How Do I Determine Pricing?
Plus: Idea Forge Will Launch on Thursday!
First, Idea Forge will go live next Thursday. If you…
👉 Struggle to come up with startup ideas
👉 Can’t objectively assess which ideas are the right ideas
👉 Want to get real feedback on your ideas
This product is for you.
If not, please still check it out & upvote when I launch on Product Hunt next Thursday! 😂
All the support with Smart Updates really helped me make an informed decision to pivot or persist. So it does make a real difference.
Now, On To Pricing…
Pricing.
An exact science?
Or is that all bullshit?
4 principles that help me determine pricing for the startups I’m currently building:
1/4 Pricing Theory Does Not Apply for Early-Stage
The theory suggests we can work out the ideal price point between charging too much (i.e. putting customers off) & charging too little (i.e. customers get a bargain, leaving revenue on the table).
Monetizing Innovation, for example, does a great job of explaining pricing theory. If you work on a product with 1,000+ paying customers, go read it.
HOWEVER…
If you are still struggling to get your first customers, all that theory is irrelevant.
Firstly, it requires enough actual paying customers to respond to surveys & interact with you to give you some confidence that your research is reliable.
Secondly, it requires you to trust that what they say (e.g. “Sure, I’d pay x for this bundle of features”) = what they actually do.
I’ve dealt with humans all my life.
You probably have too.
In my experience?
There’s a BIG difference between what people say & what they do.
2/4 Pricing is Primarily Psychological
When we set a price, it sends a certain signal.
For example, when a course is $9.99, are we really gonna bother doing it? Watching all the videos? Doing all the exercises? Completing it to the end?
Nope.
When, instead, we happily pay for a $3-5k bootcamp?
It signals quality.
It signals, “this is a serious thing.”
It shows confidence that it will deliver.
Therefore, I usually set pricing high.
Specifically, I generally set it at least 2x the price of the competition to signal:
This is different.
This is more than just “better”.
This will deliver on its promise.
(This is what we call anchoring i.e. taking the market average or “standard” price & creating a new price point for this category of products. With Prod MBA, this means I charge $3,500 v. $999 that many other companies charge).
Idea Forge: Pricing
Now, for Idea Forge, the big risk is going to be revenue; will founders be willing to pay for something they currently do for free (usually just have a load of notes scattered around to store startup ideas)?
My prices are essentially anchored to $0 because the current solutions are free.
Therefore I’ll start experimenting with the following:
Free: Limited usage
$9 Day Pass: A subscription doesn’t make sense for a product aspiring founders will only use a few times every few years, so a user can pay for 24hr all feature access
$49 Lifetime Access: Full access to all features, forever
Usually I don’t follow the Product-Led Growth approach of offering a freemium version because conversion rates are shockingly low (1-3%)). As I don’t have endless funding & only want to build truly high-value startups, I’d rather see whether a customer will pay upfront.
3/4 Stack Value = Higher Price
As the price itself is psychological, so the way we bundle features & value together is.
Imagine if I launched Idea Forge with just one feature:
Manually add & store startup ideas.
Would anyone pay for it?
No.
Because it’s just a less convenient version of Apple Notes, Notion, etc.
There’s not enough value in the stack.
It’s why people pay $9 for a course & $9,000 for a bootcamp.
A course = videos.
A bootcamp = videos plus coaching, access to network, assignments, bonus content & workshops.
Idea Forge’s Value Stack
For launch, I’ve therefore tried to stack enough value together to create something the market is willing to pay for:
Manually add & store startup ideas
Plus generate ideas based on your experience, skills, type of business you want to build
Plus different ways of auto-assessing the idea (for example, how quickly it could take you to quit your job & do it full-time)
Plus ability to share with friends for feedback
Plus ability to get feedback from a product expert (me to start!)
4/4 Pricing Should Be Determined By Your Long-Term Goals
Finally, you’re not a publicly traded company!
You don’t have a responsibility to shareholders to maximise profit.
Your business?
No investors?
Do whatever the hell you want.
For me that means I’m not gonna stress over maximising revenue.
I don’t care.
I just want to build cool stuff people use - & that brings in enough profit to pay me a salary.
That means I just go back to my long-term goals with this project (building 12 SaaS Startups in 12 months):
Can I build 1/12 products that brings in $3-4k per month profit (to pay my bills)?
If I charge $49, I only need 100 Lifetime Access customers per month to make that happen.
If people prefer buying a day pass, I’ll need 400 Day Pass customers per month.
That sounds realistic to me.
Conclusion
Will all these principles translate to a wildly profitable product?
I’m not sure.
It’s worked with previous startups I’ve built.
Will it work with SaaS?
We’ll find out next week, when I launch Idea Forge.
Great idea!
I’ve build a little demo website to compare ideas to each other - basically „hot or not“ for ideas 😅
Could be a cool addition to idea forge - what do you think ?
TheIdeaHunt.com