What have you learned about pricing?
Hey everyone - I'm launching my first product soon & would love to tap into this community's experience on price-setting for B2C software (ours helps job seekers).
The long story short is we’ve been leaning towards entering a fairly established market at significantly lower pricing (like ~4-5x) than competitors. The thesis is this will help us A) attract users in general, and B) drive better unit economics by focusing more on capturing paid users and not focusing (much?) on total user acquisition (paid + free).
Here are my primary questions:
Is there a “too low” when it comes to pricing (i.e. as a percentage market rates)? While we offer a feature-rich product, I’m starting to have doubts that the pricing might cheapen product perception before users even give it a chance.
How have you decided how much to give away for free if you do run free accounts? Ideally I think we’d lean into a trial-only model, but competitors all have free accounts, so I feel somewhat pressured into going this route as well).
How important were/are free user accounts to your software? What would I be missing out on by not chasing/having as many free users? Obviously more users = more awareness, but does that mean better awareness? Does that matter when you're the "new guy"?
I can add some context specific to our app in the comments in case it’s helpful for anyone generous enough to provide feedback.
Thanks so much in advance for your thoughts, advice, and any good vibes you can send our way!
Dan
p.s. Not sure if I'm permitted to share our launch page in this forum. I'll update if that's permissible.
Replies
the way cal.com prices their product vs. calendly might be a use case for you to look into.
calendly came first, they set the standard. but cal.com have implemented a few clever pricing ideas. for example, for a one-person op, it simply doesn't make sense to use calendly - only one event type, got to pay them to get paid thru Stripe and paypal. and cal.com offer these on their free plan and they're unlimited.
what this does is that as and when a one-person band wants/needs to expand, their chances of switching away from cal.com are significantly reduced.
sounds like you may be in a similar situation with the 3 players in the market, @dan_difr
@taniabell thank you so much for your insights! I'm definitely going to spend some time this morning looking into how cal.com prices against calendly to see what I can learn and potentially apply.
We've got a pretty weird product in terms of stickiness, meaning that the whole point of using it is to help people get to a point where they don't have to use it. We're we've got a few ideas we'll implement over the coming 1-2 quarters to mitigate that (assuming we can validate the initial product has legs).
My hope would be to find a sweet spot where people get enough ongoing value from the tool that the cost of switching to a competitor doesn't make a ton of sense, and the price attractive enough to not make people feel like it's an "extra expense" they need to cut from their budgets.
@dan_difr oh yes, ofc. your product is meant to help ppl find jobs.
in that case, also worth checking out that dating app. their tagline is something like 'the dating app that's meant to be deleted'. sounds like a very similar space from the perspective of stickiness.
@taniabell haha I'll have to give my wife a warning before logging into Hinge! Or are you just trying to cause trouble 😜
@dan_difr i was thinking their marketing and messaging might be a good source of inspo for your product which, as you said, is meant to be deleted too.
@taniabell I gotchu! Was just making a joke :)
Pricing is always a moving target! Early on, we debated whether to go low-cost for mass adoption or premium for niche power users.
What worked?
Tying pricing directly to unlocked value.
We realized that underpricing by 4-5x (compared to competitors) risked signaling lower value rather than making the product attractive. Instead, we tested tiered pricing based on measurable business impact—the more value we provide, the more we charge.
For those pricing in crowded markets, have you seen success with value-based pricing, or do customers still anchor to market rates?
@goodgistai thanks so much for the thoughtful feedback. Tiering is definitely something I'm familiar with from my time in B2B software. I've seen it applied on the B2C side as well, but have some doubts it would be effective in our case.
Here's where I'm a bit concerned: in our market, the rest of the companies are strictly 2-tier. (They either have free or paid.) At least one of the bigger companies also switched from a 3-tier system to a 2-tier, so I'm gathering it may not be super effective, or may have been confusing folks. I admit I may be reading too much into that.
We definitely have one or two things on our roadmap that are pretty specialized & could be bolted on for an additional charge, (or broken out into a higher tier), but I'm leaning toward following the market and sticking to Free and Premium only during launch.
That being said, I'm typing this, I actually had an idea come to mind regarding a potential "power user" scenario even within our current feature set. I don't think we'd be able to to implement by launch, but I think it's worth exploring/modeling, and maybe there's something there in the future!
Just to clarify, did you decide on tiering before launch, or is it something you layered in later, after trial and error, or seeing how paying users were actually using the system?
@dan_difr Great insights, Dan!
Tiering can definitely be tricky, and market norms play a big role. In our case, we started with a simple structure but refined it based on real user behavior. Seeing where customers found the most value helped us shape the tiers better over time.
Your idea around a potential ‘power user’ tier sounds interesting have you considered testing it with early adopters before a full rollout?
Can you say more about what you're building? It seems like modern wisdom is that "free plan = bad" but I tend to disagree in most cases. Having a huge cohort of users that have accounts but have not converted to paid is a strength as long as you send all of your product updates, newsletters, etc. to them. If you're selling a b2c subscription, I think it's more powerful to have a huge list of "maybe one day" users than a tiny list of "tried but didn't convert" users.
I think there's definitely a 'too low' with regards to a user's perceived value. It's tantalizing to undercut a market and launch a cheap tool, but a safe assumption is generally that your competitors would price lower but can't- either due to market factors, margins, headcount, etc. But the other side is that AI has already changed this equation in many markets and now many businesses that were not feasible are now possible. The end result is that there's a ton of room on the lower end of many markets to compete.
Re: how much to give away- I'd give away as much as the user needs to be convinced you can solve their problem. Get the user to input data, commit to the process, and understand how you solve their issue.
@steveb thanks so much for the thoughtful response! Here's a bit more context
Product:
PH: Difr
Website: difr.me
Market:
→ There are 3 well-established companies in the market that I’ll be trying to break in to
→ There's roughly 80-90% core feature overlap among all of us; then each of us has our differentiators, bells & whistles
→ Monthly pricing for competitors range from $27 to $50, depending on the plan duration.
→ If we run with the prices I'm currently modeling (roughly $6-13), I'd break even at 7% paid users would then be able to scale profitability very quickly after that.
Regarding building mailing list, I would definitely offer a free premium trial and a scaled down version of a free plan, so I suppose I'd still have a mailing list. But then again, a lot of those users may be unlikely to be active, so may they may not be likely paid customers for long? I guess that's another area I just don't have data on yet.
I'm also thinking through what you said about being too aggressive and there being plenty of room on the lower end to compete. I'm starting to feel like I'm overthinking the importance of getting pricing "right" at launch and "beating" the market. I'm bootstrapped so I'm just a bit nervous about not attracting users right away, and I'm probably not thinking enough about reinvestment & future marketing if pricing isn't enough to do that. Perhaps I take a more experimental mindset into all of this...
Thanks again! I'm open to all the advice in the world right now! :)