The price is right?

Discussions
#1

Hello Bootstrappers,

I would like to get some advice on the all high topic of pricing. There ar lots of articles and podcasts on this topic but still I am not sure how to start. Maybe someone can help or force me into a decision :slight_smile:

The Situation
Currently I am setting up an service that helps e-commerce shop owners to create squeeze pages for their facebook promotions in just a few minutes. They would use that squeeze page for a campaign running 2-3 weeks and putting it offline afterwards (maybe reactivate again later). For a new product promotion they would set up a new page (again for 2-3 weeks online).

Pricing Option #1 - monthly
The classic of having monthly billing and multiple plans. For example the smallest plan would be:
3 parallel pages for 19$ / month

Pricing Option #2 - per activation
The user pays per page activation (making page online available) and the page would be online for the next X days. For example:
9$ for 30 days
Meaning if the user wants more than 30 days he needs to buy another X days.

My thoughts so farā€¦
Monthly is easy to understand and a very common model. Per activation on the other hand would fit the nature of promotions. I already asked my testers but got a pretty mixed result and price rangeā€¦arg.

There are pros and cons to both models but what do you think?

Thanks!
Alex

#2

I like the per ā€˜xā€™ model vs monthly for the right situation. It sounds like you have a situation where it would work. Itā€™s easy for people to see how the cost works into their bottom line, itā€™s very linear as things scale.

#3

Yeah, thats true. On the other hand the customer always have to make an active decision. I wonder if a very small monthly fee would fit as well, like having a ā€œ10$/month for 2 parallel pagesā€ starter plan.
So favouring the monthly, even if the amount is very small.

#4

Checkout https://postmarkapp.com/pricing the pricing is per ā€˜xā€™ but you buy credits that go towards the ā€˜xā€™. You can setup thresholds so they auto renew (which is how I have it setup) so you can setup and forget. Iā€™m a huge fan of a model like that (wish I had a good idea for something that could use it)

#5

@dgrigg thanks for the hint. Credit is another interesting indirection. I already have the feeling some kind of y for x model fits better than the monthly.

Anyone else with some opinion?

#6

Credit can be tricky early on (I think) as you can be getting money for goods not yet delivered so you canā€™t really recognise and spend it. It is possible people could sign up, add a minimum level of credits then not use them. You are then on the hook to deliver those credits later or potentially refund them. It can work and obviously in some cases (ie postmark) it is totally correct.

For simplicities sake of being able to understand your cash flow early on I would recommend going for a monthly fee and take a guess at what metric will split larger customers from smaller ones ie number of concurrent pages you show for them? Number of followers on FB? Number of views of the page (assuming you can measure that). This will probably be wrong but once you have enough customers (50-100 Iā€™d guess) you can work out what metric you can use to separate those willing to pay more from those only willing to pay smaller amounts. It may even make sense to switch to a credits based model at that point but at least you will have data about how many credits people would use monthly etc and set it up (more) correctly at that time.

#7

Also big fan of Postmark model. I spent 1250 USD with them in my first week and felt like I got a deal because they discount based on number of credits you buy at once. So it works for them for sure from a cash flow perspective.

#8

Did you consume those credits at that point? If not I am thinking they probably canā€™t spend the cash since you would count as someone they owe $1250 of services to.

At least in the early days as a bootstrapper Iā€™d not be confident spending money people had paid until they had consumed the credits as who knows if you have actually solved their problem sufficiently yet or not?

#9

I know that the concept for credits would be more complex in terms of cash flow and book keeping. Thats why I think I wont start with that indirection.
But still I can do some discount on the activations:

7$ for 15 days
9$ for 30 days
15$ for 60 days
ā€¦

Nice catch here would be to send reminder Mails to extend duration if the promotion is nearly expired. Using stripe I could safe the customer and card for an easy payment flow.

1 Like
#10

Did you consume those credits at that point? If not I am thinking they probably canā€™t spend the cash since you would count as someone they owe $1250 of services to.

I am spending about 5% of those credits each month, each month a bit more. So they got me to prepay 1.5 years of service.

Those credits are non-refundable. So high margins + non-refundable credits => you can spend the cashflow as it comes in.

#11

Your real pricing problem is that you shouldnā€™t build something you think is only worth $7. You need to change it to be more valuable (or price it higher and see how it goes).

To get to $100,000/year you need to sell 14,285 blocks of these a year. If the average customer only uses 1 of these each thatā€™s an impossible number. Even if itā€™s 10 per customer thatā€™s still almost 1500 customers which is almost impossible without some really fantastic viral marketing kinda thing happening.

2 Likes
#12

Well @ian , I guess your right. Somehow I got down with the price in my head over time.

First I wanted to do a solid 19$ as a minimum plan and the up with 49$, 89$ increasing features and parallel sites.
Then I realised that a monthly plan is maybe a bit against the nature of promotions since they are only online for x days and they would pay even if there is no promotion online.

Just thinking to myself: why not just target customers that are always running multiple promotions meaning to concentrate on the customers with a serious business. They should have no problem with monthly and after time I can increase values by adding more featuresā€¦

Hmm, or just take 29$ per activation and see how it goes. Arggggā€¦spinning loops in my headā€¦ :confounded:

#13

Yeah I mean not doing subscription is ok but:

  1. Then you need to charge more not less. $99 per use?
  2. Ideally youā€™ll have some kind of recurring nature even if itā€™s not actually billed on a recurring basis.

HelpSpot was sold as one off licenses until the last year or so, but customers stilled paid yearly support. They didnā€™t have to (not auto-billed) but most companies want support and bug fixes so they do. That means weā€™ve had individual customers whoā€™ve paid us over $100,000 over the last 10 years. 1 customer to make $100k or 14,000 :slight_smile:

Not all product categories will support that of course, but you need to figure out how to make it a sustainable business.

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#14

This begs the question of what exactly is your value prop? Do you expect your tool to increase conversion rates or are you just selling the convenience of getting setup in a couple of minutes? Obviously increasing conversion rates is way more valuable and would allow you to charge based on the increased ad spend ROI.

#15

From the business point of view I like more the subscription model. You will have a recurring revenue, which would help you to plan your earnings.

Itā€™s truth that promotions are seasonal (btw are you sure that putting the landing offline is a good idea? If it has been indexed you could be losing some leads), but it also truth that there is always some excuse to launch a promotion (Christmas, Black Friday, Cyber Monday, Summer Sales, Birthdays, Mother dayā€¦ etc). I think if people have it, they will use even if they didnā€™t plan it from the beginning. Right now Amazon, for example, has a permanent ā€œdealsā€ category. It could help to sell old stock or something like that.