If you wouldn't pay for my app, your pricing advice is worthless

http://tbbuck.com/if-youre-not-giving-me-money-your-pricing-advice-is-worthless/

by mootothemax • 15 years ago

89 43 15 years ago

mise• 15 years ago

What I've found difficult with pricing split tests, which you discuss at the end of the article, is that it takes loooots of time to statistically prove anything (if a paying conversion comes along every two days, for example).

mootothemax5• 15 years ago

Yup, I think at the start you have to go with gut feeling until you can get reliable stats. As ever with SaaS - it's all about getting enough traffic until you can shape it how you want :)

wccrawford• 15 years ago

I'm surprised this had to be said. Basic economics will tell you that the only way to determine price is what people will pay... Not what they say they'll pay, or what they say others will pay, or what they say people should pay. Only what they will pay.

And everyone's price point is different, of course... Some would never buy, others would spend far more than most people. It's all about finding that sweet spot.

arkitaip• 15 years ago

The meta insight seems to be that you should never trust what customers say, only what they do. Other areas where this applies is user testing ("No, I don't think it's that difficult to use.") and marketing ("This ad looks way better than that.").

mootothemax5• 15 years ago

The meta insight seems to be that you should never trust what customers say, only what they do.

"Never" is a strong word, but I think it's a good general rule to stand by.

reinhardt• 15 years ago

One more area: (most) female dating advice. "I want a sweet nice guy" vs "all my ex-es were jerks". Guess who she's attracted to.

mootothemax5• 15 years ago

I'm surprised this had to be said

It's great that you're naturally that level-headed, but I think when you have a crowd of people telling you X, it's easy to forget that they're not customers - let alone that customers will usually tell you that they want to pay less ;)

wpietri2• 15 years ago

You shouldn't be very surprised.

It's true that the only way to be sure of what people will pay is to see what they pay. But by the time you have an actual product to sell, you will have asked people for advice and feedback about 8 million times. It's very natural at that point to go for 8 million + 1 and say, "What would you pay for this?"

Pricing is one of the few things in business that's traditionally amenable to gathering hard data. Which is why I'm so excited about the Lean Startup approach; there one tries to apply the same data-driven spirit to everything.

lurker14• 15 years ago

The traditional and very successful approach to getting past the brittleness of "What would you pay for this?" is to sell vaporware. It's how Micro-Soft (before the S was lowercase and the hyphen was dropped) and many others got started.

You say to yourself: "I have a pretty good idea of how much work and expense it will take me to build this", then you go off and try to sell it as though it was already done or just getting polished for release. Once you have orders (or even better, cash advance!), you (privately) commit to either finish the product or cancel/refund orders if you fail^Whave a great learning experience.

It's dishonest, but it works, and if you structure your offer fairly (don't induce reliance on the vaporware, only induce desire), it's not evil.

Successful established authors do this before they write books. It's a standard technique in publishing.

See also KickStarter.

kenjackson2• 15 years ago

If everyone you talk to says, "I wouldn’t use this service if you paid me in gold-plated puppies" then you really should consider that your service may have a problem.

mootothemax5• 15 years ago

If everyone you talk to says, "I wouldn’t use this service if you paid me in gold-plated puppies" then you really should consider that your service may have a problem.

Hehe, I very much agree :) At the same time - what if 25% or 30% of replies are this negative? I've experienced that on other forums, only to end up making a decent amount of money.

raganwald• 15 years ago

Very true. Another possibility to investigate: You are talking to the wrong people. For example, if you are interested in software for managing HR processes, HN might be a great place for architecture advice, but are startups really a useful market to sample for product pricing and features?

joe_the_user• 15 years ago

It is possible you're talking to the wrong people.

I wonder, though, how you could have designed the right app if you have only been talking to the wrong people?

I mean, the sequence is either - "design an app that you yourself want and that you think is sooo cool that the whole world will want too" or "talk to people different enough from programmers that you need to understand them first to create a great app". The first approach is (caricatured) Steve Jobs, the second approach is Patio11. But it seems if the people you're talking to hate your app, you've failed at either of these approaches.

silverbax882• 15 years ago

I hear you, but that's now always true. I wouldn't pay $10 to sign Cam Newton as my quarterback, but my Carolina Panthers just paid millions for him. Just because I don't see the value in something doesn't mean someone else won't.

silverbax882• 15 years ago

As an addendum - my company (meaning, me and my staff) ran a basketball showcase over the summer. Players who attended paid on average $125 apiece to play for about 8 hours. Would most people pay that much just to play basketball? Of course not. But I know hundreds of college coaches and my event was featured on the front page of major media outlets. So it was worth it to them - a bargain, actually. Most events are far more than that.

wpietri2• 15 years ago

No, you should consider that you're talking to the wrong people.

You might be talking to people in the wrong audience. If you asked me about, say, Gilt Groupe, I'd recommend setting it on fire. But that's because I'm a big nerd, and I think "luxury goods" are for idiots. I'm not in the market.

Or you could be talking to the right audience but the wrong end of it. Consider the Crossing the Chasm model: http://en.wikipedia.org/wiki/Crossing_the_Chasm

If you show your early product to anybody on the right three quarters of that curve, they'll tell you the seven thousand ways your idea is obviously wrong. The first SSDs (circa 1995) were too small, too slow, and too expensive for the mass market. But for military and aviation use, they were golden.

Every product has problems. The trick to startups isn't removing all the problems. It's finding somebody who's happy with early versions despite the problems, and then removing just enough problems that you can sell it to a slightly bigger audience.

epo• 15 years ago

The full quote was “I wouldn’t use this service if you paid me in gold-plated puppies… but I think you should be charging $X”. The "... but" part is why their opinion is worthless. And if you base your advice on selective quotation you should really consider whether your advice is worth anything.

bugsy2• 15 years ago

I agree completely. It was very clear to me when reading the original that the context is that the person simply has no interest in buying the product no matter what for his own reasons. The selective quoting completely changes the vibe to read that the person deeply despises the product, not that he has no use for it. The use of selective quoting here is dishonest and highly misleading, by intention.

forgottenpaswrd• 15 years ago

I friend of mine spent something like 2.000 eur for renting sports super cars and try them on different circuits on Germany.

I would never do that, even it it were free, but I can spend a lot of money on computers and gadgets like 3d printers and plotters.

Every body has different interests and necessities. Let it be.

euroclydon2• 15 years ago

I've sold CWC [1] for, $12.95, $19.95, $24.95, and $29.95, multiple times at each price point, over the past few months.

It's nice to find a way to segment the market and take advantage of price elasticity of demand.

[1] See profile.

mootothemax5• 15 years ago

I love your product, it's cool! :) Mentioning segmenting, I've often wondered about taking exactly the same product, marketing it on a fresh website and raising or lowering the price depending on who the market is. Although I've also been partly worried that that's a good way to end up with a massive consumer backlash ;)

euroclydon2• 15 years ago

There are all kinds of ways to add/remove bells and whistles in order to have a pricing page with several tiers, yet very little change to the underlying code-base or product. You can charge more for support, exclusive access to additional content/material, number of time the user can do something per month.

It's been said many times on here, there are always people who want to pay more -- ignore them at your own peril.

chopsueyar2• 15 years ago

This headline made me laugh.

chopsueyar2• 15 years ago

I've recommended this Harvard Business Review article before, but I believe it is still relevant.

How Do You Know When the Price Is Right?

by Robert. J. Dolan

Published Sep 01, 1995

http://www.amazon.com/gp/product/B00005RZ5D/ref=as_li_ss_tl?...

thoradam• 15 years ago

"charge too little, and people won’t use your service"

What?

tptacek• 15 years ago

Pricing and adoption aren't a linear relationship, because price points also position products.

I don't know how big an effect this is in the $1-$5 range, but it extremely important in premium categories.

joshuacc• 15 years ago

Just to throw out an extreme example, I definitely wouldn't hire a wedding photographer who charges $100 for a day's worth of photography. If they have to charge that little, they probably aren't very good. And given the importance of the occasion, I want to be sure that the photos are excellent.

skmurphy• 15 years ago

$5 laser eye surgery, $10 car price communicates value.

SoftwareMaven• 15 years ago

The much more difficult thing is separating those who wouldn't use your app for functionality reasons (dude, it's a guitar...I'm a drummer.) versus those who wouldn't use your app for pricing (dude, I can't afford your sticks.)

You will only gain noise from the former, but you may find something out from the latter. You may still want to choose to ignore it (Apple has received no end of "it's too expensive" feedback), but the knowledge will still help you understand who your buyers are and how to best market to them.

FWIW, this is product managmpement 201. Pricing doesn't happen in the first year. :)

bugsy2• 15 years ago

I agree with the article. We occasionally get comments about how our software is too expensive. The only thing that matters though is we do periodic pricing experiments and we know for a fact we don't make more money by lowering the price or by raising it.

davedx• 15 years ago

A/B testing your pricing? Do people really do that?

I wouldn't like to be on the receiving end when your customers find out about that one.

absconditus2• 15 years ago

Amazon has done it.

gregory802• 15 years ago

I've heard about their UX A/B testing around showing cart flow and checkout, but actual pricing? Can you link to research?

wmwong• 15 years ago

I vaguely remember reading a post that patio11 did that before. Correct me if I'm wrong. My memory likes to play tricks on me. In the end, if it turned out it was better, you would give everyone the lower price and offer a discount or moneyback to the people who had to pay more during the test. If the higher price turned out better, you leave everything as is or you could discount the people paying more and just get all new customers to pay the higher price.

wnight• 15 years ago

Unless your app is trivial it won't appeal to only one type of person so you're going to have to model multiple types anyways.

For instance, the inbox cleaning utility mentioned - it could be used by busy CEOs whose time is money, and by computer-illiterate people like the stereotypical grandparents who need frequent access to the same tool despite having ample time to shop around on price. You need to advertise to both group independently or you won't get either.

So model the people who don't like your software too, and their desired payment options, as more data points from which to understand your actual best market.

physcab2• 15 years ago

This is exactly the type of problem I have been encountering with my app FitLabs (www.fitlabs.co). Its an app catered to people who do Crossfit and are used to paying $150/month in gym fees. So I thought, "hmm if people are already paying that much, they wouldn't have a problem paying a premium for a tool that lets them get more out of their workouts". Wrong. I built the tool, and people balked at the price. They said I should lower it to $10/month, but even when I did that they still didn't sign up.

jonnycowboy• 15 years ago

Like wpietri writes below, you should try marketing to a different segment. For example, try selling a slightly-modified version to the military for boot camp training in order to better track solider performance.

byoung2• 15 years ago

if people are already paying that much, they wouldn't have a problem paying a premium for a tool that lets them get more out of their workouts

You have to remember to explain how they gain from using your product in monetary terms. In exchange for $150/month in gym fees, I get to use their equipment, showers, electricity, trainers, cleaning crew, etc. When I use your app, what do I get? Maybe your app saves me 30 minutes three times a week vs using a diary. At my hourly rate, $30 is a bargain.

When I was doing freelance web design, you wouldn't believe how many businesses were spending $400/mo on paper YellowPages ads, but couldn't see the value in spending $500 + $50/mo for a website. When I explained that they could use just half of that monthly spend on SEO and PPC ads, and have better conversion tracking, they saw the appeal. When I explained that an online scheduler could save them $1600/mo over having a full time receptionist, they really saw the appeal. You have to frame it in terms of cost savings/increased profit/saved time, etc.

physcab2• 15 years ago

This is excellent insight. As a developer, my gut reaction is to say but look at all these features and people will pay for that. But thats not really the case. In fact, it seems what people actually pay for is an efficient solution to something that takes them far too much time (or makes/saves them money).

dasil003• 15 years ago

Well, unless that person happens to be an entrepreneur with a track record of successfully pricing products much like yours.

If you wouldn't pay for my app, your pricing advice is worthless

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