Your product is built. You've got a website. You're within inches of going live.
Just one problem: how are you going to make money off of this?
To you, your product has the value of the sleepless nights, long days, and endless thought and hard work you've put into it. But is that the value others will see, too?
How can you price competitively without underselling your effort?
These experts know how you feel, since they've been there, too. Here's what they have to say about pricing strategy, along with some tips on boosting your sales revenue.
Unique WordPress & WooCommerce Plugins
When we first started selling WordPress plugins, we set the prices quite low at $29. This was a mistake because we found ourselves providing a lot of support for very little money. I was tempted to give up on selling plugins because it didn't seem profitable.
Since then, we have experimented with different pricing strategies to find the right balance between the right balance of sales vs. the time spent supporting customers.
I'm a firm believer in the principle that it's better to sell 10 products for £100 than 20 products for £50. This is because there are fewer customers to support, so your business is more profitable and sustainable as a result.
For example, in March we increased the price for our WooCommerce Product Table plugin from $75 to $99. The number of customers decreased by 1/3, but revenue stayed exactly the same. I would view this as a successful price rise because while revenue is the same, the product is now more profitable.
Service for Finding Developers for Your Team
The Moonlight pricing strategy has stayed the same since the beginning. Developers set their hourly rate, and we add a 15% processing fee. Invoices are sent to clients weekly, based on the hours worked.
Moonlight succeeds when our users get what they want: Our core KPI is measuring net revenue per week (you can read more about it here. Our pricing model and KPI aligns us directly with the success of our users. On one side, we have contractors who want to make money, so we succeed when they bill hours. On the other side, we have clients who want to hire quality developers, so we succeed if we can provide them with people they want to continue working with.
Optimize margins later: We allow clients to pay invoices with credit cards even though it cuts into our profit. This allows smaller bootstrapped startups to hire good talent, and stay loyal to Moonlight.
Undercut the competition: We compete with other hiring marketplaces and traditional recruiters. By researching other pricing models online and talking directly with competitors, we had a full picture of what the standard rates were. We settled on a 15% processing fee because it's lower (50% lower on average). Because we've created a self-serve automated platform, this is sustainable for us long-term.
Lifecycle limitations: Our biggest pain point with pricing is when clients use Moonlight simply for matchmaking, rather than an ongoing relationship. This means they may drop off after they get an initial introduction. We are continuing to build out the lifecycle products in the platform to make it useful for the entire remote work experience: finding, hiring, managing, and paying software contractors. We believe this will continue to justify the processing fee, even for long-term engagements.
Why no subscription? Many people have advised us to figure out a subscription model. This sounds great on paper, but we have yet to find a subscription model that continues to align us with our core mission and users. Without VC investment, we have to find product-market fit to survive. While our processing fee model is not a guarantee of stability, it allows us to be flexible and quickly see how our product and marketing changes affect our core KPI. This weekly reality check is what keeps us accountable to users and business goals.
WordPress Maintenance Plans for Website Owners
Finding an effective pricing strategy is pretty difficult! I don't think there's a one-sized-fits-all solution for everyone. We all are in different industries with different target audiences, so at the end of the day, experimenting with pricing is just plain necessary for everyone.
But here's what we did. I think it can apply to most people.
When we started the company, we did a lot of competitor research to see what other people in our space were offering and where they were pricing themselves. We then priced ourselves at a place where we thought we could differentiate ourselves and attract business away from our competition.
At the end of the day, this is just an educated guess. It's not something you should worry too much about or get analysis paralysis with. 99% of the time, your first pricing try will be wrong and you won't know until you test. That's just how this works!
Once your website is getting a significant amount of traffic and you're making multiple sales per month, it's time to start experimenting with pricing! Try increasing your price by 20%. Then maybe try ending prices in a 7. Then maybe a 9.
At the end of the day, you want to increase customer lifetime value and decrease user and revenue churn. If you're accepting payment via Stripe, use a tool like Baremetrics to measure this as you test different pricing to see which returns the best value to your business.
Honestly, there's no real finish line here. Keep experimenting and optimizing for LTV + churn and you'll find your way.
Just my two cents. Hope this helps! :)
Music Submission Platform
To understand the pricing, you need to understand the model. In this case, musicians submit their music to bloggers, who get paid to give a response. I knew I wanted something along the lines of "$1 per response," but I also knew that bulk purchases should have discounts.
I played with the idea of profit sharing: the blogs that responded the most got the biggest share of the pie. But that overcomplicated things. As did trying to calculate an "average cost" of credits purchased on the site.
So instead I decided that I'd fix the cost of what the bloggers were paid at $0.50, and take the hit on any discounts that I applied to larger packages/fees/whatever. The mix actually ended up working quite well, and at this point the profit split is somewhere along the lines of what Apple/iTunes has (70/30).
As for the package prices, I initially put them in as "filler" values, and then just ended up launching the site with them. They seemed to work. Sort of goes with my whole ethos of not over-thinking things and just doing. :)
Service for Finding Marketing Experts
Pricing is one of the hardest things to get right, especially in a B2B niche. I've been through quite a few pricing schemes - pure commission, self-serve, and high touch sales, but monthly contracts, and finally where I am now with two offerings. One is a higher monthly fee and gets way more, another is an annual subscription fee that is low touch and low maintenance.
I decided on the current model, which works best, by trial and error. The real kicker was that I realized that those paying me more were happier. When I spoke with my best customers, I realized that they were willing to pay me a lot more than they were already, in order to get better service. So I raised my prices and my revenue almost doubled.
I do wish I had done more customer research ahead of launching pricing so I would not have had to change pricing so much. That has led to a lot of confusion and a lot more work. I'd recommend looking at how much your competitors charge, and figure out if that makes sense for you. Don't make being "cheaper" your value proposition because then you'll only get the cheap customers.
Service for Checking the SEO Health of Websites
When I started SiteGuru, it was a freemium service: sign up for free, but if you wanted to check more pages and more websites, you would have to upgrade. You could even check a single page without signing up. I thought that would be a great teaser for people to get a first experience with the service, so they would sign up. Unfortunately, only 5% did. I changed that to always requiring an email address. The results are great: signups have increased threefold.
I thought I was being generous by letting paid users (plans from $29) check more websites. It turned out that it was only confusing to them. The fact that they could add multiple websites made people think it was only meant for web agencies, which it wasn't. I'm now planning to add a $9/month plan that lets you only check a single website. That should clear things up.
Premium WordPress Updates
Kernl's pricing strategy at the beginning was to undercut my nearest competitor. As I learned more about pricing strategy and understood my customers better, I split my offerings into several different groups.
About 1.5 years ago I raised Kernl's prices after reading this article by Patrick McKenzie. I was scared that I was going to lose out on customers and signups, but I grandfathered my existing users into their old plans and made the jump. Turns out, I had nothing to be scared of. I should have increased prices earlier! Signups and conversions didn't slow down at all.
Things aren't quite perfect yet. I think I've gone too far with the number of plans that Kernl has and it sometimes confuses customers. Ideally, I would like to get this down to one low-cost plan and then one high-priced plan that customers can grow into.
Practical HTML/CSS Course
My product is a learning course so I basically couldn't use any pricing strategies other than one-time payments for it. The trickiest part was to find out the best price that is acceptable for users but not too cheap.
That's when I came up with idea of comparing the price to buying something in real life which is a part of your daily routine. My initial plan was to keep the price within the 5-15 euro range, so I compared it to buying 2 coffees and I got a number of 8 euros in my head. I also built a demo version of the paid lesson for the course with the option to upgrade the plan at any time.
By the time I launched on Product Hunt I decided to change my tactics a bit. I prepared a discount for the first couple of days after launching, and I also decided to raise the default price as I got some opinions from other people saying "Wow, 8 euros is really cheap for a learning course." Therefore, I ended up having 6 euros as a discounted price and 10 euros as the default price.
I read a quote one day that said: "If no one complains about your product price, it's too cheap." I wouldn't say that's true for 100% of situations, but that helped me to see the topic from another perspective. You should never underestimate your work and efforts you put into developing it, but also always have a reason for setting your price. Don't just go for a random number. Check out other similar products, measure your product value and build your strategy on that.
Service for Building Scalable Web Scrapers
I read a lot about pricing before launching Scraper API. Two resources that I found particularly helpful were Patrick Mackenzie's excellent article on pricing low-touch SaaS and the Price Intelligently eBook.
I started out by looking at prices for competing products and pricing slightly below that. I would definitely do that again, as competitor pricing is a great way of getting a ballpark idea of what customers would be willing to pay for your product.
We have monthly plans at five different price points: free, $20, $80, $200, and $400. The only pricing change we have made is to add overage pricing, which I highly recommend for API products, because at the end of the day, customers are going to run into API limits. When that happens, you can either turn off their API access, automatically bump them up to the next higher-priced plan, or charge them a variable amount based on how much they go over their plan limits. The variable charge seems like the fairest way to handle overages, and it was actually much easier to implement than I thought it would be with Stripe.
In the coming weeks, I plan to test out an annual plan with a discount to entice customers to pay more upfront.
Painless Cron Monitoring Tool
Coming up with a pricing strategy for a new product is a challenging task, but over time you get better at it. I treat pricing as a product feature, and just as any other feature, you should keep iterating and improving it.
When I launched Cronhub I didn’t know anything about pricing so I went ahead with a basic pricing model called “Cost-Plus” pricing. With this model, you calculate everything that costs money to your business and then add a healthy margin on top of it. The margin is your profit. It’s simple and covers the cost.
Then, after learning more about pricing and talking to others, I started to explore “Competitor-Based” and “Value-Based” pricing strategies. The competitor-based pricing strategy is influenced by your competitors. It makes sure you don’t go too low or high compared to your competitors. The good part of this strategy is that it’s less prone to being wrong and you can come up with your pricing table in a short time. Currently, Cronhub's pricing model is a mix of "Cost-Plus" and "Competitor-Based" strategies.
Eventually, I’m thinking I want to go with “Value-Based” pricing which is also called customer-based strategy. It’s primarily based on your customer surveys and research. The tricky part of this model is that it requires some initial customer base so I need to wait a little bit.
One of the books that helped me to price Cronhub which I recommend is “The Anatomy of SaaS Pricing Strategy.”
Online Business Proposal Software
In the last two years we've had a lot of fun experimenting with pricing in our proposal management SaaS, Proposeful, and much of what we learned is not what you'd expect.
In the beginning, we went completely against regular advice and started without a free trial or a free plan. We had to first validate if there were companies willing to pay for what we offered, and we knew our product was still not very polished. We understood that if they felt the pain and tried our product, they might end up not buying because our product was still not good enough and we would mistake that by the market not being willing to pay.
It's very evident that users who have committed financially are more willing to put in the time to learn how to use your product. They're more invested, after all. So after closing a few clients this way we used their feedback to improve our product and make it the best available.
After we were confident we had a great product, we launched a (very generous) free plan. Common sense says that freemium's intent is to convert users from the free plan to the paid one, but we realized our free and paid plans cater to different profiles. So our free users are a way for us to build a community and gain reach, while learning how to improve our product for larger businesses with more complex needs, who are willing to pay.
We'd never have gotten where we are today if we had not taken risks with prices. We tried charging from $2 to $400 a month, with monthly and annual plans, just to see what happened and how that changed our user's perception. That allowed us to determine the most revenue we can get from users, which is essential in scaling your business.
So, don't be afraid to experiment and try counterintuitive things for new clients, especially if you're small.