Hacker News Reader

Comment by rubicon33 | Hacker News Reader

I'm really interested in your second question!

I just released a product recently which HUGELY undercuts the competition. I was able to build it cheaply, over the course of a couple of years, and as a result I never took investment or hired anyone, so I can offer the product at incredibly low rates (compared to the competition).

My worry is that I may be pricing it so low, that I'm actually scaring off potential customers. This is an enterprise product, so they're used to seeing massive licensing fees. I initially thought that offering it at the lowest price I could afford, would mean I would garner the most customers, but now I'm starting to wonder if that's true... I have no experience pricing things, and I'm really considering putting out a survey to existing customers.

View on HN

Note that you don't want to maximize customers, you want to maximize revenue. So even if hugely undercutting your competition gets you the most customers, you may still want to raise prices. If doubling your prices doesn't produce half as many customers (e.g. because you're still undercutting your competition) then you want to double your prices to make more money.

So yes, worry about scaring off potential customers with a price too low, but don't worry about scaring customers with a price that's too high, unless you scare off proportionally more than you increase the price. The way you describe it sounds like you could make way more money by raising your prices.

> Note that you don't want to maximize customers, you want to maximize revenue.

Now there is a memo that the Silicon Valley web startup economy didn't get...

This link [1] has a good description of Sandy Kurtzig's "flinch" pricing method with Enterprise customers (I believe she was the first female startup founder to IPO her company). Her book, "CEO" about her startup journey is a good read, it was one of the first books I read that got me interested in business.

[1] http://venturehacks.com/articles/pricing

Thanks, this was funny to listen! ... $75K! ... aeh per year!

I just wanted to say that be careful about lowering your price just because you can. You should charge a price that maximizes your profit. Don't charge low just because you can, unless you have a reason (company philosophy, growth, etc.). Business usually exists to maximize profit. If you are priced a lot lower than your competition, double check whether your price is too low.

If not scaring them away, you might just be leaving money on the table for no good reason. Enterprise customers aren't as price sensitive as consumers or smb.

How long is your sales cycle from visitor to paid? If less than 1-2 months, just play around double the price for a month and see what happens.

Having run and advised numerous companies over years, increasing prices is one of the best decisions a startup can do. In 90% of cases there are no ill effects and just increased income which helps buld a better product. Profitability FTW.

Reply on news.ycombinator.com