Ask HN: What are best ways to determine a pricing strategy?
Our startup is starting to look at various pricing strategies. We're debating the merits of having one pricing plan vs. multiple, and are considering ways of determining a fair monthly price for our service.
HN Community, how do you determine the best pricing strategy, in terms of the type of plan offered & how much you charge?
In advance, thanks for your time!
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Determine how much value does your product delivers to the customers. Let's say if it saves them $500/month, you can easily charge/they will happily pay at least $100/month.
Regarding what type of plan, you should think about what do your customer demographic look like. If they are same type of people with same type of needs, give them one price. I tend to support one-price only, because that reduces troubles like different settings on the backend, have customers to decide, and communicate the differences clearly, etc.
Focus group and test markets. Do focus groups of your target customer to get an idea on optimal pricing. Then randomly create separate pricing points and monitor the conversion rate. Find the point of profit optimization (# of sales vs. profit) and you have your price. Beware you also want to be aware of any growth rate influence (word of mouth) that might occur at different pricing points.
There is a book on software pricing: Don't just roll the dice by Neil Davidson. You can get it free on his website: http://www.neildavidson.com/dontjustrollthedice.html