How Much is your Product Worth?
It’s a trickier question than it sounds. Hitting that perfect balance of value and price takes no small amount of research, iteration, and probably quite a few mistakes along the way.
Whether you’re charging too much or charging too little, either can be a real detriment to the continued growth and success of your business. Some serious effort should be devoted to making sure the price is right, and fortunately, there is a wealth of wisdom out there to support you in that interest.
Writing for FirstRound, Patrick Campbell recently shared his wisdom on how to focus in on the perfect pricing strategy for your product, no matter what particular form it takes. He goes through all the steps of research from audience discovery to the completed pricing page. And the best part? You don’t have to spend tens of thousands of dollars to do an effective and comprehensive market analysis.
Instead, you simply have to use what are called target buyer profiles or buyer personas. Popularized by places like Hubspot, these are essentially fictional representations of your ideal customer that chart their particular interests, background, and their willingness to spend money on a specific product.
These serve as archetypes to represent the different personalities that your ideal customer will look like. Patrick Campbell recommends making about 3 to 5 unique groups, each with a persona to go with it. This is because it’s important to look at your potential customers as humans, not numbers.
These personas are not just important to define your price, but also the content and messaging that’s going to get people interested in your product at all.
But while these personas are great, it’s sometimes good to gather feedback from real people too. Campbell recommends customer surveys to get that job done, but not any old survey will do. He suggests creating questions on a spectrum each with a focus that can help you target the specific deficiencies in your offering, whether it be the quality of your customer service that they enjoy or the value of your features. Ideally, the two ends of the spectrum should be quality and price, so that you can see whether certain people are more interested a great product or simply getting as cheap an offering as they can.
Once you have a stronger sense of who exactly your audience is, and what they want, you can move on to the development and iterative phase of your strategy. There are other factors to consider here, not least the cost of doing business and your ideal revenue target. Remember that the whole point of this is to stay afloat and growing. These other considerations must ultimately cede to that core interest.
Recognizing the changes in your industry and the prices that your competition are offering is critical too, especially if your ideal prospect is the type that’s going to do their own research. Make your best guess at determining how the value of your product stacks up to what the closest competitors are offering and price accordingly.
People need a good reason to give your product the time of day, and a competitive price is going to factor into that more often than not.
The last thing to keep in mind is that it’s always a good approach to give people as many options as possible. Particularly for SaaS products, but certainly not exclusively, this often takes the form of basic, upgraded, and premium tiers. If you think you can offer a wide enough range of features to justify that kind of system then it can be incredibly valuable. Instead of saying Yes or No, people will be more inclined to say Yes or Yes when deciding which options suits their needs.
Pricing is a process, and it’s not one that will ever reach any state of “finished”. As your market changes and your product changes, it’s obvious that your price is going to need to change too. Always make sure that you are constantly iterating, and constantly improving your strategy based on the metrics that you see value in. If you do that, you’re on your way to hitting the kind of price that is going to get people buying. Then, you can keep your business growing and driving toward success.