How do you measure the willingness to pay of users & the price sensitivity?
Hello all,
As we are now growing, we are looking into monetizing our solution. We provide a platform for software developers and tech leads that helps streamline development workflows and automate team cooperation (keypup.io).
On the developers market, there is a well known business model, which is fremium: essentially, the platform comes with a free-forever base offer, and then there are paid plans for some "advanced" or "premium" features.
The question we have to tackle is 2-folds:
1 - How do you measure the willingness to pay of your users ahead of launching the monetization? Is there a tool you can use or what would be a good way to go about it?
2 - How do you measure the price sensitivity? Of course, there is always looking at what the competition or similar services do. But is there a way to "test" the market?
Thanks in advance for your inputs!
Salut Stephane,
Here's a way to be confident about a price before trying one out:
Remove all the other potential anxieties, then set a fair price.
The price of a product is often thought of as the biggest point of hesitation. In reality, if there are other points of hesitation, the potential buyer will turn around despite a low price. They might tell you the price was the main anxiety, but in reality, it was the other anxieties that pushed them away.
In the case of keypup, I suspect the following are anxieties that might very well hurt the buyer's momentum:
And a low price is also an anxiety:
That last one is perplexing, but it's legitimate. It's related to the anxiety of "Will this be around for a long time?". One way you can innovate on price is to only offer a yearly subscription with a guarantee you'll support your buyers for at least 6 months if the product doesn't work (being up front about it). Maybe a money-back guarantee also, pro-rated to the month. Something like that.
I think if you can remove all other anxieties, you'll have a gut feeling about what the right price should be and the subscription length that will fit. Small tweaks after that.
I hope that helps!
À plus.
That's really good insight. Thanks a lot for sharing it!
Thanks a lot Pascal. Great points in your reply indeed, much appreciated! You're on point that price is rarely the first "anxiety" - this is why we have not started the monetization yet - working on all other aspects.
Good point re price point as well. Makes sense.
Merci!
Talk to users to get a sense of price sensitivity. But don't say "would you pay X?" the answer is always less. Say "The price IS X." and try to get them to commit at least verbally. Then find a different user and say "The price IS Y." After talking to a bunch of users at different price levels you'll have a sense of pricing as will as a change to understand what users value and if there any features that are missing that are valuable.
Don't run A/B tests. You don't have enough traffic for statistical significant and you will miss out on valuable qualitative feedback.
Another approach is to just start with a price, then adjust up/down over time and see how the market responds.
Thanks @stevenkkim. Discussion makes sense to indeed get qualitative feedback. As we are an online platform, we do not get to 'call' our users. But we can discuss with them by chat. Do you reckon that would allow for a meaningful discussion?
There are lots of ways to get qualitative feedback; chat is fine; email is another. But I do think nothing beats a live conversation in terms of gathering feedback. You get a lot of information and nuance that is lost in chat/email.
There are some online businesses that require an onboarding phone call like Superhuman.
https://growth.design/case-studies/superhuman-user-onboarding/
https://medium.com/toyboxsystems/onboard-your-users-lesson-learned-from-superhuman-6db2b73042c2
If you don't feel comfortable requiring a phone call, then you can make it optional. Or you can send an email to your customers requesting a 10-15 minute call to gather feedback and make the product better – some will probably respond, especially if they like the product but want to see some improvements.
Good luck!
I see. Thanks a lot for the Superhuman use cases, very informative. Cheers!
Pricing always comes down to what the market is willing to pay, you can check what your competition offers in the same market and then price yours competitively.
Also, I would suggest adding 'Pay what you can' button to your free plan instead of just calling it 'Free'.
Thanks! Interesting concept the 'Pay what you can'. Does it work? I mean do people actually pay some money with such a prompt rather than none?
In my personal experience it works, Looking at company like IFTTT which has been in market for so long do it; I feel *'Pay what you can' is underrated mainly because it seems like asking for donation but it's totally different.
These are my inference -
•People who can't/won't pay wouldn't pay anyways. But they can use the free option.
•But people who can pay and want to just try out the free version before committing to a higher plan now has an option to pay for the free version.
•People who see it as a status symbol and/or want to support the product but don't want to commit to a payment schedule would pay for it.
I see. Thanks a lot - very interesting!
Set up a few different landing pages with pricing options and "Buy Now" button.
Use something like Landen.co (now called umso.com) to make it easy. When they click the buy button, let them join a waiting list.
Now go spend $100 on several different ad campaigns to drive different audiences to your landing pages. You'll see which gets clicks.
Thanks Davey. I like the idea of testing with different landing pages. Much appreciated!