Ask HN: How do you price a product when in a market for custom-built s/w

https://news.ycombinator.com/item?id=10486389

by digital_ins • 11 years ago

3 2 11 years ago

news.ycombinator.com

We're trying to play in the world of custom software for natural language processing. In one single line: we provide an API that will allow a business to voice-enable their apps: Like a conversational, domain-expert Siri for their business.

But we're struggling with understanding how to price. Some have suggested the TAM (time & materials) model, and we've read most of the software pricing material there is out there. Others have suggested benchmarking ourselves against competitors, but this is tough because competitors are too nascent (as a result, there's very little publicly [and legally] discoverable data). :-(

We've just started b2b outreach and are very afraid that if we price too low, we will lose credibility re our tech (and it really is cutting-edge stuff we've built).

How would you go about thinking about this problem?

ddingus• 11 years ago

What is it worth to them?

If you have very little to work on, then most all of your value perception will be in the eyes of your prospects.

Have you segmented your prospects yet? Who are the targets, and what are they all about?

Go and case study with a few of them. Present the use case and planned functionality along with what benefits you see.

Then ask them to model what those mean. They will have some risks and costs on their end too. How do they weigh all of that?

Once you have a good idea of what return they may get, you can price on that and actually have some meaningful basis for your pricing, depending on the level of investment required on their end to really get the benefit.

And be up front with a friendly prospect or two. What would they pay?

They won't really know, and neither do you. Make the mutual investment to find out and use early access, some input on the technology, etc... as an investment on your part to encourage them to do the same.

Secondly, doing this means really understanding what they are about and how they make their money. Each rough segment will have it's own dynamics, and ideally you find there are some common ones.

pandaFish• 11 years ago

Pick an overly high price, and if you run into resistance, work your way down.

Position yourselves as being "in beta", with a successful customer(even if it's your team). Start at $10k, and do everything you can to get the your customer to be successful.

If people object to the price, respond with the value your product, not discounts.

The more people pay for something, the more they are going to like what they bought, and the more likely they are to use the service.

Ask HN: How do you price a product when in a market for custom-built s/w

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