A simple argument for investing in your pricing
cranberryblog.substack.com
A simple argument for investing in your pricing
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Re: A simple argument for investing in your pricing
#2Customers’ willingness to pay signals how much they value a product or feature.
I'd change that very slightly. It's not their willingness to pay, but their cold, hard cash that signals how much they value the product. Many, many people will say they're willing to pay for a product before you build it, and they really are, but won't actually pay for it when it comes time to sign up because they either no longer have the need, or the product isn't actually a good fit, or they can't afford it, etc. You can't really believe any signal except the money going into your bank.
Re: A simple argument for investing in your pricing
#3Customers’ willingness to pay signals how much they value a product or feature. I'd change that very slightly. It's not their willingness to pay, but their cold, hard cash that signals how much they value the product. Many, many people will say they're willing to pay for a product before you build it, and they really are, but won't actually pay for it when it comes time to sign up because they either no longer have t…
unfortunately you only have the willingness to pay before the product or feature is delivered.
Re: A simple argument for investing in your pricing
#4Customers’ willingness to pay signals how much they value a product or feature. I'd change that very slightly. It's not their willingness to pay, but their cold, hard cash that signals how much they value the product. Many, many people will say they're willing to pay for a product before you build it, and they really are, but won't actually pay for it when it comes time to sign up because they either no longer have t…
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Re: A simple argument for investing in your pricing
#5> Price increases on existing customers are pure margin.
Don't do this. Grandfather your old customers. Of course, it depends on the kind of business. But in B2C, customers can be price-sensitize and they don't (rightly so) understand why they should pay more for the same value they receive from a product.
> Now let’s assume we increase average prices by just 10% without losing any customers.
I chuckled.
Re: A simple argument for investing in your pricing
#6Customers’ willingness to pay signals how much they value a product or feature. I'd change that very slightly. It's not their willingness to pay, but their cold, hard cash that signals how much they value the product. Many, many people will say they're willing to pay for a product before you build it, and they really are, but won't actually pay for it when it comes time to sign up because they either no longer have t…
The book „The Mom Test“ describes the behaviour very good. Most often these people are not totally honest in evaluating your idea because multiple reasons e.g. you asking the wrong way (happened to me too!) or they are not really thinking about it buying it but only about commenting your idea. Should be read by everyone!
Re: A simple argument for investing in your pricing
#7Customers’ willingness to pay signals how much they value a product or feature. I'd change that very slightly. It's not their willingness to pay, but their cold, hard cash that signals how much they value the product. Many, many people will say they're willing to pay for a product before you build it, and they really are, but won't actually pay for it when it comes time to sign up because they either no longer have t…
unfortunately you only have the willingness to pay before the product or feature is delivered.
That's not true at all. You can charge customers before you build anything - it's just the 'pre-order model'. Lots of businesses do that, including some high-profile startups. Check out the sites like Seedrs and Kickstarter for examples.
Re: A simple argument for investing in your pricing
#8> Price increases on existing customers are pure margin. Don't do this. Grandfather your old customers. Of course, it depends on the kind of business. But in B2C, customers can be price-sensitize and they don't (rightly so) understand why they should pay more for the same value they receive from a product. > Now let’s assume we increase average prices by just 10% without losing any customers. I chuckled.
A nice way i have seen is grandfather your old users to the old price. But only users paying the new price are getting the new and shiny features. The product is not worsened for the old users. If they are really interested in the new features let them upgrade to the new pricing model with more features.
Re: A simple argument for investing in your pricing
#9> Price increases on existing customers are pure margin. Don't do this. Grandfather your old customers. Of course, it depends on the kind of business. But in B2C, customers can be price-sensitize and they don't (rightly so) understand why they should pay more for the same value they receive from a product. > Now let’s assume we increase average prices by just 10% without losing any customers. I chuckled.
Re Grandfathering: That's really difficult to do in iOS Apps for example.
It also introduces a new level of complexity on many levels, e.g. rights and access management, product versioning and maintenance, customer support etc.
Re: A simple argument for investing in your pricing
#10> Price increases on existing customers are pure margin. Don't do this. Grandfather your old customers. Of course, it depends on the kind of business. But in B2C, customers can be price-sensitize and they don't (rightly so) understand why they should pay more for the same value they receive from a product. > Now let’s assume we increase average prices by just 10% without losing any customers. I chuckled.
Strongly disagree. Grand-facthering pricing sounds reasonable but is a nightmare for us.
As well as the technical issues with having to build in a load of complexity to maintain various features on different customer accounts, at some point there will be things that will change but customers will not accept that.
Most of our customer completely understand that they are paying for a service, not a product. Just because their features don't change doesn't mean it is costing us nothing to run the service.
Price gouging is morally dubious just because they are sticky but when you are selling a value-add (we could be saving you X employees per year) then it is reasonable to charge an amount of money as the OP says that customers are not as price-sensitive as you think.