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There are a lot of questions to answer about your product during the building and pre-release phase, such as:
... and how much is the product going to cost?
There are, of course, 2 sides to this - one being the business and/or creator of the product ...
And the other being the actual users of the product - its customers - the ones who either use the product for years to the benefit of their business or personal lives or ignore it for one or many reasons.
Wanting my product to stick around and be a tool that is useful to business and personal websites for many years, I let the focus on the customer lead the way in terms of how I priced Gazeble.
And I settled on this broad answer to the question:
How do I price my product for my customers?
To price your product with your customer in mind you should consider who your customer is (their demographics and resources) and the ongoing value customers derive from your product.
For me, it was about answering those 2 (complicated) questions.
I'm going to walk you through how you can break down the 2 questions to determine pricing for your product. I'll also explain my thinking behind Gazeble along the way.
As you brainstorm, research and build your product, you should (and likely will) constantly put yourself in the mind of your customer:
To adequately answer those questions, you have to know who your customer is ...
Is your product a B2C - business-to-customer - product or B2B - business-to-business - product. Are you selling it to be used by individuals in their personal lives or by individuals trying to improve, grow or benefit their businesses?
Is my product B2B or B2C?
To determine whether your product is a B2B product or a B2C product, ask if I sell this to my neighbor will they use it in their family or in their roofing business?
This has a direct effect on pricing. Products sold to consumers will typically need to be priced much lower since money is being used on the product instead of personal items like groceries, a vacation or new shoes whereas products sold to businesses can usually be written-off as a business expense and business owners understand needing to spend money to make money.
Before you price your product, it's important to understand the financial-position of your customer.
If your product is geared toward consumers/individuals in their personal lives, is your product meant to help people with their yachts or vacation homes? If so, you could probably make the assumption that your customer has financial flexibility to be able to afford a yacht and/or a vacation home.
Or is your product meant to help the middle or lower class to save money or time on a menial household task? If that's the case, then, while it is possible your customer may have financial flexibility, it's also likely that they don't so you may need to keep their lack of financial status in mind when considering pricing.
If your product is geared toward businesses, is your target market closer to that of small businesses or organizations of 100+ employees?
Keeping in mind your customer's financial situation is necessary to know even before starting development on your product - will the retail price exceed the development cost? - but also when setting its price.
You need to make sure that your customer can afford your product.
Now that we've considered some basics in terms of our customer - who they are and their financial situation - we should consider the value that our product delivers.
If you're building a product, then you (should) believe in it and the power that it has to improve the lives and situations of its customers.
We believe in the value derived by our product, but, realistically, will the customer?
Does your product directly impact your customer's financial status - either their top-line (sales/earnings) or bottom-line (earnings minus expenses)?
If yes, then it becomes fairly easy to determine the worth and value of your product - just take the dollar-difference (... or Euro or Yen or whatever).
Some products have an indirect impact on finances:
Accounting services would be more direct - you pay them X to do your taxes and they prove that they added Y in terms of additional tax savings or returns.
Time is money and I'd argue is worth more than money. We can make more money but we can't add more hours in the day.
So, it's worth it to consider how much time your product is able to save your customer, not just how much money.
It's easy to find products that claim to directly impact and improve our time:
For you, how does your product save its customers time and boost their productivity?
Time and money and quantifiable, but one thing that is perhaps more important than both of them combined yet hard to measure is quality of life.
While time and money refer simply to time and money, quality of life is more of a category including factors such as:
Like I almost fell into a trap with Gazeble and saving time, be careful to not equate your product's impact on a customer's financial situation with improved mental well-being. Yes, they could very well be related but your customer may not look at it that way and even if they do they won't add them up as additional contrived values.
Products falling directly into this category would include:
Other products that allow you to make the world a better place would fall into this category as well.
So, can your product improve the quality of life for its customers?
TLDR - To price your product with your customer in mind, you need to consider who your customer is and the amount of resources at their disposal that they could use to pay for your product. Then, identify how your product improves the lives of its users in terms of money, time and quality of life.
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