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Whenever I read "charge more," I think of the implicit assumption that service owners want to maximize total profit. While I can understand that desire, there'

by dguo 6y ago

Whenever I read "charge more," I think of the implicit assumption that service owners want to maximize total profit. While I can understand that desire, there's no law of nature that says we have to act in a profit-maximizing manner. A SaaS service could have a different goal: running a sustainable business that benefits as many people as possible. So they could choose to charge a deliberately low amount such that more people can afford to or are willing to pay for it, while also charging a high enough amount that the business is financially sustainable.

EduardoBautista 6y ago
I can’t see how charging less would help with running a sustainable business. I would imagine charging more would help with that.
- Kaze404 6y ago
  Parent never said that. Charging less helps with the goal of having a sustainable business that benefits as many people as possible because it lowers the barrier of entry.
  - zepto 6y ago
    Maybe, but it’s also possible that if you charge too little, people subscribe but don’t benefit, because they don’t use the service much. Subscribing doesn’t necessarily imply benefitting, but the higher the price, the more correlated these are likely to be.
    - Kaze404 6y ago
      If people don't use your product if they don't have the pressure of sunken cost, then maybe they're not really benefitting either way.
      - zepto 6y ago
        The whole point of subscriptions is that they aren’t sunken cost.
        Shared404 6y ago
        If I subscribe to something for a month, and then feel compelled to use it that month instead of some better tool because I paid for it, I would say that's a sunken cost. A time limited one, but still there.
        zepto 6y ago
        Technically true, but seems like an exotic case, and proves the point that sunk cost isn’t a substantial issue here.
        Shared404 6y ago
        >Seems like an exotic case, I've worked with enough people who used adobe because "I've already payed for this month, so I have to use this" that I'm not sure it's that exotic. And while sunk cost may not be a huge issue, it's definitely still there. I'm not going to make any sort of comment on anything else in this thread, because I don't really know what I'm talking about. However, I don't see how it's possible for someone to derive more benefit from an app overall by paying a higher subscription. Your subscribers might correlate better with people who are benefiting, but for an individual, either they [Pay less and have the same amount of possible benefit] or [Pay more and have the same amount of possible benefit]. How does it work out that they get better value from the second option?
        Kaze404 6y ago
        For people with disposable income, sure. For the people parent is talking about, they definitely are.
- Nasrudith 6y ago
  Customer adoption rate and assuming no real marginal costs. Try to sell something made solo for one million dollars each.
- logicallee 6y ago
  >I can’t see how charging less would help with running a sustainable business. I would imagine charging more would help with that. I believe you focused on the wrong half of the sentence. This is the part that they mean: >that benefits as many people as possible. The benefit is the utility people get. So say you run a matchmaking app. You can charge $500 to create a happy couple and create 1,000 happy couples (you have just 1,000 customers worldwide) or charge $1 to make a happy couple and have 75,000 happy couples. If you look at your profit, $500k is way higher than $75k. Plus you only have to deal with 1,000 users which you might do by hand whereas 75,000 overwhelms you personally so you have to hire dedicated customer service reps. The 75k users require bigger hosting and service fees. At the end of all this you net just $20,000 from your 75,000 users whereas you would have gotten $450,000 if you had charged $500. So why would you pick a $1 price point? Because you enjoy hearing from the 75,000 happy couples you created, getting sent their wedding pictures, heartfelt thanks, etc. You think you are giving a service, and you'd rather give it to 75,000 people than 1,000 people. That's what OP means by "help as many people as possible." The higher the price, the fewer people can afford it. If you want your app to help more people, you have to lower the price.
baconandeggs 6y ago
Of course! You can choose to charge anything you want, not only for your product but for your salary too! There is no law, man-made or otherwise preventing you to do so. Actually there is a law preventing you to charge too little for your own work but it is what it is.
a13n 6y ago
If you charge more, you can make more money, to grow your team, to build a bigger/better product, to serve more people.
- cortesoft 6y ago
  The implicit assumption there is that the app will have a good return on investment if you spend more development time on it. Sometimes, a product is as good as it is going to get, and you are chasing diminishing returns by continuing to add new features. You often see this with mature commercial software, where teams need to justify their expense by redesigning and upgrading things that don’t need to be upgraded. Maybe we should stop developing that piece of software, and instead put the resources to something new.

by dguo 6y ago

EduardoBautista 6y ago

I can’t see how charging less would help with running a sustainable business. I would imagine charging more would help with that.

Kaze404 6y ago
Parent never said that. Charging less helps with the goal of having a sustainable business that benefits as many people as possible because it lowers the barrier of entry.
- zepto 6y ago
  Maybe, but it’s also possible that if you charge too little, people subscribe but don’t benefit, because they don’t use the service much. Subscribing doesn’t necessarily imply benefitting, but the higher the price, the more correlated these are likely to be.
  - Kaze404 6y ago
    If people don't use your product if they don't have the pressure of sunken cost, then maybe they're not really benefitting either way.
    - zepto 6y ago
      The whole point of subscriptions is that they aren’t sunken cost.
      - Shared404 6y ago
        If I subscribe to something for a month, and then feel compelled to use it that month instead of some better tool because I paid for it, I would say that's a sunken cost. A time limited one, but still there.
        zepto 6y ago
        Technically true, but seems like an exotic case, and proves the point that sunk cost isn’t a substantial issue here.
        Shared404 6y ago
        >Seems like an exotic case, I've worked with enough people who used adobe because "I've already payed for this month, so I have to use this" that I'm not sure it's that exotic. And while sunk cost may not be a huge issue, it's definitely still there. I'm not going to make any sort of comment on anything else in this thread, because I don't really know what I'm talking about. However, I don't see how it's possible for someone to derive more benefit from an app overall by paying a higher subscription. Your subscribers might correlate better with people who are benefiting, but for an individual, either they [Pay less and have the same amount of possible benefit] or [Pay more and have the same amount of possible benefit]. How does it work out that they get better value from the second option?
      - Kaze404 6y ago
        For people with disposable income, sure. For the people parent is talking about, they definitely are.
Nasrudith 6y ago
Customer adoption rate and assuming no real marginal costs. Try to sell something made solo for one million dollars each.
logicallee 6y ago
>I can’t see how charging less would help with running a sustainable business. I would imagine charging more would help with that. I believe you focused on the wrong half of the sentence. This is the part that they mean: >that benefits as many people as possible. The benefit is the utility people get. So say you run a matchmaking app. You can charge $500 to create a happy couple and create 1,000 happy couples (you have just 1,000 customers worldwide) or charge $1 to make a happy couple and have 75,000 happy couples. If you look at your profit, $500k is way higher than $75k. Plus you only have to deal with 1,000 users which you might do by hand whereas 75,000 overwhelms you personally so you have to hire dedicated customer service reps. The 75k users require bigger hosting and service fees. At the end of all this you net just $20,000 from your 75,000 users whereas you would have gotten $450,000 if you had charged $500. So why would you pick a $1 price point? Because you enjoy hearing from the 75,000 happy couples you created, getting sent their wedding pictures, heartfelt thanks, etc. You think you are giving a service, and you'd rather give it to 75,000 people than 1,000 people. That's what OP means by "help as many people as possible." The higher the price, the fewer people can afford it. If you want your app to help more people, you have to lower the price.

baconandeggs 6y ago

Of course! You can choose to charge anything you want, not only for your product but for your salary too! There is no law, man-made or otherwise preventing you to do so. Actually there is a law preventing you to charge too little for your own work but it is what it is.

a13n 6y ago

If you charge more, you can make more money, to grow your team, to build a bigger/better product, to serve more people.

cortesoft 6y ago
The implicit assumption there is that the app will have a good return on investment if you spend more development time on it. Sometimes, a product is as good as it is going to get, and you are chasing diminishing returns by continuing to add new features. You often see this with mature commercial software, where teams need to justify their expense by redesigning and upgrading things that don’t need to be upgraded. Maybe we should stop developing that piece of software, and instead put the resources to something new.