🗞 What's New: Pricing your product in 2023

Pricing can be really difficult to nail:

• Lots of information on pricing doesn't actually apply to indie hackers, so we've put together a guide to help you craft your best pricing strategy yet!
• Why do you build in public? Is it still worth it? Founders weigh in below on why building in public is still a great strategy, and the benefits that can come from it.
• Founder Eddy Reynoso spent 10 months building an unvalidated product, scrapped it, and built a new product in 3 weeks with validation. Here's how talking to users helped him hone in on the feature that mattered most, and how he helped an independent artist raise $1,000 in 1 day.

Want to share something with over 100,000 indie hackers? Submit a section for us to include in a future newsletter. —Channing

💰 Pricing Your Product in 2023

by James Fleischmann

Pricing is a really difficult thing to nail. Entire books have been written about pricing, but from what I’ve seen, very little of what is written actually applies to indie hackers.

Here's what you need to know about pricing!

Pricing strategies

There are a ton of pricing strategies out there, but only a few really apply to indie hackers. Let's get right to the ones that count:

1. Competitor-based pricing:

Take a look at your competitors to understand how their product compares to yours, then price yours lower or higher accordingly.

When comparing products, it’s easy to get caught up in features. But think about quality, customer service, and brand recognition, too.

The beautiful part of this strategy is that the more established your competitor is, the more they’ve tested and honed their pricing. That means that you can let them do a lot of the heavy lifting for you! It’s easy, low-risk, and is a darn good starting point.

The biggest problem with this method is that, if you’re niching down hard, your audience may not have the same willingness to pay as your competitor's audience, so keep that in mind.

2. Value-based pricing:

This is the golden child of SaaS pricing strategies. Consider the value you’re providing, and talk to customers about it to determine a price that they’re willing to pay.

This also helps you create a great product with awesome customer service (as if you didn’t already have enough incentive!). And, it allows you to charge higher prices right off the bat, since you have the data to back up that decision.

While this sounds great on paper, it’s not an easy strategy to adopt. You need to really know your customers and what they’re willing to pay. That requires a lot of research, including interviewing potential customers. If you happen to be building something that scratches your own itch, you’ve got a leg up here.

3. Others:

I’ve researched other strategies, and they just don’t apply to indie hackers.

There is one more thing to take into consideration. I’m a big believer in going with your gut, and I don’t see any reason why that wouldn’t be a good starting point for pricing. The important thing to remember is that, after you launch, prices can (and should) be adjusted.

Pricing models

In addition to pricing strategies, there are four pricing models that will likely apply to indie hackers:

1. Tiered pricing: This will be what most indie hackers go with. Under this pricing model, you offer multiple tiers of your product. It allows you to access different user segments, increase revenue, and anchor the price point, making it more likely that customers will opt for their preferred tier. There aren’t really any downsides. Note: I would probably include freemium pricing in this model.

2. Per-seat pricing: This is another popular one, though it is used almost exclusively for B2B products. Under this model, you charge per user on a plan. It’s great because your revenue is predictable, and it scales. On the flip side, it can cause churn. According to Patrick Campbell, you should only go this route if each user has access to different things. If user A can log into user B’s account and everything is the same, this is not the right model.

3. Flat-rate pricing: This means one price only, and one set of features. It’s the simplest way (both for you and the customer), but it ignores certain customer segments, thus leaving money on the table.

4. Usage-based pricing: Think “pay-as-you-go." It makes a lot of sense if the value you’re providing is based on transactions, gigabytes, etc. It’s nice because the price scales with usage, which increases revenue while reducing churn. On the flip side, it’s hard to predict revenue.

How to price your product

First off, decide whether you’re opting for a one-time payment or a subscription model. Second, decide which pricing model makes the most sense for you. Let’s be honest, the vast majority of us are going to go with tiered pricing, since it’s tried and true.

Third, decide on your pricing strategy and use it to decide your price. Here’s my unpopular opinion: Don’t use value-based pricing. Not in full, at least. Yes, it’s the best way to go for most software products, but indie hackers are a different breed. Most of us have few resources to throw at pricing, so a mix between two strategies might be a better option.

Value-based pricing steps

1. Identify your quantifiable customer personas: Here’s a template for this from ProfitWell. If you don’t have the required data, just make your best guesses.
2. Find your value metric: What exactly are you charging for?
3. Survey people within those personas: What price would feel too high, too low, etc.? Is your value metric correct?
4. Build tiers based on what you’ve found.
5. Apply it and see how it does: Adjust as necessary.

Competitor-based pricing steps

1. Identify competitors that are similar to you.
2. Analyze their product, price, and position.
3. Compare their product and position (i.e. cheap vs. luxury) to yours.
4. Either go above, below, or equal to your closest competitor. Or, calculate the average price of your competitors for a benchmark, then go above, below, or equal to that.
5. Apply it and see how it does. Adjust as necessary.

The best of both worlds

Here’s my suggestion. It’s less scientific than value-based pricing, but it’s quicker:

1. Identify your target market.
2. Identify your value metric.
3. Identify competitors who have a similar target market and value metric to you. Note: If you have a different target market than your competitor, make an educated guess as to whether they’re willing to pay more or less.
4. Compare their product and position to yours.
5. Either go above, below, or equal to your closest competitor. Or, calculate an average price of your competitors for a benchmark, and go above, below, or equal to that.
6. Confirm that you’re happy with that based on your perceived value of your product (don’t bother doing all that fancy persona work).
7. Brand yourself accordingly.
8. Publish the price and see how it does.
9. Adjust as necessary.

Other things to consider

Here are a few other things to consider while you go through the pricing process:

• How soon do you need to cover costs? Will you be able to do that in time? You’ll need to make projections about revenue for this.
• Customers’ willingness to pay.
• Demand.
• Price elasticity: Are customers very conscious of price, or will a change in price have very little effect?
• What would you actually pay?
• LTV:CAC ratio: While most of your costs don’t really increase much per customer for software products, marketing costs do tend to increase. Most SaaS companies aim for a ratio of four or more.

Pricing best practices

Here are some suggestions that I picked up while researching pricing:

• Determine pricing early on: Talk to your early customers about pricing.
• Charge more, but remember that it’s better to start a little too cheap than to start too expensive. Starting out too expensive will impact your product’s validation process. In the beginning, it’s generally more important to have users than it is to have profit.
• Keep your pricing simple.
• Never stop pricing: Markets change and the economy fluctuates. Many founders recommend reassessing every quarter.
• Make sure you nail your value proposition.
• Anchor potential customers by showing a few options.
• Freemium is great sometimes, but it shouldn’t be taken for granted. Make sure it’s right for you.
• Localize the currency symbol.
• Account for purchasing power parity in your pricing.
• Consider offering a free trial, even if you have a free tier.
• End your price with a nine if your product is cheap. End it with a zero if it’s luxury.
• If you’re discounting your annual plan, use a dollar or month discount, not a percentage discount. But be cautious with this; some studies show that annual discounts result in lower revenue.
• If you have an enterprise tier, it should have custom pricing so you can charge according to their requirements.

While A/B testing is usually a good practice, most will say it’s a no-go for pricing. It’s inherently unfair to some of your potential customers, and you need a lot of sales for the test to be statistically significant, anyway.

Instead, just start at a price and increase it every now and then. Every increase is a test, and you can revert if necessary. And, of course, grandfather your old users in at their original price.

Don’t overthink it. You’re likely going to be wrong about pricing, anyway. Name a price, launch, then tweak accordingly!

What are your top tips for pricing? Share your experience below!

Discuss this story.

📰 In the News

from the Growth Trends newsletter by Darko

💭 Seven AI predictions for 2023.

🍺 Lessons for B2B marketers from the booming craft brewing scene.

🎁 US retail sales have grown by 7.6% this holiday season.

📱 Maximize relevance for your Facebook Ads.

🔎 Realign your marketing metrics before the new year.

Check out Growth Trends for more curated news items focused on user acquisition and new product ideas.

🛠 Why Do You Build in Public?

by Sole Garcia

Why do you build in public? Is it still worth it for founders?

Community cares

Amos Bastian says that it's all about community:

It can be lonely building by yourself, but by joining others who are building in public, you get a real sense of solidarity. I also love seeing others building things, and want to be involved with them.

You can get feedback from others about what you are building and find answers to any questions that you may have. It's super useful!

It's also calming for my mind to write down the things that I'm thinking about. Why not do it in public to get all of the benefits? It's nice to read it all back and reflect on your journey.

Edrick agrees:

Twitter is to indie hackers what LinkedIn is to professionals.

Personally, it's about building a personal brand and connecting with others. There are lots of great people to meet on the platform.

I basically have a brand new account, and I see more interaction when I add to the discussion of an existing tweet rather than posting my own. But, if you're putting out interesting tweets every day, and providing value to others by interacting with them, there's no way you can lose in the long run!

Coming out of your shell

Upen says that building in public helps him come out of his shell:

As the founder of Micro SaaS HQ, I get this question a lot. If you are a dev, you will naturally be more inclined to build features than talk to customers and do marketing and sales. Coming out of this loop can be tough for many founders.

Note that building in public is not always about posting the positive things. You should share your challenges also, to help people connect with you on a deeper level.

Drew Meulemans agrees:

1. It's forcing me to come out of my shell, so to speak. I'm an introvert, so I'm inclined to just keep my head down and code. Pushing commits is nice, but my app will never get anywhere if my marketing is lackluster and I never do outreach in the community that my app serves.
2. I really like seeing others sharing the progress that they make, and I want add to that.
3. Indie hacking a SaaS product is a long road filled with solving many small problems over time. Not many people do this, so the experience can sometimes feel a little lonely. Sharing helps it feel less lonely.

Marketing matters

Iain Cambridge says that it's about the marketing aspect:

Some of it is marketing. If you're constantly reading about design decisions and why I made them, it keeps you interested so you remember the project.

The other part is to remove the risk. When you're building tech on top of other tech, your biggest risk is that will it just disappear. Building in public shows the level of effort going into it. It shows that it's very unlikely to just disappear. Also, people want to know what the roadmap looks like.

My buyer persona is the company CEO. I want to target businesses. When it comes to the tech you build on, that decision is normally not made by technical people. Technical people make recommendations, but they normally don't make the decisions. So, building in public helps make the process more accessible to all, technical and non-technical!

Why do you build in public? Let's chat below!

Discuss this story.

🚀 The Spector Report

by Josh Spector

I'm sharing growth tips for creative founders! Here's this week's:

The easiest way to grow your audience is to connect to an existing one.

Find communities where your people hang out, and become an active participant in them. Don’t just show up and promote yourself. Build relationships.

Don’t make people come to you. Go to them!

Subscribe to Josh's For The Interested newsletter or I Want To Know podcast for more.

✅ Eddy Reynoso Talks the Importance of Validation

by Eddy Reynoso

Hi, indie hackers! I'm Eddy Reynoso, founder of Dimension, a platform that allows you to support independent artists that you believe in, while getting exclusive benefits and recognition.

I started working on the app with two friends in January. We spent nights and weekends shipping features for months, and this was to our detriment.

Read on for more about our journey!

The features

We wanted to launch with tons of features to make our platform enticing to creators and supporters. Some of the features that we designed and built out included:

• A chat feature.
• Direct message feature.
• Web3 authentication.
• Email authentication.
• NFT token gating.
• One-time purchasing.
• Subscription purchasing.
• Social media posting functionality.

We launched all of these features before we solicited feedback or validated our idea. This led to months of building with no feedback, subpar features, and burnout.

The turnaround

One day, we all met to discuss our situation. We'd been building for months, we were burned out, and had a product with a bunch of unfinished features that we weren't even sure that people would use...if we ever launched it.

After spending some time debating whether we should just scrap the project, we decided that we wanted to launch with one completely finished feature, then validate that feature with real users.

We got the idea to stop over-engineering from Pieter Levels' book, MAKE. In it, he repeatedly stresses two points:

1. Launch your product as fast as possible, because the best feedback you can get is from real users using your product.
2. Talk to as many users as possible while building so you aren't trying to solve a problem that doesn't exist.

We decided to put all of our focus on one feature: Proof of creator support.

The concept

We were very confident about our idea for several reasons:

1. Supporters are very passionate about supporting their favorite creators, and they want to make it known.
2. Supporters love to say they supported an artist early on in their career, and they want a way to prove that they were early supporters.
3. Supporters want recognition from their favorite creators.
4. Creators need new ways to monetize since they have traditionally received the short end of the stick on existing platforms.

Our platform allows creators to set up a public page where their supporters can donate money in exchange for perks, like digital collectables, merch, discounts, etc.

In addition, our platform doubles as proof of the exact date a supporter chose to support an artist publicly, how many social media followers the artist had at the time of support, and the order in which the user decided to support, compared to other supporters.

We raised $1K with our first artist on our first day, funded solely by passionate supporters. Now that we know there's real interest from artists and supporters, we plan to add features incrementally, while onboarding artists.

We spent ten months building a product that we never launched or solicited feedback for, but those mistakes we made will never be repeated. We hope that this inspires you to not make that same mistake.

Talk to users and ship your product as fast as possible!

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 James Fleischmann, Darko, Sole Garcia, Josh Spector, and Eddy Reynoso for contributing posts. —Channing