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​A few weeks ago I told you about my friend Val, who was considering new pricing for his product Blogstatic.

I said, "before you can determine which direction you should go with your pricing, you need to ask a few key questions."

Let's look at those now.

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Who is looking for a product like this?

The crucial ingredient for any product is demand. People have to want what you're selling, otherwise they won't buy it at any price.

One quick test is to see if folks are asking for product recommendations on Twitter, Reddit, Slack, LinkedIn, etc.

What you want is to see people in motion looking for a product like yours:

Kelly Barnhill is Now a Dragon @kellybarnhill Hey friends - for those of you who enjoy the longer forms, which blogging platforms do you like? Medium? Substack? Something else? What are people using these days? March 15th 2023 0 Retweets 9 Likes

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What options are they considering?

Once folks start looking for a product, they consider a few options.

For example:

• Product A is $9/month, but looks buggy.
• Product B is $299/month, but looks like it's for enterprise customers.
• But Product C is $29/month and looks just right.

If folks are considering a group of options, and they're all around $29/month, you probably don't want to be the only one prices at $99/month (with similar features).

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What product do they end up buying, and why?

In most categories, there are 3-5 choices that most people end up choosing, most of the time.

The question is: why?

• Do customers frequently bring up price? ("ConvertKit had the same features, and was 10% cheaper than MailChimp.")
• Do customers like the business model? ("On Transistor, you can start unlimited podcasts for one price")
• Are customers just use what their friends use? ("All my friends have an iPhone, and I don't want to be the only one with green speech bubbles.")

There are multiple factors that influence a customer's willingness to pay.

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What are your main costs for running your product?

Another factor in how you price your product will be your costs for delivering the service (bandwidth, hosting, etc).

Many startups have been burned by pricing their products too low, and not being able to keep up with rising costs.

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What "value metric" for pricing makes the most sense?

In almost every category, pricing is based on 1-2 "value metrics:" charging per blog, charging for additional team members, charging for storage, etc.

When we were pricing Transistor, Patrick Campbell advised us to price for downloads, as that's the primary value metric in podcasting. (What do people want more of? Downloads! If they're getting something they wanted, they're likely willing to pay more).

Many times, it makes sense to use the value metric(s) already in place in your category; largely because that's how customers are evaluating their options.

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Generally, the price of your product should reflect:

• the value you give customers,
• the market segment you're targeting,
• the economy (weak/strong) you're in,
• your costs for operating your product,
• the stage of your startup.

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Let me know your thoughts! (Reply to this email)

Cheers,
Justin Jackson

PS, I just launched a new side-project:

Justin Jackson @mijustin Launching a fun side-project today: @MyPodStudio We'll feature podcasters and their home/office studios: the gear they use, how they set it up, workflows, etc. The first profile is on @stephenrobles and his sweet home studio: mypodstudios.com/stephen-robles Stephen Robles' Apple-centric home podcast studi... Producing audio podcasts and also publishing on YouTube mypodstudios.com March 16th 2023 4 Retweets 73 Likes

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