Fatboy In A Lean World

Typically the number of purchasers is high at low prices and decreases as the price goes up.

The value of the market is the area under the curve - so the exact shape of the curve matters a lot.

The shape of a demand curve can be odd. If you look at the graph the third demand curve has a 'hump' in it. This is characteristic of products like 'jeans' where a lot of people buy cheap jeans, but a significant number will only buy 'designer' and won't purchase at lower prices.

Basically all demand curves are very similar at the low-price end. People will take home stuff from hotels that they would never purchase, pens, notepads, rubbish wee shampoo bottles...

If you are doing a startup it is important to look up the demand curve and try and figure out what someone will actually pay for.

In addition you have to shape the demand curve. The demand curve for designer jeans doesn't have some sort of 'geographical' hump in it - the people who make designer jeans made that hump by a variety of cultural and other means. In order to start shaping the demand curve (and shaping your product to possible demand curves) you need to be trying (and failing) to sell up the demand curve in the interesting bit...

There is a big confusion about prices out there. People say 'oh, Twitter is free' when what they mean is 'the users are the product, Twitter's customers are other companies who want to buy data...' People also talk about Freemium as a price when in fact it is a marketing cost (if I give free stuff worth $10 to 9 people, the 10th will buy for $100 leaving me $10 clear).

The takeaway is: go and ask an outrageous amount for your half-baked, crappy prototype. The reasons people will give you for not purchasing are all vital info.