4 ms·

The post didn't make this very clear. $10 was the starting price - at the time it was for 5 users. Similar to Confluence or Jira with a very cheap (in this case

The post didn't make this very clear. $10 was the starting price - at the time it was for 5 users. Similar to Confluence or Jira with a very cheap (in this case loss-making) starting tier. Once a customer got to ~10 users it became profitable. What we didn't know if whether there'd be enough customers for us to care about the loss on those $10 tiers. E.g., if only 100 customers signed up a month, the costs would have been around $10K/month - enough to write off as a marketing expense. Once it got to $100K it became something we needed to fix.

notyourday 7y ago
> The post didn't make this very clear. $10 was the starting price - at the time it was for 5 users. Similar to Confluence or Jira with a very cheap (in this case loss-making) starting tier. Once a customer got to ~10 users it became profitable. Err.. That's not a correct way of looking at a long tail. CGS on a long tail must still be lower than the unit charge, otherwise you are paying $1.00 for $0.90 which gives you an incorrect signal about the demand. Say you make apple juice. And each juice uses 4 apples and only apples. 4 apples cost you $3. Setting a price of juice to $1.00 does not actually tell you if there's a demand for the juice because it is below the CGS, which you cannot make up in volume. The long tail test is to set the juice price at (CGS + x) where x is some number and see if you get the demand even if x is less than the other costs attributed to juice ( rent/electric/juicer/salaries). If you do, then you can make up your loses in volume because the higher the volume you are going to have the smaller process cost attributed to every unit will be so there's going to be a number at which CGS + y < CGS + x where y is the process cost attributed to a unit.