Thoughts on pricing
A product is a part of a market system; when setting a price, consider competitors + categories (i.e. “expected” SAAS pricing > for example, it’d be hard to price a mobile app for $40/mo even if it had such value just because people are used to $7/9/12/15 per month prices in the App Store)
It’s always easier to lower a price later than to raise one; always begin with a higher price and lower/discount if needed
Discounts should be done with caution because it diminishes product’s value; we should never discount unless we come up with a smart way to do that (for example, Patrick Conrad pitched Zenefits discount as a lower price for servers they got from Amazon)
People perceive prices relative to other options; $100 suit looks expensive if all other suits go for $10 but crazy cheap if you’re at Brooks Brothers, where a suit starts from $10k
Price implicitly states the quality of the product when all other parameters are unclear (i.e., $3 water seems more high-quality than $1)
Price depends heavily on the type of person we’re selling to (i.e., some people would pick $3 water over $1)
When looking at a pricing table, it should be easy to understand which “bucket” I fall into (i.e., a freelancer, a team, etc.); most products have unclear categories and just copy them from everybody else
People tend to systematically underprice their products; most makers are solving a problem they don’t have and do not fully understand the value they offer and the nature of their customers (i.e., enterprises buy insurance, managers pay from the company’s pocket, etc.)
I’ve talked to Spencer Skates, the CEO of Amplitude (a very successful analytics tool), and he told me they only had two plans in the early days of the company - free and enterprise. They experimented a lot and put a price only after they figured out how much people are actually willing to pay, and that number was way, way more than he initially expected