I've watched and been involved in a number of discussions lately on pricing for both SAAS and one off purchases. I decided to put this post together to kind of cover my thoughts but also as a way to share them.
Working for Free
No just no don't do it. The "Do it for exposure" thing, no exposure will kill you. Build a portfolio but do not do work for someone else for free and never work cheap.
There is a thing I've come across and struggled with myself that when we are low on confidence we tend to charge less. As we grow and gain confidence we want to raise prices.
If you are building a SAAS trying to raise prices can cause a lot of issues that are unintended, so think carefully before you decide on pricing.
If you are offering professional services it's actually easier to raise pricing as you get busy you run out of time you need to raise pricing in order to get people who you really want to work with. But it's still a hard thing to do.
There is a weird catch that people do. When we see a price if that price is low we think that it won't provide value. If the price is high we think it's a luxury item and we will do it when we're rich.
Find the Price
So how should you price something? Well first off there is no right or wrong answer. Actually pricing is sort of a complex and personal thing and what works for you might not be right for someone else and this is something I've done up on how to work out what price I should be using.
First you need to know how much it will cost you to run it and keep it going monthly and yearly. It really is handy to do a budget of your spending to help get a guide on what makes it profitable and pay you a salary you can live on. (that is the point after all).
What your target market already pay for services / software can give you a guide to what they see as value. Doesn't always have to be competitors products. For example does your target market use Salesforce or pay for their email hosting. This can give you an indicator that they see value in what they pay for and are willing to spend money for value and time.
This is the bit I think we all ignore. Marketing 101 is to work out a persona of your customers. I think we should do this for pricing too, work out what they are likely to already be spending. It can be really interesting to see what they are paying for other software and what they think of as value.
You need to look at the competition and see what they are pricing it at and try and match that unless your adding massive value its generally not a good idea to go too high.
Then you have to look at the numbers. If I have X and I charge Y how many do I need to get.
This is when I created a pricing matrix and this has helped me alot in how I frame my pricing but also what I'm building and offering.
What interested me when I put all this information out there was that once the price goes above 19.99 it makes it very easy to build a profitable side business or indie project.
Lower the price and more users you need. Remember converting paying users is going to be about 10% - 20% of visitors if your lucky.
This led me to a different way of thinking about about building software or services can I build something that provides real value and helps save time, I can charge more and then require less signups to make it profitable.