Comment by taprun | Hacker News Reader

Comment by taprun | Hacker News Reader

I feel like I can speak on the subject, since I just wrote a book on pricing software.

First, it's often a very bad idea to simply take a competitor's price - both Timex and Rolex would go bankrupt trying to match the other's price.

Here's the short version of what I suggest:

* Write down the pain point that your product solves in 1 sentence. * Write down the types of people who have that pain. * Rank each type by their willingness to pay and their ability to pay. Willingness will be partially based upon how well you can convince them that you'll save / earn them money. Ability will be based upon how much cash is burning a hole in their pockets.

Come up with three tiers, one for each group with the highest value for willingness*ability to pay. You may need to alter it a bit, if any of the groups prove too small.

I have two product pricing teardowns listed at my site ( http://taprun.com ) that might help you think more about pricing.

> - Write down the pain point that your product solves in 1 sentence.

> - Write down the types of people who have that pain.

> - Rank each type by their willingness to pay and their ability to pay.

Imho, this is not making the necessity to segment a market clear enough to OP.

Consider a wash-machine repairman as an example. The pain point is, naturally, "broken wash machine". Which occurs each year in a certain percentages of all households. The naive approach would be to assume that the latter is one big market, and proceeding to rank households based on their willingness and ability to pay a wash machine repairman.

In reality, there are a plethora of potential market segments which are based on criteria that do not in any way relate to price.

In light of a leaky wash machine, for instance, a household's options include:

- Calling in for the warranty if it's not expired

- Simply putting a bucket and continuing on with the broken machine

- Getting the leak fixed by the household tinkerer (or a friend or relative who tinkers)

- Buying a new wash machine

- Going to the laundromat from that point forward

- Etc.

- Calling the repairman

Point being: you want to properly identify which segments are indeed a good fit, prior to ranking them by their willingness and ability to pay.

In addition (in my experience anyway), these two steps are best taken care by interacting (email, chat, phone, face to face) with potential clients: not doing so introduces multiple risks, including coming up with a product that does not match their needs, under- or overpricing it, and -- perhaps most importantly -- missing out on opportunities to identify higher-value niches who you can up-sell things to.

Thank you for your suggestion. The comparison between Timex and Rolex made me smile. Indeed it's not a good way ;)

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