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There are three basic methodologies: 1. Your total costs + some profit $ = Product Price 2. Your comparable competitors price + or - some amount = Product Pri

There are three basic methodologies: 1. Your total costs + some profit $ = Product Price 2. Your comparable competitors price + or - some amount = Product Price 3. A BullShit price you pull out of your ass that you tell people to pay or fuck off = Product Price Explanations - 3. Apple is a prime example of this pricing model. nuff said. 2. Comparable competitor being the key phrase. I also suggest pricing higher and building a better product. Undercutting can start a nasty pricing war that can cause a lot of unndeeded revenue lost, on both sides. 1. This seems most appropriate for you. You can't just price at what you think the market says they are willing to pay. They may say they are only willing to pay $1/month. That's not going to cover your labor costs unless you have a ton of users. Figure out your labor costs associated w/ maintenance and additional features (don't forget to account for future hires). Price at that amount plus some profit (something like 10% or 20% if you have high labor costs. Don't be afraid to stretch that percentage higher too.) If you can't find a price point that covers your costs, but is in a range that users are willing to pay for, than you don't have a business. Entrepreneurs often forget that you can build this kickass product that every user needs, but if the customer doesn't have a high enough ROI they won't buy the product. User != Customer

dkyc 12y ago
I think this is bad advice. What you call "BullShit price you pull out of your ass" is called value based pricing. It means pricing your service on the value you bring to the customer, not the amount of work you invested. Because your customer doesn't care! Whether he's a genius coder that threw this together in a weekend, or he's a team of 10 that coded 6 months on this - the customer does not care. If the ROI is higher than the cost, he will buy. If it is not, he won't. Competition-based pricing only works if the products are completely equal. Like tap water or energy. Most software products are far less equal than programmers think. To us it's all just code. To real customers, even addressing their pain point in clear and concise web copy is worth something, because it saves them time. And that is what you monetize, not the lines of code written.
cx42net 12y ago
Your insight is very interesting. I cannot tell exactly my total cost because I'm missing some parameters (maintenance, working on additionnal features, some potential future hires, etc). Your comment made me think about something I was missing: ROI. I don't state in the home page that this service will help increase their sales! Silly me!
- jonwachob91 12y ago
  >>> Your comment made me think about something I was missing: ROI. I don't state in the home page that this service will help increase their sales! Silly me! ROI doesn't have to be an increase in sales. It could be increased efficiency (thus lowering the customers labor costs). There are lots of sub-categories, such as a marketing ROI. But those sub-categories can always be classified as either lower cost or increased sales. >>> Your insight is very interesting. I cannot tell exactly my total cost because I'm missing some parameters (maintenance, working on additionnal features, some potential future hires, etc). Best thing to do is guess. If you hire 2 additional engineers and a marketing specialist, you could forecast an additional $325k in labor every year. Add in your salary, so arbitrary number, lets say you have $450K in labor each year, tack on space rent server costs and other costs at a guesstimate. This'll tell you the minimum costs you are going to have in a year, divide that by a price, and that tells you how many customers you'll need to break even. Or you can divide costs by an expected number of customers and get your price.
  - cx42net 12y ago
    Well, I need many users, really many many many with this current setup :p

dkyc 12y ago

I think this is bad advice. What you call "BullShit price you pull out of your ass" is called value based pricing. It means pricing your service on the value you bring to the customer, not the amount of work you invested. Because your customer doesn't care! Whether he's a genius coder that threw this together in a weekend, or he's a team of 10 that coded 6 months on this - the customer does not care. If the ROI is higher than the cost, he will buy. If it is not, he won't. Competition-based pricing only works if the products are completely equal. Like tap water or energy. Most software products are far less equal than programmers think. To us it's all just code. To real customers, even addressing their pain point in clear and concise web copy is worth something, because it saves them time. And that is what you monetize, not the lines of code written.

cx42net 12y ago

Your insight is very interesting. I cannot tell exactly my total cost because I'm missing some parameters (maintenance, working on additionnal features, some potential future hires, etc). Your comment made me think about something I was missing: ROI. I don't state in the home page that this service will help increase their sales! Silly me!

jonwachob91 12y ago
>>> Your comment made me think about something I was missing: ROI. I don't state in the home page that this service will help increase their sales! Silly me! ROI doesn't have to be an increase in sales. It could be increased efficiency (thus lowering the customers labor costs). There are lots of sub-categories, such as a marketing ROI. But those sub-categories can always be classified as either lower cost or increased sales. >>> Your insight is very interesting. I cannot tell exactly my total cost because I'm missing some parameters (maintenance, working on additionnal features, some potential future hires, etc). Best thing to do is guess. If you hire 2 additional engineers and a marketing specialist, you could forecast an additional $325k in labor every year. Add in your salary, so arbitrary number, lets say you have $450K in labor each year, tack on space rent server costs and other costs at a guesstimate. This'll tell you the minimum costs you are going to have in a year, divide that by a price, and that tells you how many customers you'll need to break even. Or you can divide costs by an expected number of customers and get your price.
- cx42net 12y ago
  Well, I need many users, really many many many with this current setup :p