Swipe Files - 📂 Pick an initial price to learn from

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For two years in a row, SaaS founders and marketers reported content as the #1 driver of growth according to the State of SaaS Marketing Report. That's why I'm excited to partner with Embarque to help more startups level up their content and SEO with affordable done-for-you content production. With clients like Riverside, MentorCruise, EmailOctopus, and VEED... these folks know what they're doing. They'll handle the whole process from keyword research to backlink building. Make sure to mention "Corey" or "Swipe Files."

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📖 The following is an excerpt from my work-in-progress book, Founding Marketing. It's a (very) rough draft of thoughts, notes, and research... so feel free to reply with your feedback on what I should expand more on and what needs to be clarified. Enjoy!

How do you put a price sticker on your SaaS product?

Pricing is one of those parts of the business that you can agonize about for months and then end up scrapping everything you worked on.

When you’re just starting out, it’s just not worth spending a considerable amount of time on.

Pick a price you can learn from, and then move on.

You won’t have the data, time, or strategic insights to design a pricing model that you can stick with long term.

Your product is likely incomplete, buggy, and ugly. Early users are doing you a favor just by agreeing to get a demo or sign up for a beta period. Don’t pick a price that kills all goodwill.

There’s also a strategic element to this that we can extrapolate from the “learn from” part of the principle.

A price point you can learn from is a price that is:

• Equal to or lower than your competitors to give potential customers a financial reason to switch
• Low enough that it doesn’t turn away good fit users, yet high enough that it weeds out lookiloo’s and bad-fit users.
• Simple enough that it doesn’t cause friction in the decision to sign up

Here’s the story of how Intercom first came up with their pricing:

So $50 was a good divider. It taught them a lot about their user base. It helped them distinguish credible customers from folks who were just playing around.

They changed their pricing structure a year later to something that distinguished the different types of customers and types of value served. If you look at any successful business, they will always iterate on their pricing as they learn more about their business and their customers.

When you’re starting up, your goal for pricing should be to get some meaningful cash from people to learn what pricing works and what doesn’t.

The end goal is to find pricing that aligns with the value customers get out of your product.

This is in contrast to two other popular methods: Competitor-based pricing and cost-based pricing.

Of course, I wouldn’t advise you to think of a random number in your head and then make that your starting price.

At the risk of being too prescriptive, a rule of thumb to pick from one of three prices:

• $10/mo
• $100/mo
• $1,000/mo

More sophisticated way of coming up with new pricing

Make a list of all value metrics

Plot each customer’s usage (e.g. boolean, sum, average) of each value metric on a unique chart

Van Westendorp survey to measure price elasticity and ranking importance of each value metric.

—Corey

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