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Pricing Your Product

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Re: Pricing Your Product

#31

Post by ludocode »

duxup wrote: post #25
GCA10 wrote: post #16

The article hits its stride at paragraph 14, where they talk about the importance of "value-based pricing" rather than "cost-based pricing." My wake-up moment came in 2013 or so, when I was pricing the digital version of a long-ago print book I'd written. ("Merchants of Debt"). I knew that it kept finding a niche audience among investment bankers and people who want to be investment bankers. E-book prices were droppi…

I fall for this time and again. I want to buy a board game. I've already decided I'm buying it but hey there is a deluxe version for a price I wasn't planning to pay... so yeah I buy it.

Interesting example. With board games I avoid the deluxe versions because they're often incompatible with expansions. Power Grid and Settlers of Catan come to mind.

Re: Pricing Your Product

#32

Post by pavlov »

101008 wrote: post #29

My problem with this advice of testing your pricing strategy is how to communicate this to actual customers. Maybe this isn't a thing in Europe or USA; but in third-world countries a change in the price it is important and something your customers want to know. If I set my prices higher, I can't change it for my current customers. They will get mad. So I ahve to create a full logic on the backend for customers create…

One trick you can use is to figure out a set of product parameters that you can tweak into new combinations to create lots of pricing plans. They may be effectively identical to previous ones as far as your cost and engineering are concerned, but different enough that customers don’t feel someone is getting a different price for the same thing.

E.g. your previous “Medium Starter” plan included 10 foobags and up to 1.5 zoffobytes of data for a price of $19. Your new “Basic Plus” plan includes 15 foobags and 1.2 zoffobytes for $25.

Re: Pricing Your Product

#33

Post by eruci »

Pricing is HARD. I launched a SaaS in 2016 with a 100eur per month recurring plan. only 5 signups in two years. Then around 2018 someone wrote me "that's incredibly cheap. why?" So, I doubled it to 200eur per month. Today there are 60 recurring plans at 200 per month, and only 3 @100(grandfathered plans from the early days.)

Clients tend to think that if something seems too cheap, something is wrong with it.

Re: Pricing Your Product

#34

Post by fsloth »

throwaway7281 wrote: post #24

Value-based pricing is the worst societal invention. Imagine a medicine can be made from simple ingredients, but you discovered a recipe by accident. It's very valuable since it might save lives, so the value is high, the cost is low and you can reap the benefit on the mere basis that you discovered something by accident. You also need to make sure that no one "gets it", so do not educate people, just milk them - and…

Value based pricing is not about obfuscating your product.

If you manage to get extra revenues because the market values what you have you can invest the surplus to more better products.

The point is, you shouldn't dictate what users value your product, let the users dictate it.

"Imagine a world, where progress and invention would be something shared and done not out of greed but out of ability and ultimately generosity that would add to the grace of our race."

The first gotcha there is figuring out what exactly is the grace of the race. Most entities that successfully employ these sort of mission statements are dictatorships and the like and I'm sure you didn't mean that.

I think the first hurdle to get over is that world is complex and us people are not smart enough to handle all of that.

Re: Pricing Your Product

#35

Post by andi999 »

pavlov wrote: post #32
101008 wrote: post #29

My problem with this advice of testing your pricing strategy is how to communicate this to actual customers. Maybe this isn't a thing in Europe or USA; but in third-world countries a change in the price it is important and something your customers want to know. If I set my prices higher, I can't change it for my current customers. They will get mad. So I ahve to create a full logic on the backend for customers create…

One trick you can use is to figure out a set of product parameters that you can tweak into new combinations to create lots of pricing plans. They may be effectively identical to previous ones as far as your cost and engineering are concerned, but different enough that customers don’t feel someone is getting a different price for the same thing. E.g. your previous “Medium Starter” plan included 10 foobags and up to 1.…

I didnt buy a robot vacuum because of this. There was a crazy amount of different ones from the same company with different pricings. Maybe it is better now. But usually I want a product which fulfills my supposed needs for a reasonable price. Too many different products (especially from the same vendor) give me the certainty no matter which one I choose one or the other criterium will fail.

Re: Pricing Your Product

#36

Post by kbos87 »

101008 wrote: post #29

My problem with this advice of testing your pricing strategy is how to communicate this to actual customers. Maybe this isn't a thing in Europe or USA; but in third-world countries a change in the price it is important and something your customers want to know. If I set my prices higher, I can't change it for my current customers. They will get mad. So I ahve to create a full logic on the backend for customers create…

Maintaining that book of past prices, who is on them, the discounts they negotiated, the feature formulation they had - its a nightmarish web of complexity even at large SaaS vendors.

Re: Pricing Your Product

#37

Post by cameronbrown »

kbos87 wrote: post #36
101008 wrote: post #29

My problem with this advice of testing your pricing strategy is how to communicate this to actual customers. Maybe this isn't a thing in Europe or USA; but in third-world countries a change in the price it is important and something your customers want to know. If I set my prices higher, I can't change it for my current customers. They will get mad. So I ahve to create a full logic on the backend for customers create…

Maintaining that book of past prices, who is on them, the discounts they negotiated, the feature formulation they had - its a nightmarish web of complexity even at large SaaS vendors.

I really can't imagine why. This seems like one of those self contained problems where some PricingService and a DB returns a number and deals with all the complexity internally. That seems like the logical place where you'd do A/B testing of prices and the like.

Re: Pricing Your Product

#38

Post by lpolovets »

One of the biggest lessons I've learned as a VC in the past few years is that pricing really has to be aligned with and proportional to the value your product provides. If someone gets $100 of value per seat and you charge $15/seat, that's great. If you charge $15/seat for a product that creates value per gigabyte, people start gaming the system. E.g. they'll buy one seat for their company and ask that person to be the proxy user for your product. Or if you charge $10/GB and people get $20/GB of value of the first few gigabytes and then $5/GB of value after that, you're going to run into problems.

So figure out how users perceive and quantify your value to themselves, and then try to come up with a simple pricing scheme that captures 10-25% of that value. That way every time someone pays you $1, they get $4-$10 of value, and that's a no brainer purchase.

Getting pricing right has a huge ROI across the board. Good pricing improves margins, reduces sales friction, and creates happier customers.

The best book that I've read on pricing is Monetizing Innovation: https://www.amazon.com/Monetizing-Innovation-Companies-Desig...

Re: Pricing Your Product

#39

Post by bobbyz »

lpolovets wrote: post #38

One of the biggest lessons I've learned as a VC in the past few years is that pricing really has to be aligned with and proportional to the value your product provides. If someone gets $100 of value per seat and you charge $15/seat, that's great. If you charge $15/seat for a product that creates value per gigabyte, people start gaming the system. E.g. they'll buy one seat for their company and ask that person to be t…

I just spent my last audible token 5 minutes ago D:

Re: Pricing Your Product

#40

Post by lucb1e »

> Natera recently brought to market a non-invasive pre-natal test that can detect Down syndrome and other conditions in a mother’s blood. Previously, testing for these conditions required a risky procedure that extracted tissue from the fetus. Other non-invasive tests aren’t as comprehensive.

> Because Natera's test is better than its competitors' products, the company charges more.

> “Premium pricing communicates a premium product,” says Matthew Rabinowitz, the company’s CEO.

Is this normal in the USA? Talking of "premium offerings" in the context of healthcare seems sickening to me. Premium hospital beds with high speed broadband, alrighty, but premium healthcare itself? I understand that one needs to recoup R&D costs a few times over for it to be worth the risk, but that's simply cost price (risk * R&D cost / unit count * unit cost) and not a "premium product". This isn't a non-essential premium Ferrari, it could help a lot of people. Is it just me who finds this a really weird example?

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