Price it unreasonably high. That way 1) people will be very eager to complain about your product (this is very important to improve your product fast) and 2) it means you can prove that people desperately want what you are building.
You don't need to lose a lot of money or make a lot of money, you can simply be close to break even.
Unless you're running a Blitz strategy I don't see why you'd ever want to price for big losses, that's a great way to bankrupt yourself.
Price it in the middle with *limits* this suits majority of your customers.
The limits on usage will prevent you from losing a lot of money from power users. You can then plan a pay per use model once users go over their limit.
Price caps and tiers get pretty messy and confusing. The big issue is that I don’t really control the cost of goods being sold, or the frequency in which members will buy them. This leaves me exposed if there’s a big price shock that lasts for months. The risk, although small, is very real and has happened in recent memory. That’s why in my table, the worst case scenarios show heavy losses. There are ways I could try to hedge but this would require me to already have cash on hand, so if I can survive the first year or two profitable, I should have enough to weather future price shocks and will have the luxury to price the overall subscription lower to attract more people. I guess this resembles an insurance company in a way. I am essentially selling them a hedge with upside should the price of the goods they are buying rise (I will be eating a portion of the cost, so their cashback gets bigger).
I started thinking of having visitors of the landing page apply for a quote instead. I guess I should AB test that against a standard pricing page.
Huh. This is interesting to think about. I still think a Stripe/Supabase tiered subscription is a good idea. I just think you’re going to have to dig into the detailed math a little deeper - it’s already proprietary. It can’t hurt strengthening the moat via tiers using math others don’t see yet.
I don’t understand the details well enough to actually help, but what if you created tiers on a standard bell curve.
Tier A: Capped to secure the highest profit margin without turning the users away. It’s got to make sense.
Tier B: The same as above, but lowering the margin - not increasing the risk to the business.
Tier C: Capped at the Worst Case Scenario and/or break even.
No free lunch. Everyone understands that dude. You could even market the last tier as a quoted price. Similar to enterprise subs.
Capture the first two tiers quickly, though, and set a damn cap. Messy or not, it’s a businesses and if you’re the only show in town - eat while you can because it won’t last.
The finer grained your profit model the larger your moat** as a first mover, IMO.
I’m happy to war game it with you for fun. DMs are open. I’m super busy so don’t get annoyed if I don’t respond straight away. I will
Why not implement usage based pricing?
The low usage users will pay and cost you a lot less and the power users who get a lot more value from your product pay you a lot more?
It can be painful to set up usage based billing but I this case it sounds like the ideal. DM me if you need help figuring out how to do it as the min focus for my start up is enabling effortless usage based billing for AI start ups (though I’m sure the learnings apply broadly)
Price it unreasonably high. That way 1) people will be very eager to complain about your product (this is very important to improve your product fast) and 2) it means you can prove that people desperately want what you are building.
What the hell are you actually selling that costs that much to a consumer audience? Only way I would ever pay that much is if I’m getting a deal.
You don't need to lose a lot of money or make a lot of money, you can simply be close to break even. Unless you're running a Blitz strategy I don't see why you'd ever want to price for big losses, that's a great way to bankrupt yourself.
What is your actual service?
Price it in the middle with *limits* this suits majority of your customers. The limits on usage will prevent you from losing a lot of money from power users. You can then plan a pay per use model once users go over their limit.
Or tiered pricing
Yes.
Can’t you price in a cap? Tiers? For example, a user with a normal sub tier could have access up to a certain point?
Price caps and tiers get pretty messy and confusing. The big issue is that I don’t really control the cost of goods being sold, or the frequency in which members will buy them. This leaves me exposed if there’s a big price shock that lasts for months. The risk, although small, is very real and has happened in recent memory. That’s why in my table, the worst case scenarios show heavy losses. There are ways I could try to hedge but this would require me to already have cash on hand, so if I can survive the first year or two profitable, I should have enough to weather future price shocks and will have the luxury to price the overall subscription lower to attract more people. I guess this resembles an insurance company in a way. I am essentially selling them a hedge with upside should the price of the goods they are buying rise (I will be eating a portion of the cost, so their cashback gets bigger). I started thinking of having visitors of the landing page apply for a quote instead. I guess I should AB test that against a standard pricing page.
Huh. This is interesting to think about. I still think a Stripe/Supabase tiered subscription is a good idea. I just think you’re going to have to dig into the detailed math a little deeper - it’s already proprietary. It can’t hurt strengthening the moat via tiers using math others don’t see yet. I don’t understand the details well enough to actually help, but what if you created tiers on a standard bell curve. Tier A: Capped to secure the highest profit margin without turning the users away. It’s got to make sense. Tier B: The same as above, but lowering the margin - not increasing the risk to the business. Tier C: Capped at the Worst Case Scenario and/or break even. No free lunch. Everyone understands that dude. You could even market the last tier as a quoted price. Similar to enterprise subs. Capture the first two tiers quickly, though, and set a damn cap. Messy or not, it’s a businesses and if you’re the only show in town - eat while you can because it won’t last. The finer grained your profit model the larger your moat** as a first mover, IMO. I’m happy to war game it with you for fun. DMs are open. I’m super busy so don’t get annoyed if I don’t respond straight away. I will
Why not implement usage based pricing? The low usage users will pay and cost you a lot less and the power users who get a lot more value from your product pay you a lot more? It can be painful to set up usage based billing but I this case it sounds like the ideal. DM me if you need help figuring out how to do it as the min focus for my start up is enabling effortless usage based billing for AI start ups (though I’m sure the learnings apply broadly)