🗞 What's New: Pricing your product based on value

Are you struggling to achieve the right pricing?

• Many founders undervalue themselves and their products by failing to price correctly. Here's how to implement value-based pricing and use freemium to your advantage!
• Searching for product-market fit is a top reason that startups run out of money. Lessons from this defunct startup can help you avoid that.
• Growth strategist Apeksha Soni made $2,000 in 12 hours with this random experiment. Check out how he targeted the right audience with the right messaging.

Want to share something with nearly 95,000 indie hackers? Submit a section for us to include in a future newsletter. —Channing

🤑 Level Up Your Pricing Game

by Spiros Kod

Many people start indie hacking with clear goals on product development, but with no vision on pricing. Admittedly, it’s a tedious process. But, although pricing perfectly takes a long time to achieve, it can supercharge your business. But what is the perfect pricing? Read on to find out!

The price-ing is right

Pricing is a dynamic contract between you and your potential customers. As a founder, you should be implementing two things:

1. Constant communication channels to investigate Willingness to Pay.
2. Slow, steady experimentation with different pricing approaches.

Willingness to Pay is the single most important metric that you need to monitor. Knowing exactly what value your customers get from your product, and what these benefits are worth to them, is essential to your pricing strategy.

Considerations before setting your price

There is no better way to investigate perfect pricing than with market research on your customer segment and product positioning.

Are you selling a tool for developers? For marketers? For no-coders? Build ideal customer profiles and investigate their core interests, pricing power, and Willingness to Pay.

From development and product, to sales and finance, everything is used to drive someone to buy the product at the given price. Several aspects of your business influence your pricing strategy and your conversion rates:

1. Customer segment and vertical: You can go upmarket to increase Willingness to Pay, shift vertical that sees more value in your offering, or modify the ideal customer profile entirely.
2. The Three "P's" are product, positioning, and packaging: Add features, move features behind paywalls, pull features out, examine differentiations in value propositions, etc.
3. Price: Moving prices up or down directly impacts conversion and brand perception.

Determining pricing

Construct a target price that you can list in one of three categories:

1. Cost plus pricing: Calculate how much it costs you to deliver the product, and add a percentage markup.
2. Competitor-based pricing: Research what your competitors are charging.
3. Value-based pricing: The price is determined by the value delivered to the customer.

Indie hackers have a tendency to price based on cost and competitors, and that’s why there are so many products out there charging <$10 a month. You are more than likely undervaluing yourself and your product.

Consider value-based pricing, based on what your customers perceive as the true value offered. This could be value per seat, per GB used, per transaction, etc. You can use flat rate or volume pricing, as long as the value metric captures the right value!

What's your value metric?

In B2B, the value metric will probably be money saved, revenue gained, or time saved. In B2C, it might also include joy, fitness, increased efficiency, and productivity among others.

Consider these questions:

• How many hours does your product save people?
• How much do they get paid per hour?
• How often do your customers perform the task?

Obviously, joy, fitness, or even time saved can’t be measurable, but you can proxy-measure them if your customer trusts your measurement. For example, if the time you save them is worth $100 per month, there’s your value metric.

Bonus tips

1. Good design works miracles: Design boosts Willingness to Pay considerably (up to ~26%!).

2. Experiment with your pricing every quarter: Experiment with different models, add or reduce plans, and provide offers and accessibility (i.e. a private Discord).

3. Localize your pricing: Revenue per customer increases by 30% when you use the proper currency symbol. Use different prices in different regions since demand is not equally distributed.

4. Don't discount over 20%: Discounts create higher churn. Big discounts get people to convert, but they don't stick around.

5. Don't use Freemium unless you can get the value metric right: Freemium is an acquisition model, not part of your pricing! Set the limits early-on, monitor your product usage, and test changes to make users convert. Offer a free trial for your paid plans, and notify users about the limits. Be sure to offer a seamless upgrade, identify promising users, and let your sales team do their work!

Will you implement any of these pricing strategies? Let's chat below!

Discuss this story.

📰 In the News

👀 Twitter CEO Parag Agrawal’s regrets.

🙅‍♀️ Crypto is thriving, and diehard Bitcoin fans are furious.

🏙 The case for skyscrapers made from wood.

⌚️ This is exactly how long your meetings should last.

📈 The gummy bear economy is blowing up, and expected to get even bigger.

🪤 Avoiding the Product-Market Fit Trap

by Chris

A startup called Quest recently shut down after having burned through nearly $2M in funding. The reason the company failed was the number one reason behind every startup failure: It fell into the product-market fit trap. Here's how to avoid the same fate!

A working business model

Your priority as a startup founder is to keep the lights on for as long as possible until you find a business model that works. This means that your entire focus should be on reducing the amount of money going out of your bank account, and increasing the amount of money coming in. But building a great product, and looking for product-market fit, stops you from doing this.

Product-market fit

Searching for product-market fit is the number one reason that startups run out of money, and running out of money is the number one reason that startups fail. Pivoting is time-consuming and expensive.

That's why Quest (originally called Cooper) failed. The founders raised over $2M in funding to build a professional social network called Cooper. They believed that LinkedIn was too impersonal, and that the best relationships were those among people who had actually met.

They built an initial product and set about finding product-market fit. When this didn't work, they pivoted...twice. Three years and two pivots later, the founders had gone through virtually all of their funding and still hadn't found product-market fit. They had fallen for the myth that growth requires a great product.

The reality

The truth is, you don't need a great product to create massive growth in those crucial early days. HubSpot grew from $0 to $29M ARR, and built a passionate customer base, with a product that founder Dharmesh Shah himself admits sucked.

Of course, eventually HubSpot needed to fix the product to reduce churn and continue to grow. But, by then, it had $29M coming into the bank every year. So, by the time the company reached that point, it could afford to make any and all improvements necessary.

Check out the full article about this on LinkedIn, and learn more about how The BLUNT Method can help create demand before the product even exists!

Can you achieve growth without a great product? Share your thoughts!

Discuss this story.

🌐 Best Around the Web: Posts Submitted to Indie Hackers This Week

💻 Between talking and tweeting, how do you get work done? Posted by Simon Barker.

😵‍💫 I am addicted to product development. Posted by Efe Şener.

💤 You're tired, but you just don't know it. Posted by Marc Lou.

🕝 How do you push through the afternoon slump? Posted by Sophia O'Neal.

😭 Regrets on choosing your tech stack. Posted by Mark.

🔥 Who is working towards FIRE? Posted by Taylor Brazelton.

Want a shout-out in next week's Best of Indie Hackers? Submit an article or link post on Indie Hackers whenever you come across something you think other indie hackers will enjoy.

⏰ Apeksha Soni Made $2K in 12 Hours

by Apeksha Soni

Hi! I'm Apeksha Soni, and I work for a growth consultant and coach. We were looking to experiment with some new strategies simply for learning purposes. Our goal was to generate a few dollars and note all outcomes for future use.

Here's how we made $2K in 12 hours with a random experiment!

Bare strategy

We did not try connecting with our old database, placing any ads, or sending cold emails. We intended to start everything fresh since we weren't interested in connecting with the people who already knew about us.

We created a simple product: A business audit strategic call priced at $100. Anyone who bought this product would get a two hour business audit call to discuss strategies, next steps, loopholes, clarity, and vision with a business coach.

The process was simple: Clients would fill out a form consisting of 10-15 questions, make the payment, and book their call using Calendly.

Remember, nobody was told about our experience or background. Nobody knew with whom they were dealing. Everything was fresh and random.

Process

We created a form using Jotform. The questions were related to our prospects' businesses: Questions about their goals, current status of business, pain points, strong points, and motivation marks were all included. The questionnaires were in different formats. Some were dropdown, others were checkboxes, and others required manual typing. Some were in long-form format, while others were in short-form. We also added our logo and contact email for the pre-purchase query. It took approximately 10 minutes for prospects to complete the form.

At the end of the form, PayPal was integrated for making payments. Once the payment was complete, the page showed the Calendly link for people to book their call.

Marketing

Our target audience consisted of people who wanted clarity in their business, and those who wanted to refine their business goals by learning new strategies.

To reach them, we started with YouTube. We filtered the list of recently uploaded videos related to business, book summaries, talks, motivation, and business tutorials, and pasted our form link in the comments of those videos.

Next, we moved to random business blogs and filtered them based on date. We posted our links in the comments section of the most recent blog posts.

We followed this same process on Facebook, and on a couple of business forums. The outcome:

• 21 people signed up in 12 hours.
• 21 random people paid $100 each to someone on the internet for a business audit.

Lessons learned

• You don’t need a perfect website to start your business. You just need something organized and clean to communicate how you are adding value.

• Target audiences are important. You can go with random strategies, but they need to reach the right people.

• Use forms for everything. Collect payments, run surveys, build leads, and more. They are simple and effective

• Experiment a lot. There is no "how." Try new things, then try again in a new way. Something will click.

• People will trust a random person on the internet. Take advantage of this by being genuine with your offer and helping people in some way.

Discuss this story.

🐦 The Tweetmaster's Pick

by Tweetmaster Flex

I post the tweets indie hackers share the most. Here's today's pick:

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Special thanks to Jay Avery for editing this issue, to Gabriella Federico for the illustrations, and to Spiros Kod, Chris, and Apeksha Soni for contributing posts. —Channing