Ask HN: How do I price a limited, inferior product?

[god_bless_texas]

You can see my original question from a week ago here. I am a hardware guy who has an "app idea", so I went and got my learn on.

https://news.ycombinator.com/item?id=18903013

I entered into this project because I wanted to learn some software skills, and by several strokes of good luck and help from the hn community I have a rough prototype actually working. I am so excited by the progress that I want to try and market this.

I did some market research (I'd rather still be vague, so as not to embarrass myself yet). I have discovered there are basically 3-4 products that compete in this space and they are so niche that they each charge between $500 and $5000 a month for a license per user or by site. Pricey stuff.

I basically have no cost in this yet other than whatever AWS is going to bill me and some of my own time. I am considering something like charging $5 a month per user just to get a bunch of users onboard and traction established. I don't want to get in the habit of other freemium companies because I don't ever want to cross that chasm.

To be fair I think I am looking at a segment of the market that has far more users of what I am making that these other groups are not addressing. They are going after some huge "cookies", while I am looking at going after all the "crumbs" that are left over.

My goal is to get this to the point that it provides a nice side income that can maybe someday take over my main source of wages. I'm a contractor and consultant by nature so it's just another piece of the pie chart overall I guess.

What do you think, HN? I value your opinion.

[mtmail]

Look at the value you create, not the cost. In SaaS margins of 90% are possible if remove your time in the calculations. In B2B the decision maker has the same work with getting approval, adding you to their supplier list, dealing with their accounting department or filling out forms for $5 or $50. I'd even argue per-seat price model has disadvantages because the invoice amount might change month-to-month and requires additional re-confirmations of the customer's accounting department. Start with a higher price (be confident), you can always lower later or offer (time limited) discounts. $5/month is zero when you have to deal with 1-2 support emails, the first 12 months is zero when you have to do one Skype sales call.

Lots is written about SaaS pricing, it's complex. https://www.priceintelligently.com/blog/ has a decent blog on that topic (and free ebook I seems).

[jansan]

My experience with professional products is that price does not matter too much. If your customer needs a solution, in many cases they are willing to pay whatever you ask if the price is within a reasonable range. We did some experiments with changing prices and to our surprise there was almost no effect on the quantity we sold.

I would rather recommend to work on a special feature that your competitors do not have. Your product may be inferior, but maybe there is a feature that some potential customers are looking for, but cannot find in other products. This may be more attractive than a really cheap price, which also may raise suspicion if the price is that much lower than the price of competing products.