3 ms·

Ask HN: How do you determine your price point?

8 points by quizbiz 17y ago

Trying to find a good price point for a license and for products. I'm not sure how to go about this. How do I charge one group x amount and another 2x an see which is more profitable?

alavrik 17y ago
One of the best introductory articles on pricing I've read: http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...
aditya 17y ago
1. Survey your audience, ask specific questions like, would you pay a) $10-20 b) $30-$40 c) 1 million billion of this product 2. Check your competition to see what they're charging (counterpoint: http://en.wikipedia.org/wiki/Blue_Ocean_Strategy http://en.wikipedia.org/wiki/Blue_Ocean_Strategy) 3. Pick a number (ref: http://network.businessofsoftware.org/video/dharmesh-shah-on-insights-from http://network.businessofsoftware.org/video/dharmesh-shah-on... - worth watching in its entirety) 4. Play with specials - this week, we're offering a 30% discount to all new users (better than decreasing the price outright and incurring the wrath of existing users) 5. Model the numbers, at all times, how many licenses do you need at x price point to break even, etc.
stevenjames 17y ago
In terms of the product(s), what would you pay for it?
- mediaman 17y ago
  That's not always the best metric, particularly when your product is being sold to an entity which is dissimilar to you (see: rich people, medium to large companies). In those cases, they are often willing to pay much, much more than you would. Many people make the mistake of underpricing because of this.
  - patio11 17y ago
    Relatedly, you not selling to HN posters, people on Slashdot, starving college students, or people who are morally opposed to spending money for software. I don't mean to step on any toes, but I've heard "$20 is sort of pricey for a business -- why not make it $10?" enough to be skeptical of the advice on pricing from other people, unless they are saying Charge More.
    - mediaman 17y ago
      Good point. Your business is a good example of one in which you are able to charge reasonably aggressive prices even to a demographic that is not normally considered monied. That people are often willing to pay far more than you'd think is certainly not limited to enterprises and the wealthy.
nkohari 17y ago
IANAL, but you're in dangerous legal territory if you charge two groups of people different amounts for the same product. Either make it a different license offering, or make sure you're not discriminating against either group. :) You really can't figure out a price point in a scientific way (sample and control)... you just have to adjust it organically and see.
- ryanwaggoner 17y ago
  I love how you state that you're not a lawyer then present definitive legal advice. How is charging different amounts to different people "dangerous legal territory"? Companies do this all the time...think about all the transactions where the price is haggled back and forth, or companies offering a special discount to startups or nonprofits, or offering specials on certain days of the week, etc. Unless you're segmenting your groups by some protected status, like gender or religion, I don't see how it's a legal matter at all. But mostly I'd like to hear why you know that it is.
  - dctoedt 17y ago
    I think he's referring to the Robinson-Patman Act - http://en.wikipedia.org/wiki/Robinson-Patman_Act http://en.wikipedia.org/wiki/Robinson-Patman_Act.
gojomo 17y ago
Flinch pricing: http://venturehacks.com/articles/pricing http://venturehacks.com/articles/pricing
mattmaroon 17y ago
a/b test it if you have decent traffic. You have to make sure you get a statistically significant sample.

8 points by quizbiz 17y ago

Trying to find a good price point for a license and for products. I'm not sure how to go about this. How do I charge one group x amount and another 2x an see which is more profitable?

alavrik 17y ago

One of the best introductory articles on pricing I've read: http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...

aditya 17y ago

1. Survey your audience, ask specific questions like, would you pay a) $10-20 b) $30-$40 c) 1 million billion of this product 2. Check your competition to see what they're charging (counterpoint: http://en.wikipedia.org/wiki/Blue_Ocean_Strategy http://en.wikipedia.org/wiki/Blue_Ocean_Strategy) 3. Pick a number (ref: http://network.businessofsoftware.org/video/dharmesh-shah-on-insights-from http://network.businessofsoftware.org/video/dharmesh-shah-on... - worth watching in its entirety) 4. Play with specials - this week, we're offering a 30% discount to all new users (better than decreasing the price outright and incurring the wrath of existing users) 5. Model the numbers, at all times, how many licenses do you need at x price point to break even, etc.

stevenjames 17y ago

In terms of the product(s), what would you pay for it?

mediaman 17y ago
That's not always the best metric, particularly when your product is being sold to an entity which is dissimilar to you (see: rich people, medium to large companies). In those cases, they are often willing to pay much, much more than you would. Many people make the mistake of underpricing because of this.
- patio11 17y ago
  Relatedly, you not selling to HN posters, people on Slashdot, starving college students, or people who are morally opposed to spending money for software. I don't mean to step on any toes, but I've heard "$20 is sort of pricey for a business -- why not make it $10?" enough to be skeptical of the advice on pricing from other people, unless they are saying Charge More.
  - mediaman 17y ago
    Good point. Your business is a good example of one in which you are able to charge reasonably aggressive prices even to a demographic that is not normally considered monied. That people are often willing to pay far more than you'd think is certainly not limited to enterprises and the wealthy.

nkohari 17y ago

IANAL, but you're in dangerous legal territory if you charge two groups of people different amounts for the same product. Either make it a different license offering, or make sure you're not discriminating against either group. :) You really can't figure out a price point in a scientific way (sample and control)... you just have to adjust it organically and see.

ryanwaggoner 17y ago
I love how you state that you're not a lawyer then present definitive legal advice. How is charging different amounts to different people "dangerous legal territory"? Companies do this all the time...think about all the transactions where the price is haggled back and forth, or companies offering a special discount to startups or nonprofits, or offering specials on certain days of the week, etc. Unless you're segmenting your groups by some protected status, like gender or religion, I don't see how it's a legal matter at all. But mostly I'd like to hear why you know that it is.
- dctoedt 17y ago
  I think he's referring to the Robinson-Patman Act - http://en.wikipedia.org/wiki/Robinson-Patman_Act http://en.wikipedia.org/wiki/Robinson-Patman_Act.

gojomo 17y ago

Flinch pricing: http://venturehacks.com/articles/pricing http://venturehacks.com/articles/pricing

mattmaroon 17y ago

a/b test it if you have decent traffic. You have to make sure you get a statistically significant sample.