Earlier today I got into a pricing discussion with a fellow entrepreneur. We were talking about all the usual topics like number of plans, positioning in the market, and competitor pricing. Then, I shared the biggest pricing mistake we made at Pardot in the early years: our pricing model didn’t grow well with the account. Meaning, as our customers became more successful, and got more value from the product, there was little opportunity to capture more revenue. Eventually, we shifted from pricing based on email volume to pricing based on the size of the database, and that made a huge difference.
Here are a few thoughts on product pricing:
- Consider having two value axes: one based on functionality/modules and one based on usage (e.g. seats or metered)
- Err on the side of being too expensive as it’s easier to give a discount to win a deal and customers are more likely to give pricing feedback when things are more expensive (no one ever tells you your product is too cheap and they’d pay more)
- Balance capturing the most value with the pricing plans vs making them easy to understand (lean towards keeping things simple)
Pricing is an area many entrepreneurs struggle with, especially if the product isn’t in the market yet or only has a few customers. As the business develops and more prospects consulted, pricing becomes more obvious. Even then, make sure and capture more value as product usage grows.
What else? What are some more thoughts on product pricing?