David Cummings on Startups

Product Pricing Doesn’t Matter Pre Product/Market Fit

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David Cummings

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Recently I was talking with an entrepreneur about product pricing and positioning ideas. Only, this startup was pre product/market fit and didn’t have 10 passionate customers. My advice: product pricing doesn’t matter when searching for product/market fit. What matters is getting the product in the hands of as many potential customers as possible and iterating based on feedback.

Here are a few thoughts on product pricing pre product/market fit:

  • Charge something, even if it’s nominal, so as to get quality feedback
  • Pricing is fluid and will change several times per year, even after product/market fit (see Pardot’s pricing progression through the years)
  • Start pricing higher than initially thought as prospects are more likely to give pricing feedback that things are too high than they are that it’s too low. Also, it’s easier to offer discounts to test different pricing strategies than it is to try and retroactively raising prices.

When debating product pricing pre product/market fit, ignore coming up with a perfect price and instead focus on customer delight.

What else? What are some more thoughts on product pricing pre product/market fit?

Comments

2 responses to “Product Pricing Doesn’t Matter Pre Product/Market Fit”

  1. avifreedman (@avifreedman) Avatar
    avifreedman (@avifreedman)

    Agree w core thesis! We started in 2014 and were always asked, and gave pricing. People said “Hmm (pause pause) seems about right”. In 2015 when we started selling in production we raised pricing 66% and people said “Hmm (pause pause) seems about right”. We were at 85% at-scale gross margin with that pricing so we stopped and that’s what we went with.

    1 year into production, we’re focusing on simplifying some of the dimensional “hair’ and the next Q may be re: forking functionality to charge as separate solutions, vs raising pricing.

    Reply
  2. skmurphy Avatar
    skmurphy

    Good article: two points come to mind. 1. There is a big difference between “free” and “a dollar.” It’s key is to determine value you are offering. 2. It’s better to ‘underprice’ and if there is not uptake then you know there is a value problem than overprice and be unclear whether lack of uptake is lack of absolute value or a price to value mismatch.

    Reply

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