The Perfect Price is Unattainable

Alright, listen up y'all. I'm here to tell you about the wild world of pricing models for your little bitty business. Now, I know you might think that finding the right price is like trying to hit a bullseye with a blindfold on, but trust me, it ain't that bad. You just gotta know what you're doing.

First things first, revenue ain't about the cash money in the beginning. It's all about validation. When someone hands over their hard-earned dough for your product, they're saying a whole bunch of things at once. They're saying your product is good enough to solve their problem, it's worth more than what they're paying for it, and their problem is painful enough that they're willing to fork over the cash to fix it. All of that with just one payment. That's why the price ain't the most important thing at the start. As long as it ain't higher than the value of your product, it'll do. It might not be the perfect price and you might leave some money on the table, but at this stage, all that matters is showing that your business can work. Early pricing validates your business and initial product. Later pricing is all about maximizing that revenue.

So, here's the three rules of early pricing: it ain't ever gonna be perfect, it can be changed, and it should be aspirational.

Now, if you're making a complicated product, you're gonna have to start with a stripped down version of your final vision. It's only gonna have the basic features, just enough to show what problem your product is solving at its core. But your price should reflect the value of your full vision. That's because you're selling to a special kind of customer: the early adopter.

The Psychology of Pricing for Early Adopters

Regular customers look at a product, figure out how much value they'll get out of it right away, compare that to the price, and then buy it if the benefit is way higher than the cost. But if a product promises to be better in the future, they might not buy it because of the risk. "Majority customers" just wanna buy now and be done with it. They're all about the present.

Early adopters and their even more radical friends, the innovators, don't think like that. They make buying decisions based on what things might turn into. They'll buy an electric car even if there ain't no charging stations for it yet. They trust that if enough people get on board, the network effect will take care of that. These customers are buying for the future; they believe in the potential of the things they're purchasing.

And that's what they see when they look at your first quirky version of your product. They see it for what it might become, not for what it's missing. And they'll pay for what they think it will be. Of course, there's a lot of thinking that goes into making a decision like that, but you can bet that the innovators and early adopters in your market will pay a premium for a product that's breaking new ground.

Here's the catch: you gotta live up to the expectations you set with your price. And you gotta do it fast. Your early customers might become your biggest supporters and marketing channels if you do it right. But if you don't deliver on your promise, they'll pack up and move on to the next promising product.

So, how do you measure the value you're providing? It's all about figuring out your customers' central value metric and keeping track of it. A value metric is the most relevant metric that goes up when your customer's business is doing well. For example, if you have an image hosting service, the number of images uploaded is probably the value metric. If you have a project management tool, it might be the number of tasks completed. You get the idea.

Once you know your customers' value metric, you can use it to set your price. If you can show that using your product significantly increases their value metric, you can justify a higher price. And if you can prove that your product is helping them achieve their goals faster and more efficiently, that's even better.

But remember, your price should always be based on the value your customers are getting, not just the cost of making your product. If you're too focused on the cost side of things, you might end up charging too little and leaving money on the table. On the other hand, if you charge too much, you might turn off potential customers. It's all about finding that sweet spot.

There you have it. Pricing models ain't as scary as they seem. Just remember to focus on the value you're providing, keep track of your customers' value metric, and be willing to adjust your price as your product evolves. Happy pricing!