This is probably not great advice. Prices do more than determine how much money you'll make from a given group of customers; they also select which customers you'll be servicing. The two most important pricing lessons startup founders need to learn are segmentation and qualification. You should select a market segment that's attractive, and your pricing scheme should in part serve to ensure that you're not wasting time being responsive to the demands of people outside that segment.
The list of things you can do to repackage your product to go after different market segments is very long and very few of the bullets on the list involve changing code. I think the most important thing to do is to select a group of customer prospects deliberately and then make something those people want, rather than making something for the whole world and trying to optimize the number of people who buy through prices.
You can cost yourself customers/clients by pricing too low.
We've been looking at pricing services suggested in this thread, and we've been self-selecting away from the extremely expensive services (e.g. Price Intelligently [1]), as that indicates that the service is targeted towards large enterprises, and not small SaaS companies.
Conversely, if the services were priced lower, that would probably scare off large enterprises.
Large enterprises also tend to require more sales and support effort, longer sales cycles, chasing after receivables, etc. All other things being equal, you have to charge more per unit for enterprises. (This has changed somewhat with lines of business just putting some things on credit cards but it's still a reasonable rule of thumb.)
Absolutely. And that's one model. It has its challenges. You have to find the right differentiation. Will anyone pay the premium for the enterprise version? And where are your development efforts going? It's not straightforward but it's certainly a valid approach.
Yes. Running a boostrapped organization for 7 years now, I always wish we had priced higher. The few times where we've priced offerings too high, it was always easier coming down in cost rather than going up, and we learned a lot from those early customers who would pay a premium.
Service based but somewhat related. I've recently decided in my consulting efforts; if the customer doesn't try to negotiate the price I'm way too cheap. Supported anecdotally by two interactions with the same customer - a colleague of mine from another company went in at a price for some work that I considered way too low. The response from the customer was "when can you start?" I recently quoted what I considered to be a perfectly reasonable rate for some work and that was the start of the negotiation. We had a good exchange of analogies to support our differing positions!
That's another great point. If you're going to make money from long relationships based on recurring payments, it's good to know that it's extraordinarily difficult to raise prices on an existing customer. If you sell to large companies, you'll find they have entire departments dedicated to ensuring that never happens.
The list of things you can do to repackage your product to go after different market segments is very long and very few of the bullets on the list involve changing code. I think the most important thing to do is to select a group of customer prospects deliberately and then make something those people want, rather than making something for the whole world and trying to optimize the number of people who buy through prices.
You can cost yourself customers/clients by pricing too low.