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One rule to know about pricing which is counter intuitive. (And that has been repeated countless times on HN) Your pricing is never high enough If you want yo

by polote 6y ago

One rule to know about pricing which is counter intuitive. (And that has been repeated countless times on HN) Your pricing is never high enough If you want your prospects/customers to take you seriously they have to find you expensive. If you seem cheap they will not take you seriously.

dubcanada 6y ago
Do people not take Walmart seriously? Office 365 is also extremely cheap compared to what you get. Do people not take that seriously? I don't think blanket statements like, you're SAAS product is not expensive enough, work. You should take a tailored approach for what works for you.
- graerg 6y ago
  >Do people not take Walmart seriously? Depends on what you mean by "people". For a lot of average consumers/customers, Walmart _isn't_ taken seriously. They're not aware (and don't care) about the incredible supply/logistics magic that Walmart orchestrates behind the scenes. They'll pay a premium to buy stuff elsewhere to avoid the inferior goods connotations associated with Walmart.
  - iujjkfjdkkdkf 6y ago
    For electronics or clothes maybe, for many household things Walmart had name brands and people know that. I dont go there (and I assume pay a premium) because I dont like places that treat customers as cattle, and would happily pay a few cents extra for a shopping experience that hasn't had every ounce or humanity stripped from it. Granted I'm in the minority and it's hard to even find places that treat their customers like people anymore.
  - mixmastamyk 6y ago
    It's not about the goods mosly, but rather standing in long, slow, lines with the masses.
- rootusrootus 6y ago
  > Do people not take Walmart seriously? I tend to think that they mostly sell cheap crap, that even their brand-name stuff has been renegotiated with the manufacturer so they can sell you a lower quality version in order to have the lowest price. They have definitely done this with some products, and at least attempted it on others. So yeah, their pricing definitely affects my perception of their products. I avoid Walmart. Office 365 has the clout of Microsoft behind it. I don't know that the general rule applies as well as it does to some new SaaS company I have never heard of before.
  - arbuge 6y ago
    You may avoid it, but hundreds of millions don't, so the point stands. "Cheap crap" is obviously one possible way to go, and companies like Walmart have grown very successful that way.
    - bryanrasmussen 6y ago
      are there hundreds of millions of enterprise customers for your SAAS product?
      - dubcanada 6y ago
        Sometimes shooting for enterprise customers doesn't work. Some products need the little guy to survive, not global international enterprise companies.
    - rootusrootus 6y ago
      Many people are totally fine with buying cheap crap. As long as they know that going in, that's great. Walmart is indicating with their prices that they're offering lower quality merchandise, which many people find acceptable because the cost is lower. It's honest.
      - pfranz 6y ago
        I think a lot of people overvalue what they think they need--basically YAGNI. There is a bit of once burnt, twice shy. I learned when first moving out to go to the dollar store to fill my apartment; bathroom trash can, shower curtain rings, kitchen cups/plates, toilet brush. Then upgrade what doesn't work (paper-thin shower curtains will billow with the steam and stick to you). It wasn't as wasteful as I had expected and I saved a lot of money compared to just buying everything from the average retail store. Even Wal-Mart plays on this by stocking name brands here and there.
- ufmace 6y ago
  You're kind of both right IMO. The great majority of products created by techies interested in startups are priced much lower than the market will bear, and so their prices should rise. There definitely is a market out there for the cheapest possible version of something. Usually, turning a profit while moving a product at the cheapest possible price involves maximizing volume, cutting quality to be bare minimum, and ruthlessly eliminating overhead. Like, if there aren't thousands of people on the internet complaining about how crappy your quality is, you probably need to cut it further. I haven't studied it, but I have a hunch that most of the type of people who surf HN for business advice aren't interested in being in a commodity industry where you have to do these things to have a viable business. Or if they find themselves in one, they aren't going to be ruthless enough in the right directions to make it. They better find the right place to get advice for that sort of business, or they won't last long.
danenania 6y ago
Another way to think about this is that even if you built a product to scratch your own itch, you may not be your own ideal customer. In that case, your instincts on pricing could be way off. You might be cost-sensitive and look for a good deal when buying tools and infra to support your own projects. But buyers at larger companies aren’t spending their own money, so their thought process is very different. As long as the price fits in the budget and isn’t an outlier compared to other products they pay for, then it’s not going to be what they focus on. They’ll care much more about quality, trustworthiness, ease of integration, support, and things like that. That’s why putting your price at the high end of the 'acceptable' range is a win-win. You don’t leave money on the table, and you make an implicit commitment to high quality and good service, which the customers you really want value more than a bargain.
loceng 6y ago
Pricing psychology is so interesting, where there seems to be a hierarchy as well; which flows into the idea or rule that you should never limit how much someone can spend.
TriNetra 6y ago
I recently read a story in the book 'Influence – The Psychology of Persuasion' (by Robert B. Cialdini): > I GOT A PHONE CALL ONE DAY FROM A FRIEND WHO HAD RECENTLY opened an Indian jewelry store in Arizona. She was giddy with a curious piece of news. Something fascinating had just happened, and she thought that, as a psychologist, I might be able to explain it to her. The story involved a certain allotment of turquoise jewelry she had been having trouble selling. It was the peak of the tourist season, the store was unusually full of customers, the turquoise pieces were of good quality for the prices she was asking; yet they had not sold. My friend had attempted a couple of standard sales tricks to get them moving. She tried calling attention to them by shifting their location to a more central display area; no luck. She even told her sales staff to “push” the items hard, again without success. Finally, the night before leaving on an out-of-town buying trip, she scribbled an exasperated note to her head saleswoman, “Everything in this display case, price × ½,” hoping just to be rid of the offending pieces, even if at a loss. When she returned a few days later, she was not surprised to find that every article had been sold. She was shocked, though, to discover that, because the employee had read the “½” in her scrawled message as a “2,” the entire allotment had sold out at twice the original price! > It is easy to fault the tourists for their foolish purchase decisions. But a close look offers a kinder view. These were people who had been brought up on the rule “You get what you pay for” and who had seen that rule borne out over and over in their lives. Before long, they had translated the rule to mean “expensive = good.” The “expensive = good” stereotype had worked quite well for them in the past, since normally the price of an item increases along with its worth; a higher price typically reflects higher quality. So when they found themselves in the position of wanting good turquoise jewelry without much knowledge of turquoise, they understandably relied on the old standby feature of cost to determine the jewelry’s merits.
intrasight 6y ago
"is never high enough" isn't really actionable info. I need to set a price, and it will be somewhere between $10 and $1000 month. You could of course try to fill the area under the demand curve, but that poses it's own challenges. I settled on $1000/mo because for the customers that will really benefit from my software, that is how much they benefit.
AdieuToLogic 6y ago
> If you want your prospects/customers to take you seriously they have to find you expensive. This is BS. If you want your customers to take you seriously, seriously solve their pain. One example is charging $1 USD for a song, which at least one company has done and made billions. Making an offering "expensive" in and of itself neither conveys legitimacy nor value. It only begs potential customers to contemplate the cost/value proposition more critically.

by polote 6y ago

dubcanada 6y ago

Do people not take Walmart seriously? Office 365 is also extremely cheap compared to what you get. Do people not take that seriously? I don't think blanket statements like, you're SAAS product is not expensive enough, work. You should take a tailored approach for what works for you.

graerg 6y ago
>Do people not take Walmart seriously? Depends on what you mean by "people". For a lot of average consumers/customers, Walmart _isn't_ taken seriously. They're not aware (and don't care) about the incredible supply/logistics magic that Walmart orchestrates behind the scenes. They'll pay a premium to buy stuff elsewhere to avoid the inferior goods connotations associated with Walmart.
- iujjkfjdkkdkf 6y ago
  For electronics or clothes maybe, for many household things Walmart had name brands and people know that. I dont go there (and I assume pay a premium) because I dont like places that treat customers as cattle, and would happily pay a few cents extra for a shopping experience that hasn't had every ounce or humanity stripped from it. Granted I'm in the minority and it's hard to even find places that treat their customers like people anymore.
- mixmastamyk 6y ago
  It's not about the goods mosly, but rather standing in long, slow, lines with the masses.
rootusrootus 6y ago
> Do people not take Walmart seriously? I tend to think that they mostly sell cheap crap, that even their brand-name stuff has been renegotiated with the manufacturer so they can sell you a lower quality version in order to have the lowest price. They have definitely done this with some products, and at least attempted it on others. So yeah, their pricing definitely affects my perception of their products. I avoid Walmart. Office 365 has the clout of Microsoft behind it. I don't know that the general rule applies as well as it does to some new SaaS company I have never heard of before.
- arbuge 6y ago
  You may avoid it, but hundreds of millions don't, so the point stands. "Cheap crap" is obviously one possible way to go, and companies like Walmart have grown very successful that way.
  - bryanrasmussen 6y ago
    are there hundreds of millions of enterprise customers for your SAAS product?
    - dubcanada 6y ago
      Sometimes shooting for enterprise customers doesn't work. Some products need the little guy to survive, not global international enterprise companies.
  - rootusrootus 6y ago
    Many people are totally fine with buying cheap crap. As long as they know that going in, that's great. Walmart is indicating with their prices that they're offering lower quality merchandise, which many people find acceptable because the cost is lower. It's honest.
    - pfranz 6y ago
      I think a lot of people overvalue what they think they need--basically YAGNI. There is a bit of once burnt, twice shy. I learned when first moving out to go to the dollar store to fill my apartment; bathroom trash can, shower curtain rings, kitchen cups/plates, toilet brush. Then upgrade what doesn't work (paper-thin shower curtains will billow with the steam and stick to you). It wasn't as wasteful as I had expected and I saved a lot of money compared to just buying everything from the average retail store. Even Wal-Mart plays on this by stocking name brands here and there.
ufmace 6y ago
You're kind of both right IMO. The great majority of products created by techies interested in startups are priced much lower than the market will bear, and so their prices should rise. There definitely is a market out there for the cheapest possible version of something. Usually, turning a profit while moving a product at the cheapest possible price involves maximizing volume, cutting quality to be bare minimum, and ruthlessly eliminating overhead. Like, if there aren't thousands of people on the internet complaining about how crappy your quality is, you probably need to cut it further. I haven't studied it, but I have a hunch that most of the type of people who surf HN for business advice aren't interested in being in a commodity industry where you have to do these things to have a viable business. Or if they find themselves in one, they aren't going to be ruthless enough in the right directions to make it. They better find the right place to get advice for that sort of business, or they won't last long.

danenania 6y ago

Another way to think about this is that even if you built a product to scratch your own itch, you may not be your own ideal customer. In that case, your instincts on pricing could be way off. You might be cost-sensitive and look for a good deal when buying tools and infra to support your own projects. But buyers at larger companies aren’t spending their own money, so their thought process is very different. As long as the price fits in the budget and isn’t an outlier compared to other products they pay for, then it’s not going to be what they focus on. They’ll care much more about quality, trustworthiness, ease of integration, support, and things like that. That’s why putting your price at the high end of the 'acceptable' range is a win-win. You don’t leave money on the table, and you make an implicit commitment to high quality and good service, which the customers you really want value more than a bargain.

loceng 6y ago

Pricing psychology is so interesting, where there seems to be a hierarchy as well; which flows into the idea or rule that you should never limit how much someone can spend.

TriNetra 6y ago

I recently read a story in the book 'Influence – The Psychology of Persuasion' (by Robert B. Cialdini): > I GOT A PHONE CALL ONE DAY FROM A FRIEND WHO HAD RECENTLY opened an Indian jewelry store in Arizona. She was giddy with a curious piece of news. Something fascinating had just happened, and she thought that, as a psychologist, I might be able to explain it to her. The story involved a certain allotment of turquoise jewelry she had been having trouble selling. It was the peak of the tourist season, the store was unusually full of customers, the turquoise pieces were of good quality for the prices she was asking; yet they had not sold. My friend had attempted a couple of standard sales tricks to get them moving. She tried calling attention to them by shifting their location to a more central display area; no luck. She even told her sales staff to “push” the items hard, again without success. Finally, the night before leaving on an out-of-town buying trip, she scribbled an exasperated note to her head saleswoman, “Everything in this display case, price × ½,” hoping just to be rid of the offending pieces, even if at a loss. When she returned a few days later, she was not surprised to find that every article had been sold. She was shocked, though, to discover that, because the employee had read the “½” in her scrawled message as a “2,” the entire allotment had sold out at twice the original price! > It is easy to fault the tourists for their foolish purchase decisions. But a close look offers a kinder view. These were people who had been brought up on the rule “You get what you pay for” and who had seen that rule borne out over and over in their lives. Before long, they had translated the rule to mean “expensive = good.” The “expensive = good” stereotype had worked quite well for them in the past, since normally the price of an item increases along with its worth; a higher price typically reflects higher quality. So when they found themselves in the position of wanting good turquoise jewelry without much knowledge of turquoise, they understandably relied on the old standby feature of cost to determine the jewelry’s merits.

intrasight 6y ago

"is never high enough" isn't really actionable info. I need to set a price, and it will be somewhere between $10 and $1000 month. You could of course try to fill the area under the demand curve, but that poses it's own challenges. I settled on $1000/mo because for the customers that will really benefit from my software, that is how much they benefit.

AdieuToLogic 6y ago

> If you want your prospects/customers to take you seriously they have to find you expensive. This is BS. If you want your customers to take you seriously, seriously solve their pain. One example is charging $1 USD for a song, which at least one company has done and made billions. Making an offering "expensive" in and of itself neither conveys legitimacy nor value. It only begs potential customers to contemplate the cost/value proposition more critically.