Ask HN: How do you price Product or Service?

The basic formula would be COGS + CAC * Markup. Where COGS is the Cost of Goods Sold, what it costs you to make the product or deliver the service. CAC is Customer Acquisition Cost, or what it costs you to get a new customer. Different industries will support different levels of markup.

You also need to consider the lifetime value of the customer. If somepays pays $10/month for a subscription and the average customer stays 1 year, the lifetime value is $120. If it costs you $5/month to provide their service and it cost you $10 in advertising to acquire them as a customer, then over their lifetime you'll earn $50.

You can look at your competitors' pricing to see how much markup (and therefore how much profit) can be sustained over each customer's lifetime. If you're selling on added value (things your competitor doesn't have), you might be able to charge more than they do. If you're selling on price, you'll have to charge less.

Pricing can and should change over time, too. You might start with a high price for early adopters and go down over time. Or you might start underpriced and go up as you get adoption. Pricing also has to match up with your overall business growth goals in able to return enough to your investors to be worth it.

It depends on a few things, but the biggest factor is your primary buyers. General consumers and small businesses are quite price sensitive, high net worth people and medium sized businesses are less price sensitive and more willing to spend if the value is created. Large corporations and enterprises are the least price sensitive.

Also, consumers, small businesses and enterprises are the most demanding of support, but of those only enterprises understand they have to pay for it. Medium to large businesses are generally moderate support needs, as they reach the enterprise level the support demands go up.

So outside of who is the primary buyer, you need to define their support needs, risks, costs to run it and value generated to the client. Then price accordingly. I always try to value price not discount price. E.g. if the value your service or product provides is greater then the selling price then you are selling at a discount and IMO making a mistake generally. However, there are exceptions where it is necessary at least at low service levels to do this.

*edit, fixed punctuation.

Whatever number you think of, (I start with what I would pay), double it (I’m cheap), and then work down 10% at a time until you get the desired number of sales.

The best price is the highest price that a customer can pay. And not every customer must pay the same price.