My 3 step pricing strategy
Plus, burning art.
Things are pretty crazy in Valencia right now during Fallas - a three-week festival where more than 800 of these sculptures are crafted and put up around the city. They’ll all be burned on Tuesday night (save for the winner, which will be “pardoned” and put in the Fallas museum):
I had the privilege of being the first guest on Ashley Rudland’s new Humble podcast. It’s a long one - watch here.
What I’m reading:
Finished and greatly enjoyed Steven Bartlett’s Diary of a CEO. Now in the middle of Shane Parrish’s Clear Thinking.
Pricing products is hard.
For new products, we don’t yet know what people will be willing to pay, and we also likely aren’t starting with a fully-featured or dialed product.
When it comes down to it, I’d much rather have a bunch of people sign up for what I realize is priced too low, than to have too few people sign up for something priced too high.
Here’s the simple approach I like to take, the one we took with Aware, and we’re now doing the same with ViralBox:
Set a target price - that is, my best guess as to where I’d like to see my product priced.
Launch the product with an early-bird 50% discount.
Once I get 10 or more customers at that price, change the discount to 40% off, or 25%, or whatever feels right.
Repeat step 3 until I get to the target price or determine the price increase is at the point of causing too much friction.
This approach has multiple benefits:
People are incentivized to sign up early to get the early-bird discount before prices rise.
You avoid starting with such a high-friction price point that nobody signs up.
You give your product some time to grow into the target price. When I’m launching a product there’s usually a lot of room for improvement in the UI/UX and feature set, and the discount accounts for this.
I’ve found this process to be an effective, yet simple way to tackle what can otherwise be an overwhelming and complicated process.
Additionally, when someone does suggest the price is too high, I generally ask the following questions:
Getting answers to these questions leads to more insights about the needs of the individual, which may or may not be solvable in pricing.
(These questions are my simplified version of the Westendorp Price Sensitivity Meter.)
When you’re ready:
Monthly coaching: My 1:1 coaching via chat has been more popular than expected so I’ve closed them to new signups before they become more than I can keep up with. I have replaced those with new coaching options.
1:1 clarity call: Wherever you are on your bootstrapping journey, chances are I've been there. I know the struggles and challenges and am here to help through a 1:1 clarity call.
Tools and resources: A complete list of the tools and resources I use to run my business, and some books that have helped me along the way.
Til next week!
Mac