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If there is one thing that I have learnt from "Predictably Irrational" book, it is that humans make their money-related decisions by having a reference point. Z

If there is one thing that I have learnt from "Predictably Irrational" book, it is that humans make their money-related decisions by having a reference point. Zendesk could have always been priced at thousand bucks and no one would have complained. But once you set the price, you provide your customers with a reference point which they are going to use. You can't run away from that. For example, even though Microsoft Office probably provides a lot more value than what it costs, it they doubled their prices overnight, would you not expect any outrage?

mikeryan 16y ago
Its funny as we move to SAAS models this seems to be a bigger issue. With Desktop apps you could just stick people on a version and let them keep their existing pricing plan with some sort of dedicated EOL. Anyone wanting a newer/better/prettier version would need to pay for the upgrade. This breaks down severely on these web models, where you're more inclined to start out with a lower price and feature set while you gain customers, but want to increase the price as you add features (and value) Its sticky and makes setting your first price point a more critical game. I wonder if people have thought about "versioning" their SAAS apps. (do they? I don't have a ton of familiarity here). Personally I think Zendesk has to reward their early customers by keeping them at their current rate.
- Splines 16y ago
  You could try introducing a tiered pricing model. Allowing users on a lower tier to trial features on a higher tier (or introducing the higher-tier features at a limited mode) might help convert users up.
  - bdickason 16y ago
    This is what we're looking at with our new startup. We have a core featureset that will probably carry a subscription but other than scaling with more 'users' (in our case, employees), I'm not sure of other ways to increase the price without screwing people.
blacklife 16y ago
Nice read if you have account. Similar to what you are describing: http://www3.interscience.wiley.com/journal/21451/abstract http://www3.interscience.wiley.com/journal/21451/abstract Short summary: anchor points play a great role in setting human expectations. When plaintiffs ask for exorbitant amount of money*, then usually will get more money than they really deserve because jury's anchor point is set high.

mikeryan 16y ago

Its funny as we move to SAAS models this seems to be a bigger issue. With Desktop apps you could just stick people on a version and let them keep their existing pricing plan with some sort of dedicated EOL. Anyone wanting a newer/better/prettier version would need to pay for the upgrade. This breaks down severely on these web models, where you're more inclined to start out with a lower price and feature set while you gain customers, but want to increase the price as you add features (and value) Its sticky and makes setting your first price point a more critical game. I wonder if people have thought about "versioning" their SAAS apps. (do they? I don't have a ton of familiarity here). Personally I think Zendesk has to reward their early customers by keeping them at their current rate.

Splines 16y ago
You could try introducing a tiered pricing model. Allowing users on a lower tier to trial features on a higher tier (or introducing the higher-tier features at a limited mode) might help convert users up.
- bdickason 16y ago
  This is what we're looking at with our new startup. We have a core featureset that will probably carry a subscription but other than scaling with more 'users' (in our case, employees), I'm not sure of other ways to increase the price without screwing people.

blacklife 16y ago

Nice read if you have account. Similar to what you are describing: http://www3.interscience.wiley.com/journal/21451/abstract http://www3.interscience.wiley.com/journal/21451/abstract Short summary: anchor points play a great role in setting human expectations. When plaintiffs ask for exorbitant amount of money*, then usually will get more money than they really deserve because jury's anchor point is set high.