Choosing your price points
Here’s my simple pricing strategy when you’re just starting out building any SaaS/B2B company:
- Keep it simple - don’t make people have to overthink it too much
- People will pay a premium for price clarity
- Start with very low prices. Your product sucks and getting early customer feedback is worth paying for.
- Gradually, increase your prices as you add more features that benefit your customers.
- Once you find the complain point (the point where a few customers think your product is too expensive), stop increasing your prices. Your next step is to continue to build things that add lots of value to overcome the complaining.
- Customized pricing will allow you to price larger customers out in the long-run. Don’t worry about price maximization - that will come later.
- Always have a big-tier that you don’t expect anyone to buy (it helps people think that you scale and sometimes people just buy it)
- Consider your audience: Very low price points will attract fairly price sensitive customers that can become difficult for some businesses to support. It can also drive the wrong kind of feedback when you think about product.
- Always experiment with customized pricing - increase it and see if you lose the customer. Don’t be risk averse, take risks!
- If your pricing is usage based, be prepared to be transparent and take initiative by alerting your customers before they exceed their usage.
- Be extra benevolent about refunds. An angry customer can cost you many more customers. Meanwhile, a happy one can do the opposite.
- Give some of your product away for free - don’t make people put in a credit card at first. Those free customers will become your largest evangelists one day.
- Invoicing is pain - there’s 2-3x more overhead than you think.
- Always grandfather in your customers on cheaper prices - too many companies have screwed up and pissed off happy customers. Besides, when they upgrade, they’ll be on a higher plan anyway.
- Month to month, risk-free pricing is a huge differentiator today. Your lock-in is how good your product is and how many people in your customer’s organization now depend on it.