How do you evaluate what the pricing of your product?
Bigyan Karki
11 replies
We recently launched our product, and we fixed a price of $19.99/month. Although we have measured some factors like competitors' prices, our costs, and a few user interviews, I want to understand how other people do it. In case you are curious, this is the link to the product: https://thedrive.ai.
Replies
Ailsa Williamson@ailsa_williamson
Pricing is not a one-time decision. It's an ongoing process that may require adjustments over time based on market dynamics, customer feedback, and the evolving needs of your business. As you mentioned, it's great that you've already considered factors like competitors' prices, costs, and user interviews. Continuously monitoring and evaluating these factors will help you refine and optimize your pricing strategy. Good luck!
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Great discussion, eager to hear different thoughts as we are still evaluating)
hey there Bigyan,
exciting to see new products emerge and shape the landscape. on pricing, it can indeed be a complex puzzle. here are a few elements that can factor into the equation:
1. value: price is a direct reflection of the value you're providing. are you saving people time? helping them earn more money? relieving stress? how much are those outcomes worth to your customers?
2. audience: consider the financial resources of your target demographic. a product aimed at solopreneurs may be priced differently than one for large enterprises.
3. costs: obviously, you need to cover your costs and make a profit. but go beyond just the cost of development, hosting, etc. consider customer acquisition costs, support, etc.
4. growth: pricing isn't static. it can and should evolve with your product and market. initial lower pricing can accelerate growth and feedback, higher pricing later can maximize revenue from a well-established, high-value product.
5. psychology: pricing is as much about perception as numbers. is your product positioned as a premium offering? a cost-saving tool? the price should reflect that.
so, there's no perfect pricing, only what works best for your unique product, market, and goals.
constantly experiment and iterate, and listen to your customers' feedback. good luck bro!
What’s your customer acquisition cost?
Compare your pricing to competitors.
Ask your customers in your early customer interviews what would they pay for something like this.
Consider the value you're offering at each tier of subscription.
It's always best to price high and then lower your price if you are struggling with acquisition.
It's a lot harder to increase prices once customers get used to a low price-point and this can lead to churn.
In my case we calculated our prices by directly taking our AWS costs and adding mark up to it. This actually turns out to be cheaper than a lot of our competitors which gives people extra incentive to go to us!
When evaluating the pricing of your product, several factors come into play. Here are some key considerations:
Cost Analysis: Determine the costs associated with developing, manufacturing, and distributing your product. Consider factors such as raw materials, labor, overhead, and any other expenses involved in the production process.
Market Research: Conduct thorough market research to understand the demand for similar products in the market and analyze their pricing strategies. Assess the value proposition of your product and its uniqueness compared to competitors.
Customer Perception: Understand how your target customers perceive the value of your product. Consider factors like quality, features, benefits, and brand reputation. Determine if customers would be willing to pay a premium for your offering or if a lower price point is necessary to attract them.
Pricing Strategies: Choose an appropriate pricing strategy based on your business goals. Options include cost-based pricing, value-based pricing, competitive pricing, or penetration pricing. Each strategy has its own advantages and considerations.
Profit Margin: Determine the desired profit margin for your product. Consider your business objectives, overhead costs, and the level of investment required for future growth. Ensure that your pricing allows for a sustainable profit margin while remaining competitive.
Pricing Flexibility: Consider the flexibility of your pricing strategy. Will you offer discounts, promotional pricing, or bundle options? Determine if you need to adjust your pricing based on market conditions, customer feedback, or seasonal demand. https://shorturl.at/fmvO3
Testing and Feedback: Continuously test and gather feedback on your pricing from customers, sales channels, and industry experts. Adapt your pricing strategy based on insights gained to optimize profitability and market competitiveness.
We ended up with a price fairly similar to yours. We looked at competition but to be honest, it's hard to compare apple with apples. At the end of the day, we settled on a price that makes the value a no-brainer, and also understanding that we decided to go down the router of being great at what we do - that businesses will need to connect their other systems to it, so need to keep in mind the fact that this cost is likely additional to their current system - but much less than having someone tackle it manually! Good luck!
thiesw are all constructive advices. Thank you :)
You can evaluate the pricing of your product by considering your costs, your competitors' prices, and the value your product provides to your customers.