Ohh – This is a tough one. Anyone selling anything that’s new to the market, be renewable energy, a robot that does laundry, imported vodka or innovative SAAS has experienced this heart wrenching, gut churning marathon to figure out how to price the product.
At LeadSift Inc., we’re a B2B selling to large brands and F500 companies. Recently, our sales cycles have shortened to a couple months and sometimes, even a week. And when we ask for cash, the companies don’t shut their doors on our face and in fact, sign up for yearly contracts or renew monthly ones. Yet, we’re far from figuring out how to price our software.
Yet, I wanted to share the few lessons we learned over the last year.
1. Free does not work. DO NOT give your product away for free.
This one is difficult to follow. You’re so tempted to give away your stuff for free in the first few months, as a bait. Just don’t. If they don’t pay to try it, it’s not a big enough pain for them, they won’t bother using your freebie. You’re going to waste resources. Even if you price it cheaply and give them a huge discount, make them pay!
2. You can give them a big discount but get something in return
For example, give them beta user pricing, a 90% discount but get weekly phone calls to monitor how they’re using it, all numbers and metrics as feedback and if successful, a case study. And put this down in writing.
3. Negotiations start at a NO.
Sometimes your customers WILL go away or not want to use your stuff. Don’t give up on the sale. It’s ok for them not to be early adopters and risk takers and feel the jitters. If your product works, they will come back for whatever price is worth it.
4. Start somewhere, don’t sweat it.
Pick a price. Work on proving the value of your product over time and you’ll figure the price of your product. It’s THAT simple. Every successful company changes pricing as the market grows. Some start expensive and move to freemium, some start cheap and grow to be expensive as shit. And so will you.
5. Remember you’re leading the market, so enjoy it!
Yeah, imagine when they decided what pop costs. Or set an overall standard price for rent downtown. Yeah, you’re doing that for your market. So own it!