5 ms·

If you wouldn't pay for my app, your pricing advice is worthless

89 points by mootothemax 15y ago

thoradam 15y ago
"charge too little, and people won’t use your service" What?
- tptacek 15y ago
  Pricing and adoption aren't a linear relationship, because price points also position products. I don't know how big an effect this is in the $1-$5 range, but it extremely important in premium categories.
- joshuacc 15y ago
  Just to throw out an extreme example, I definitely wouldn't hire a wedding photographer who charges $100 for a day's worth of photography. If they have to charge that little, they probably aren't very good. And given the importance of the occasion, I want to be sure that the photos are excellent.
- skmurphy 15y ago
  $5 laser eye surgery, $10 car price communicates value.
mise 15y ago
What I've found difficult with pricing split tests, which you discuss at the end of the article, is that it takes loooots of time to statistically prove anything (if a paying conversion comes along every two days, for example).
- mootothemax 15y ago
  Yup, I think at the start you have to go with gut feeling until you can get reliable stats. As ever with SaaS - it's all about getting enough traffic until you can shape it how you want :)
wccrawford 15y ago
I'm surprised this had to be said. Basic economics will tell you that the only way to determine price is what people will pay... Not what they say they'll pay, or what they say others will pay, or what they say people should pay. Only what they will pay. And everyone's price point is different, of course... Some would never buy, others would spend far more than most people. It's all about finding that sweet spot.
- arkitaip 15y ago
  The meta insight seems to be that you should never trust what customers say, only what they do. Other areas where this applies is user testing ("No, I don't think it's that difficult to use.") and marketing ("This ad looks way better than that.").
  - mootothemax 15y ago
    The meta insight seems to be that you should never trust what customers say, only what they do. "Never" is a strong word, but I think it's a good general rule to stand by.
  - reinhardt 15y ago
    The meta insight seems to be that you should never trust what customers say, only what they do. Other areas where this applies is user testing ("No, I don't think it's that difficult to use.") and marketing ("This ad looks way better than that."). One more area: (most) female dating advice. "I want a sweet nice guy" vs "all my ex-es were jerks". Guess who she's attracted to.
- mootothemax 15y ago
  I'm surprised this had to be said It's great that you're naturally that level-headed, but I think when you have a crowd of people telling you X, it's easy to forget that they're not customers - let alone that customers will usually tell you that they want to pay less ;)
- wpietri 15y ago
  You shouldn't be very surprised. It's true that the only way to be sure of what people will pay is to see what they pay. But by the time you have an actual product to sell, you will have asked people for advice and feedback about 8 million times. It's very natural at that point to go for 8 million + 1 and say, "What would you pay for this?" Pricing is one of the few things in business that's traditionally amenable to gathering hard data. Which is why I'm so excited about the Lean Startup approach; there one tries to apply the same data-driven spirit to everything.
kenjackson 15y ago
If everyone you talk to says, "I wouldn’t use this service if you paid me in gold-plated puppies" then you really should consider that your service may have a problem.
- mootothemax 15y ago
  If everyone you talk to says, "I wouldn’t use this service if you paid me in gold-plated puppies" then you really should consider that your service may have a problem. Hehe, I very much agree :) At the same time - what if 25% or 30% of replies are this negative? I've experienced that on other forums, only to end up making a decent amount of money.
- raganwald 15y ago
  Very true. Another possibility to investigate: You are talking to the wrong people. For example, if you are interested in software for managing HR processes, HN might be a great place for architecture advice, but are startups really a useful market to sample for product pricing and features?
  - joe_the_user 15y ago
    It is possible you're talking to the wrong people. I wonder, though, how you could have designed the right app if you have only been talking to the wrong people? I mean, the sequence is either - "design an app that you yourself want and that you think is sooo cool that the whole world will want too" or "talk to people different enough from programmers that you need to understand them first to create a great app". The first approach is (caricatured) Steve Jobs, the second approach is Patio11. But it seems if the people you're talking to hate your app, you've failed at either of these approaches.
- silverbax88 15y ago
  I hear you, but that's now always true. I wouldn't pay $10 to sign Cam Newton as my quarterback, but my Carolina Panthers just paid millions for him. Just because I don't see the value in something doesn't mean someone else won't.
euroclydon 15y ago
I've sold CWC [1] for, $12.95, $19.95, $24.95, and $29.95, multiple times at each price point, over the past few months. It's nice to find a way to segment the market and take advantage of price elasticity of demand. [1] See profile.
- mootothemax 15y ago
  I love your product, it's cool! :) Mentioning segmenting, I've often wondered about taking exactly the same product, marketing it on a fresh website and raising or lowering the price depending on who the market is. Although I've also been partly worried that that's a good way to end up with a massive consumer backlash ;)
  - euroclydon 15y ago
    There are all kinds of ways to add/remove bells and whistles in order to have a pricing page with several tiers, yet very little change to the underlying code-base or product. You can charge more for support, exclusive access to additional content/material, number of time the user can do something per month. It's been said many times on here, there are always people who want to pay more -- ignore them at your own peril.
chopsueyar 15y ago
This headline made me laugh.
chopsueyar 15y ago
I've recommended this Harvard Business Review article before, but I believe it is still relevant. How Do You Know When the Price Is Right? by Robert. J. Dolan Published Sep 01, 1995 http://www.amazon.com/gp/product/B00005RZ5D/ref=as_li_ss_tl?ie=UTF8&tag=littdidd-20&linkCode=as2&camp=217153&creative=399701&creativeASIN=B00005RZ5D http://www.amazon.com/gp/product/B00005RZ5D/ref=as_li_ss_tl?...
SoftwareMaven 15y ago
The much more difficult thing is separating those who wouldn't use your app for functionality reasons (dude, it's a guitar...I'm a drummer.) versus those who wouldn't use your app for pricing (dude, I can't afford your sticks.) You will only gain noise from the former, but you may find something out from the latter. You may still want to choose to ignore it (Apple has received no end of "it's too expensive" feedback), but the knowledge will still help you understand who your buyers are and how to best market to them. FWIW, this is product managmpement 201. Pricing doesn't happen in the first year. :)
bugsy 15y ago
I agree with the article. We occasionally get comments about how our software is too expensive. The only thing that matters though is we do periodic pricing experiments and we know for a fact we don't make more money by lowering the price or by raising it.
davedx 15y ago
A/B testing your pricing? Do people really do that? I wouldn't like to be on the receiving end when your customers find out about that one.
- absconditus 15y ago
  Amazon has done it.
  - gregory80 15y ago
    I've heard about their UX A/B testing around showing cart flow and checkout, but actual pricing? Can you link to research?
    - absconditus 15y ago
      http://www.wired.com/techbiz/media/news/2000/09/38622 http://www.wired.com/techbiz/media/news/2000/09/38622 Searching for Amazon different prices with Google provides many claims of this over the years.
      - gregory80 15y ago
        this appears to be far more anecdotal evidence than research. I was thinking a published study, not simply consumers noticing price differences on checkout, haphazard sampling to say the very least..
- wmwong 15y ago
  I vaguely remember reading a post that patio11 did that before. Correct me if I'm wrong. My memory likes to play tricks on me. In the end, if it turned out it was better, you would give everyone the lower price and offer a discount or moneyback to the people who had to pay more during the test. If the higher price turned out better, you leave everything as is or you could discount the people paying more and just get all new customers to pay the higher price.
wnight 15y ago
Unless your app is trivial it won't appeal to only one type of person so you're going to have to model multiple types anyways. For instance, the inbox cleaning utility mentioned - it could be used by busy CEOs whose time is money, and by computer-illiterate people like the stereotypical grandparents who need frequent access to the same tool despite having ample time to shop around on price. You need to advertise to both group independently or you won't get either. So model the people who don't like your software too, and their desired payment options, as more data points from which to understand your actual best market.
physcab 15y ago
This is exactly the type of problem I have been encountering with my app FitLabs (www.fitlabs.co). Its an app catered to people who do Crossfit and are used to paying $150/month in gym fees. So I thought, "hmm if people are already paying that much, they wouldn't have a problem paying a premium for a tool that lets them get more out of their workouts". Wrong. I built the tool, and people balked at the price. They said I should lower it to $10/month, but even when I did that they still didn't sign up.
- jonnycowboy 15y ago
  Like wpietri writes below, you should try marketing to a different segment. For example, try selling a slightly-modified version to the military for boot camp training in order to better track solider performance.
- byoung2 15y ago
  if people are already paying that much, they wouldn't have a problem paying a premium for a tool that lets them get more out of their workouts You have to remember to explain how they gain from using your product in monetary terms. In exchange for $150/month in gym fees, I get to use their equipment, showers, electricity, trainers, cleaning crew, etc. When I use your app, what do I get? Maybe your app saves me 30 minutes three times a week vs using a diary. At my hourly rate, $30 is a bargain. When I was doing freelance web design, you wouldn't believe how many businesses were spending $400/mo on paper YellowPages ads, but couldn't see the value in spending $500 + $50/mo for a website. When I explained that they could use just half of that monthly spend on SEO and PPC ads, and have better conversion tracking, they saw the appeal. When I explained that an online scheduler could save them $1600/mo over having a full time receptionist, they really saw the appeal. You have to frame it in terms of cost savings/increased profit/saved time, etc.
  - physcab 15y ago
    This is excellent insight. As a developer, my gut reaction is to say but look at all these features and people will pay for that. But thats not really the case. In fact, it seems what people actually pay for is an efficient solution to something that takes them far too much time (or makes/saves them money).
dasil003 15y ago
Well, unless that person happens to be an entrepreneur with a track record of successfully pricing products much like yours.

89 points by mootothemax 15y ago

thoradam 15y ago

"charge too little, and people won’t use your service" What?

tptacek 15y ago
Pricing and adoption aren't a linear relationship, because price points also position products. I don't know how big an effect this is in the $1-$5 range, but it extremely important in premium categories.
joshuacc 15y ago
Just to throw out an extreme example, I definitely wouldn't hire a wedding photographer who charges $100 for a day's worth of photography. If they have to charge that little, they probably aren't very good. And given the importance of the occasion, I want to be sure that the photos are excellent.
skmurphy 15y ago
$5 laser eye surgery, $10 car price communicates value.

mise 15y ago

What I've found difficult with pricing split tests, which you discuss at the end of the article, is that it takes loooots of time to statistically prove anything (if a paying conversion comes along every two days, for example).

mootothemax 15y ago
Yup, I think at the start you have to go with gut feeling until you can get reliable stats. As ever with SaaS - it's all about getting enough traffic until you can shape it how you want :)

wccrawford 15y ago

I'm surprised this had to be said. Basic economics will tell you that the only way to determine price is what people will pay... Not what they say they'll pay, or what they say others will pay, or what they say people should pay. Only what they will pay. And everyone's price point is different, of course... Some would never buy, others would spend far more than most people. It's all about finding that sweet spot.

arkitaip 15y ago
The meta insight seems to be that you should never trust what customers say, only what they do. Other areas where this applies is user testing ("No, I don't think it's that difficult to use.") and marketing ("This ad looks way better than that.").
- mootothemax 15y ago
  The meta insight seems to be that you should never trust what customers say, only what they do. "Never" is a strong word, but I think it's a good general rule to stand by.
- reinhardt 15y ago
  The meta insight seems to be that you should never trust what customers say, only what they do. Other areas where this applies is user testing ("No, I don't think it's that difficult to use.") and marketing ("This ad looks way better than that."). One more area: (most) female dating advice. "I want a sweet nice guy" vs "all my ex-es were jerks". Guess who she's attracted to.
mootothemax 15y ago
I'm surprised this had to be said It's great that you're naturally that level-headed, but I think when you have a crowd of people telling you X, it's easy to forget that they're not customers - let alone that customers will usually tell you that they want to pay less ;)
wpietri 15y ago
You shouldn't be very surprised. It's true that the only way to be sure of what people will pay is to see what they pay. But by the time you have an actual product to sell, you will have asked people for advice and feedback about 8 million times. It's very natural at that point to go for 8 million + 1 and say, "What would you pay for this?" Pricing is one of the few things in business that's traditionally amenable to gathering hard data. Which is why I'm so excited about the Lean Startup approach; there one tries to apply the same data-driven spirit to everything.

kenjackson 15y ago

If everyone you talk to says, "I wouldn’t use this service if you paid me in gold-plated puppies" then you really should consider that your service may have a problem.

mootothemax 15y ago
If everyone you talk to says, "I wouldn’t use this service if you paid me in gold-plated puppies" then you really should consider that your service may have a problem. Hehe, I very much agree :) At the same time - what if 25% or 30% of replies are this negative? I've experienced that on other forums, only to end up making a decent amount of money.
raganwald 15y ago
Very true. Another possibility to investigate: You are talking to the wrong people. For example, if you are interested in software for managing HR processes, HN might be a great place for architecture advice, but are startups really a useful market to sample for product pricing and features?
- joe_the_user 15y ago
  It is possible you're talking to the wrong people. I wonder, though, how you could have designed the right app if you have only been talking to the wrong people? I mean, the sequence is either - "design an app that you yourself want and that you think is sooo cool that the whole world will want too" or "talk to people different enough from programmers that you need to understand them first to create a great app". The first approach is (caricatured) Steve Jobs, the second approach is Patio11. But it seems if the people you're talking to hate your app, you've failed at either of these approaches.
silverbax88 15y ago
I hear you, but that's now always true. I wouldn't pay $10 to sign Cam Newton as my quarterback, but my Carolina Panthers just paid millions for him. Just because I don't see the value in something doesn't mean someone else won't.

euroclydon 15y ago

I've sold CWC [1] for, $12.95, $19.95, $24.95, and $29.95, multiple times at each price point, over the past few months. It's nice to find a way to segment the market and take advantage of price elasticity of demand. [1] See profile.

mootothemax 15y ago
I love your product, it's cool! :) Mentioning segmenting, I've often wondered about taking exactly the same product, marketing it on a fresh website and raising or lowering the price depending on who the market is. Although I've also been partly worried that that's a good way to end up with a massive consumer backlash ;)
- euroclydon 15y ago
  There are all kinds of ways to add/remove bells and whistles in order to have a pricing page with several tiers, yet very little change to the underlying code-base or product. You can charge more for support, exclusive access to additional content/material, number of time the user can do something per month. It's been said many times on here, there are always people who want to pay more -- ignore them at your own peril.

chopsueyar 15y ago

This headline made me laugh.

chopsueyar 15y ago

I've recommended this Harvard Business Review article before, but I believe it is still relevant. How Do You Know When the Price Is Right? by Robert. J. Dolan Published Sep 01, 1995 http://www.amazon.com/gp/product/B00005RZ5D/ref=as_li_ss_tl?ie=UTF8&tag=littdidd-20&linkCode=as2&camp=217153&creative=399701&creativeASIN=B00005RZ5D http://www.amazon.com/gp/product/B00005RZ5D/ref=as_li_ss_tl?...

SoftwareMaven 15y ago

The much more difficult thing is separating those who wouldn't use your app for functionality reasons (dude, it's a guitar...I'm a drummer.) versus those who wouldn't use your app for pricing (dude, I can't afford your sticks.) You will only gain noise from the former, but you may find something out from the latter. You may still want to choose to ignore it (Apple has received no end of "it's too expensive" feedback), but the knowledge will still help you understand who your buyers are and how to best market to them. FWIW, this is product managmpement 201. Pricing doesn't happen in the first year. :)

bugsy 15y ago

I agree with the article. We occasionally get comments about how our software is too expensive. The only thing that matters though is we do periodic pricing experiments and we know for a fact we don't make more money by lowering the price or by raising it.

davedx 15y ago

A/B testing your pricing? Do people really do that? I wouldn't like to be on the receiving end when your customers find out about that one.

absconditus 15y ago
Amazon has done it.
- gregory80 15y ago
  I've heard about their UX A/B testing around showing cart flow and checkout, but actual pricing? Can you link to research?
  - absconditus 15y ago
    http://www.wired.com/techbiz/media/news/2000/09/38622 http://www.wired.com/techbiz/media/news/2000/09/38622 Searching for Amazon different prices with Google provides many claims of this over the years.
    - gregory80 15y ago
      this appears to be far more anecdotal evidence than research. I was thinking a published study, not simply consumers noticing price differences on checkout, haphazard sampling to say the very least..
wmwong 15y ago
I vaguely remember reading a post that patio11 did that before. Correct me if I'm wrong. My memory likes to play tricks on me. In the end, if it turned out it was better, you would give everyone the lower price and offer a discount or moneyback to the people who had to pay more during the test. If the higher price turned out better, you leave everything as is or you could discount the people paying more and just get all new customers to pay the higher price.

wnight 15y ago

Unless your app is trivial it won't appeal to only one type of person so you're going to have to model multiple types anyways. For instance, the inbox cleaning utility mentioned - it could be used by busy CEOs whose time is money, and by computer-illiterate people like the stereotypical grandparents who need frequent access to the same tool despite having ample time to shop around on price. You need to advertise to both group independently or you won't get either. So model the people who don't like your software too, and their desired payment options, as more data points from which to understand your actual best market.

physcab 15y ago

This is exactly the type of problem I have been encountering with my app FitLabs (www.fitlabs.co). Its an app catered to people who do Crossfit and are used to paying $150/month in gym fees. So I thought, "hmm if people are already paying that much, they wouldn't have a problem paying a premium for a tool that lets them get more out of their workouts". Wrong. I built the tool, and people balked at the price. They said I should lower it to $10/month, but even when I did that they still didn't sign up.

jonnycowboy 15y ago
Like wpietri writes below, you should try marketing to a different segment. For example, try selling a slightly-modified version to the military for boot camp training in order to better track solider performance.
byoung2 15y ago
if people are already paying that much, they wouldn't have a problem paying a premium for a tool that lets them get more out of their workouts You have to remember to explain how they gain from using your product in monetary terms. In exchange for $150/month in gym fees, I get to use their equipment, showers, electricity, trainers, cleaning crew, etc. When I use your app, what do I get? Maybe your app saves me 30 minutes three times a week vs using a diary. At my hourly rate, $30 is a bargain. When I was doing freelance web design, you wouldn't believe how many businesses were spending $400/mo on paper YellowPages ads, but couldn't see the value in spending $500 + $50/mo for a website. When I explained that they could use just half of that monthly spend on SEO and PPC ads, and have better conversion tracking, they saw the appeal. When I explained that an online scheduler could save them $1600/mo over having a full time receptionist, they really saw the appeal. You have to frame it in terms of cost savings/increased profit/saved time, etc.
- physcab 15y ago
  This is excellent insight. As a developer, my gut reaction is to say but look at all these features and people will pay for that. But thats not really the case. In fact, it seems what people actually pay for is an efficient solution to something that takes them far too much time (or makes/saves them money).

dasil003 15y ago

Well, unless that person happens to be an entrepreneur with a track record of successfully pricing products much like yours.