I'm doing this AMA because I believe pricing is a critical topic that can make or break your business if you get it wrong.
I started building Gravity (https://usegravity.app) in late 2018 initially as a small side project selling Node.js boilerplates. I was charging $99 and made $396 that year.
In 2019 I increased the price to $297 and then $397 and I started to bring in some beer tokens and cover my rent during this period.
It wasn't until 2020 when I started to seriously consider this as a business (not a side project). So I started to experiment with higher price points. Current price is $895 (800%+ from my initial price).
Like most people, I experienced fear during each price increase and was worried that I'd price myself out of the market.
The more I increased my prices, the more sales I made! Once I started charging $500+ my business began to explode. Within a few months I was generating $10k in a single month.
I've done a lot of research into why this happened and talked extensively with customers who purchased at different price points and my conclusion is that my higher price * branding created an elevated level of trust. My customers don't want to entrust their entire business on a boilerplate that costs the same price as a sandwich.
There are two kinds of buyers:
Bargain buyers – these people want the cheapest product they can find and don't necessarily care about the quality.
Sophisticated buyers – they care about quality and accept that they will have to pay a higher price in order to attain it.
You want to attract customers in the #2 camp. If you have a solid product, selling to #2 is easy and in my experience they extremely easy to work with.
How has this impacted my business?
If I was still selling a $99 boilerplate I would have a side project, not a company.
It's the difference between making $12k vs $100k.
With a $99 product & $12k in revenue I would not have been able to invest the same amount of time into developing the product, producing content, building the Slack community and giving my customers a high quality experience.
Don't focus on simply being the cheapest and believing that you'll attract more customers, you risk putting yourself in a difficult position of having a lot of bargain customers who may be very demanding, and not enough capital and resources to support them.
It's much better to have a smaller base of less-demanding customers that you can deliver an awesome experience to and who are happy to enter at a higher price point for that experience.
If you have any questions, please post them below and I'll get back to you today :)