Experiment with pricing until you get it right

Pricing is a journey. Although you hear a lot about using data for everything (including pricing), the reality is much less scientific. Many founders, business owners and even large organizations admit (sometimes reluctantly) that pricing is hard.

That doesn't mean you should give up on data. Quite the opposite. Using the data for measuring the results is vital.

Pricing is a signal

If you position your product/service as "cheaper than a cup of coffee" you will end up with different customers compared to another group who pays for "save an hour a day". In the first case they will judge you based on price, i.e. on costs. In the second case the will think of what their get, i.e. the benefits.

Also, by under-pricing your product you (unwillingly) attract wrong clients. I call them "toxic clients" as they expect miracles for $5.

Luckily, it is easy to avoid them by a simple trick - charge more. More on that later.

Test your copy

Be prepared that getting the pricing page right is quite a job. I know it firsthand. I sort of gave up on getting the copy right on the first try. Businesses I am involved in are rewriting the page copy regularly because it is difficult to optimize it on the first attempt.

You can use various strategies for optimization, e.g. A/B testing, but be ready that it takes time anyway.

Speak their language

Unless you sell something to technical audience, try to replace technical advantages with clearly stated benefits described in plain language. Use the magic word "you" often. Customers are rarely interested in latest Python framework your service runs on. They want to hear what advantages it brings to them.

Stress the benefits

My suggestion is to think about price model along with the advantages your solution provides to your customers. Select one main advantage and repeat it to your customers ad infinitum.

Having selected one advantage will also greatly simplify your landing page. Focusing on usefulness of your product allows your visitors (potential customers!) to better understand what they get (the benefits).

Don't be afraid to experiment

It is OK to experiment with pricing until you get it right. It is also important to know that price is only one part of the equation. The main think is to have a product or service that customers are willing to pay for. And they'll pay for it only if it solves their problem.

Don't be afraid to test your pricing. Measure the results - revenue is probably one of the best indicators - and don't be afraid to change the prices often.

Charge more

That's an advice you probably hear often. It is not a bad idea per se but be prepared that it may take some time.

You can always start with lower price and if you have plenty of customers take it as a good signal - and increase the price. You can see this strategy applied quite often.

You end up with less customers but they will be more valuable. Such customers are usually easier to deal with.

It is also good way to find out what market is willing to pay for your service.

Simple pricing is better

Unless you are a big company (read monopoly) keep your pricing simple. Make the choice easy for your customers. If you have 3 different tiers on your pricing page, highlight the "recommended" tier to help them with their choice.

Don't forget they see hundreds if not thousands of pages a day. Simplify their life from the beginning!

An example of bad pricing

Finally, one example of bad pricing.

The other day I spoke with two guys who planned to offer career consulting services. They would charge a job seeker 200 CZK (approx. 8 USD) per hour. The service already included complimentary resume review (additional work for them).

They planned to provide this as a pair and in person. Meaning that a job seeker would sit with 2 consultants who would in addition spend extra time polishing his resume. Their reasoning was that for such a cheap price they would find many job seekers willing to pay for their service.

We'll do some simple math as those guys unfortunately forgot to do their homework. Let's fantasize they could provide the service to 8 people a day. A month has 20 workdays. That (in theory) equals to 160 customers, each paying 8 USD, a total monthly revenue of $1,280! For 2 people! And what about other costs? And additional effort?

My final recommendation is to do a simple and most optimistic math when setting the price. It saves you from a disaster.

Thank you for getting this far.