. Sometimes it feels that 37signals just shouldn't still be in business with how they do things. This makes it sound like they take the Cosmo Kramer school of business management, "this price just FEELS right." But it's been wildly successful for them. I guess the point here is that all the kinds of management training you see in traditional companies pales in comparison to having smart people with great in…
Their "intuition" and the "feels right" works because they design for people like themselves. They can put themselves in their customers' shoes and they actually fit! Sort of like how Jobs only would release a product he'd enjoy using. If the same 37s people made some other product like break pads or investment banking advice, their cavalier attitude would cause them to fail.
Good point, I should have added that its smart people with good intuition and a passion for what they do.
Re: Ask 37signals: How did you come up with pricing for your products?
#8I think its just from their experience as customers elsewhere. For me — $10 for a simple service seems a little pricey, $9 is basically $10 still, $8 is still a a tiny bit high — but $7 is the sweet spot! Same goes for higher prices too — I like $37 rather than $40. I'd think less about paying $17 for a service than $20, $19 or even $15! Not sure why, maybe its because the $7 on the end becomes my focus:- its still t…
7 isn't a bad number - and it seems to have worked with getting the bailout passed. 700 Billion feels closer/is easy to report as "Half a billion". 800 Billion would have been rounded to "One Trillion" - a (slightly) scarier number. It's very much the same problem, though at a different scale & with different decision makers - in the case of the bailout, the target audience was Congress with a nod to the media. In any case - to bring this back around to the original post - the lesson here is to know (or be) your audience and to understand the sacrifices they'll make for the value you offer.
Re: Ask 37signals: How did you come up with pricing for your products?
#9The first time I charged for a web service the hard part was getting over the guilty feeling that I was charging for something that cost me almost nothing. That's definitely not the case of course. I had to develop it, support it, pay for hosting, etc. Still, it takes a bit of strength initially to begin charging money for little more than adding a few rows to your database. From the inside it's really easy to underv…
> the hard part was getting over the guilty feeling that I was charging for something that cost me almost nothing.
Yes! Coming from the world of open source software... that's something that doesn't fit into my mentality. Other people in this thread are talking about how the 37s people were probably able to envision paying X $ for something themselves. I would have trouble with that - there are few things I pay for online besides domain names and hosting.
So how did it work out for you?
Re: Ask 37signals: How did you come up with pricing for your products?
#10The first time I charged for a web service the hard part was getting over the guilty feeling that I was charging for something that cost me almost nothing. That's definitely not the case of course. I had to develop it, support it, pay for hosting, etc. Still, it takes a bit of strength initially to begin charging money for little more than adding a few rows to your database. From the inside it's really easy to underv…
> "I was charging for something that cost me almost nothing"
Don't charge based on your (marginal) cost; charge based on the value you are delivering to your customer.