5 ms·
A couple things: 1. Being cheaper doesn't mean more sales. I've often times chosen the more expensive option simply because it is more expensive and it has to
by noahc 14y ago
A couple things:
1. Being cheaper doesn't mean more sales. I've often times chosen the more expensive option simply because it is more expensive and it has to be better right? If you're cheaper than salesforce, then I view you as an inferior product to salesforce. If you're the same price as salesforce, than you're a salesforce knock off, why not just get the real deal? If you're more expensive than salesforce, oh? Why is that? You're better in x,y,z ways? Perfect. That's exactly what I could use. Offering a lower price works when you view your self as a commodity. You probably don't want to view your SaSS product as a commodity.
2. "I"ll raise prices later" is a bad approach because SOMEONE will have looked at your sales page the day before and now want the old price. Also, if you say, "My real price is xxx, but I'm going to charge xx now", then you also have the added disadvantage of not knowing if you could actually charge xxx later. Furthermore, you might be attracting the wrong types of people via xx pricing, who then mass exodus at xxx, and you would reach the wrong conclusion. You're marketing and pricing brought in a bunch of cheapskates, and yet your revenue would triple by going to xxx, with decreased sales and support costs.
- jgalt212 14y agoNoah, 1. I follow your logic here, and it makes perfect sense to me, but per my experience in the real world things just don't work that way. If you are trying to crack into an existing market, you have to be better on both service and price. 2. Tell this to Michael Bloomberg. He raises prices every year and is one of the richest people in America. Also, there are other methods of raising prices at a later date other than just moving the sticker price. For example, introduce new/enhanced services at higher price points. For a real world example, our company did that with API access. We kept the original web access product priced low, but priced API access as a premium product.
- apaprocki 14y agoBloomberg prices increase on a two year schedule (e.g. 2010, 2012, ...) to account for inflation. It is actually a "feature" of the subscription because it has been historically stable and by tracking inflation, companies can very easily plan their costs years in advance without worrying about a rogue increase.
- noahc 14y agoI can't obviously dispute your personal experience, but I think we can both agree that price is a signal. I agree with you that you can mask your price increase and it isn't something that I'd considered when I originally posted. However, I would argue that Bloomberg was priced high enough early on to not attract cheapskates. Again, pricing as a signal. If you're charging $15,000 and the person is making $1mm a month off of it the difference between $15,000 and $25,000 isn't very much. However, if you started out charging $150 a month and hope to get to $25,000 you're going to have a very hard time doing so even if your customers are making $1mm a month of the service because you've anchored your price so low. Again, there are probably creative ways to get from $150 to $25,000 like you mentioned, but I'm not sure I'm interested in spending my creative energy moving the needle that much when I could just start out charging a much higher rate.