Completely agree with the reasons. Most all of my indie company's software is free and OSS - so no opportunity to capture any value.
I created the open source tunnel project called inlets which now has 8k GitHub stars, the same thing happened - lots of people used it, got value and didn't pay a sponsorship or for support.
So seeing the problem, I then went on to create a paid version which adds value and features for companies. The main issue was that many developers anchored the pricing to ngrok, but ngrok is not the same product, for one, it's a SaaS with rate-limits and is a cloud service.
inlets PRO doesn't have any rate-limiting, can act as a VPN, integrates natively with Docekr + Kubernetes and can be self-hosted too. That's the value of it. So when asked, I advise Ngrok customers to stay with what they know, they aren't the target market.
> The main issue was that many developers anchored the pricing to ngrok, but ngrok is not the same product, for one, it's a SaaS with rate-limits and is a cloud service.
You’re hooking me in to an interesting pitch here.
> doesn't have any rate-limiting, can act as a VPN, integrates natively with Docekr + Kubernetes and can be self-hosted too. That's the value of it.
That’s just some stuff it does though, not the value.
As an underwhelmed ngrok free user, you could probably sell me this product somehow. We have lots of pain around webhooks in CI, especially with parallel builds.
I've used ngrok for dealing with API webhooks before all well. Is there some automatic way you guys make it work? I use ngrok free and have to type in the specific up each time.
Another way to think about this is that even if you built a product to scratch your own itch, you may not be your own ideal customer. In that case, your instincts on pricing could be way off.
You might be cost-sensitive and look for a good deal when buying tools and infra to support your own projects. But buyers at larger companies aren’t spending their own money, so their thought process is very different.
As long as the price fits in the budget and isn’t an outlier compared to other products they pay for, then it’s not going to be what they focus on. They’ll care much more about quality, trustworthiness, ease of integration, support, and things like that.
That’s why putting your price at the high end of the 'acceptable' range is a win-win. You don’t leave money on the table, and you make an implicit commitment to high quality and good service, which the customers you really want value more than a bargain.
I recently read a story in the book 'Influence – The Psychology of Persuasion' (by Robert B. Cialdini):
> I GOT A PHONE CALL ONE DAY FROM A FRIEND WHO HAD RECENTLY opened an Indian jewelry store in Arizona. She was giddy with a curious piece of news. Something fascinating had just happened, and she thought that, as a psychologist, I might be able to explain it to her. The story involved a certain allotment of turquoise jewelry she had been having trouble selling. It was the peak of the tourist season, the store was unusually full of customers, the turquoise pieces were of good quality for the prices she was asking; yet they had not sold. My friend had attempted a couple of standard sales tricks to get them moving. She tried calling attention to them by shifting their location to a more central display area; no luck. She even told her sales staff to “push” the items hard, again without success.
Finally, the night before leaving on an out-of-town buying trip, she scribbled an exasperated note to her head saleswoman, “Everything in this display case, price × ½,” hoping just to be rid of the offending pieces, even if at a loss. When she returned a few days later, she was not surprised to find that every article had been sold. She was shocked, though, to discover that, because the employee had read the “½” in her scrawled message as a “2,” the entire allotment had sold out at twice the original price!
> It is easy to fault the tourists for their foolish purchase decisions. But a close look offers a kinder view. These were people who had been brought up on the rule “You get what you pay for” and who had seen that rule borne out over and over in their lives. Before long, they had translated the rule to mean “expensive = good.” The “expensive = good” stereotype had worked quite well for them in the past, since normally the price of an item increases along with its worth; a higher price typically reflects higher quality. So when they found themselves in the position of wanting good turquoise jewelry without much knowledge of turquoise, they understandably relied on the old standby feature of cost to determine the jewelry’s merits.
Depends on what you mean by "people". For a lot of average consumers/customers, Walmart _isn't_ taken seriously. They're not aware (and don't care) about the incredible supply/logistics magic that Walmart orchestrates behind the scenes. They'll pay a premium to buy stuff elsewhere to avoid the inferior goods connotations associated with Walmart.
For electronics or clothes maybe, for many household things Walmart had name brands and people know that. I dont go there (and I assume pay a premium) because I dont like places that treat customers as cattle, and would happily pay a few cents extra for a shopping experience that hasn't had every ounce or humanity stripped from it. Granted I'm in the minority and it's hard to even find places that treat their customers like people anymore.
The great majority of products created by techies interested in startups are priced much lower than the market will bear, and so their prices should rise.
There definitely is a market out there for the cheapest possible version of something. Usually, turning a profit while moving a product at the cheapest possible price involves maximizing volume, cutting quality to be bare minimum, and ruthlessly eliminating overhead. Like, if there aren't thousands of people on the internet complaining about how crappy your quality is, you probably need to cut it further. I haven't studied it, but I have a hunch that most of the type of people who surf HN for business advice aren't interested in being in a commodity industry where you have to do these things to have a viable business. Or if they find themselves in one, they aren't going to be ruthless enough in the right directions to make it. They better find the right place to get advice for that sort of business, or they won't last long.
I tend to think that they mostly sell cheap crap, that even their brand-name stuff has been renegotiated with the manufacturer so they can sell you a lower quality version in order to have the lowest price. They have definitely done this with some products, and at least attempted it on others.
So yeah, their pricing definitely affects my perception of their products. I avoid Walmart.
Office 365 has the clout of Microsoft behind it. I don't know that the general rule applies as well as it does to some new SaaS company I have never heard of before.
If you have money and you want to pay more for the same thing you are more then welcome to shop around. But just because what ever premium brand name store you use is "better" because it costs more, doesn't mean it isn't the same thing as Walmart.
Pricing is not as simple as "charge more" because it increases the premium factor by applying a this costs to much for me so it must be good factor.
There are hundreds of other factors you need to consider and I don't think applying a double my price equals success to your pricing schema always makes sense.
I think you missed the point. Walmart absolutely has negotiated deals in the past for products that appear to be the same but are not. Levi's jeans is one example. They tried to do the same thing with Snapper, as I recall, but were rebuffed.
If that's okay with you, great, you are matching the price of the product with the quality. But as a result of them doing it and not being completely transparent about it, I question what other products they've done the same thing with.
You may avoid it, but hundreds of millions don't, so the point stands. "Cheap crap" is obviously one possible way to go, and companies like Walmart have grown very successful that way.
Many people are totally fine with buying cheap crap. As long as they know that going in, that's great. Walmart is indicating with their prices that they're offering lower quality merchandise, which many people find acceptable because the cost is lower. It's honest.
I think a lot of people overvalue what they think they need--basically YAGNI. There is a bit of once burnt, twice shy. I learned when first moving out to go to the dollar store to fill my apartment; bathroom trash can, shower curtain rings, kitchen cups/plates, toilet brush. Then upgrade what doesn't work (paper-thin shower curtains will billow with the steam and stick to you). It wasn't as wasteful as I had expected and I saved a lot of money compared to just buying everything from the average retail store.
Even Wal-Mart plays on this by stocking name brands here and there.
Pricing psychology is so interesting, where there seems to be a hierarchy as well; which flows into the idea or rule that you should never limit how much someone can spend.
"is never high enough" isn't really actionable info. I need to set a price, and it will be somewhere between $10 and $1000 month. You could of course try to fill the area under the demand curve, but that poses it's own challenges. I settled on $1000/mo because for the customers that will really benefit from my software, that is how much they benefit.
> If you want your prospects/customers to take you seriously they have to find you expensive.
This is BS.
If you want your customers to take you seriously, seriously solve their pain. One example is charging $1 USD for a song, which at least one company has done and made billions.
Making an offering "expensive" in and of itself neither conveys legitimacy nor value. It only begs potential customers to contemplate the cost/value proposition more critically.
The ultimate goal with a SaaS is to "land and expand" where you can hook somebody at a cheap point, withhold some valuable features or add hard limits somewhere, and just wait for customers to self-select: the people that use your thing more hit upgrade walls faster and upgrade further and pay you more over time.
Whether or not the ideal inital price is $49 or not, that takes time to determine, but one thing about not offering anything to the lower-end is that you only invite better competition. At $49, you don't give much room for somebody to compete with you on price and still run a profitable business. At $99, attack of the clones. Frankly, after being on HN twice in a week, I am expecting the clone Banner<Noun>s any day now.
> The ultimate goal with a SaaS is to "land and expand" where you can hook somebody at a cheap point, withhold some valuable features or add hard limits somewhere, and just wait for customers to self-select: the people that use your thing more hit upgrade walls faster and upgrade further and pay you more over time.
Are you describing distribution of controlled substances having addictive properties or "Software as a Service"?
Based on your definition of "[t]he ultimate goal", can you delineate the difference?
It's well-known that people are influenced by the number and relative value of options. It may be that very few people purchase the $49 option, but that its mere presence makes people more likely to purchase a higher tier.
And by having the $49 tier present, the company can advertise that their pricing "starts at $49".
Also, there are probably some people whose purchase authority is limited to $1,000/yr.
We use many products with low price - that doesn't make me trust the products less. For me the reason to charge more is just that customers are willing to pay more than you think.
When you double the price, it is likely that the people who bought would still have bought at the new price. So you are leaving money at the table by not raising the price.
I was about to write both products went out of business but one was just rebranded and still has the same higher base pricing and seems to be doing well, so it seems it worked out very well. Maybe increasing the pricing also played a role in identifying the other roduct as too unattractive to continue and focus on bannerbear sooner than otherwise...
We at Type Studio try to offer our SaaS completely free, as we believe everyone should find out if the product is helpful. Especially as students ourselves we don't have the possibility to pay monthly fees for all the services we like to use. That's why our approach is to offer a completely free version of our video and make people who only want to edit 1 video a month happy with it. But of course we also have to think economically and make sure that our business is sustainable.
My experience has been that no one can give you as much grief and hostility as a free user. Even charging a buck a month leads to an enormous step up in customer courtesy in my world—I don't know if it applies equally to yours.
So far, this has actually worked out well. Especially for us in an early phase, every feedback and request from a user is very helpful. But that the model works is also proven by tools such as Figma.
Feedback from free users is the wrong feedback. If paying customers ask for a beta of your next feature because they need it so badly, this is feedback. You're talking to people who might leave you once you ask them to pay.
We put our prices up by 50% to new customers this month, we’ve see no difference in the amount of customers we’ve earned - just a higher revenue per customer.
In my case, I charge $4/month for a developer tool and every week or so I would receive a survey response (that people do after uninstalling it) calling me names for charging money. Apparently there are people who want the tool enough to complete the survey and curse the creator but not enough to pay $4/month for it. So for me, pricing is really hard.
Just reflecting out loud here, as I struggle with this as well.
The way you said it makes me think that at $4/month, you might actually be competing with free, as the prices seem so close. If it's $20/month, they may not say "oh but why isn't it free" or even more so at $50/month.
At low prices, maybe it just seems too much of a hassle to sign up and pay, ie, "Ugh, just $4/month? And I have to go thru the burden of signing up and giving my credit card and all that?" Whereas at $50/month, the paying process pain may feel relatively smaller.
Just a theory: I suspect another factor is that developer tools is a market that attracts a lot of individuals who use them to do hobby or bootstrapped projects that don't actually bring in any revenue. They tend to be far stingier than businesses who typically have a budget and compare the price to their bottom line.
This is a good point. I never thought of that but it's quite probable. I wonder how to best deal with this. Maybe free forever for hobby projects and only charge when people use the software in their money-making business.
After all the good advices in the article my first idea was to check where they are now after 2 years.
The site is down, dead in the water. So maybe the advices where not that good ...
I created the open source tunnel project called inlets which now has 8k GitHub stars, the same thing happened - lots of people used it, got value and didn't pay a sponsorship or for support.
So seeing the problem, I then went on to create a paid version which adds value and features for companies. The main issue was that many developers anchored the pricing to ngrok, but ngrok is not the same product, for one, it's a SaaS with rate-limits and is a cloud service.
inlets PRO doesn't have any rate-limiting, can act as a VPN, integrates natively with Docekr + Kubernetes and can be self-hosted too. That's the value of it. So when asked, I advise Ngrok customers to stay with what they know, they aren't the target market.
It still makes anchoring a challenge though, and Neil Davidson of Redgate talks about this in Don't Roll the Dice - another eBook the author may enjoy reading - https://www.red-gate.com/library/dont-just-roll-the-dice