In this two minute video I describe how to determine your pricing.
Determining Your Pricing
A transcript of my comments follows.
Pricing is typically a work in progress with an early-stage company. But I’d say a couple of things about it.
One is don’t reinvent the wheel. You’re likely selling into a market that thinks about pricing a particular way and so your pricing should be relevant to the industry you’re selling to, you know, by container, by square foot, by transaction, by seat, by ton. And they may not have bought your product before, but they bought things they think are like your product. So you don’t want to lengthen the sales cycle by educating the whole new method of pricing what you sell.
The second thing I think you want to do is tiered pricing. So you want to think about, “Gee, I’m going after this piece of the market, but even within that, say, the SMB or the SME market, there’s a pretty broad range of people, and I want to make sure I can meet their needs by offering a basic, a standard, and advanced package with various features and bundles.
And then, the third thing I’d say is be flexible. Test your pricing up and if it’s not working, tweak it.
Actually, there’s a fourth thing. I’ll often talk with start-ups that are eager to get logos on their website and they want to get customers, and so they’ll say, “Oh yeah, we’ll offer it for free. We’ll do a free trial. It’s not a problem.” And that’s nice. It’s often counter-productive.
Number one, if someone’s not willing to write you even a small check, you should wonder what their commitment to what you’re doing is. And the only thing worse than not having a sale, is to have a sale that you’ve made that’s failing that you’re spending time on.
So number one, I’d say you almost always want to charge for what you do. And related to that, I’d say free isn’t usually the biggest issue for if you’re selling to someone in business. Because the issues are much more about, “Does this take up my time? Am I putting my own personal capital at risk within the organization? Is this going to screw up the way I do things?” So those are usually much bigger considerations for the individual you’re selling to.
And those are just part of what makes the sales cycle the length it is.