Neil’s point of view is similar to the original post’s: pricing is important but just one part of your overall marketing strategy and you need to coordinate your price message with all your other messages. But he has time, in that format, to do some nice review of the basic principles (Pricing 101) and I particularly appreciated his many concrete examples of companies, including his own, who Got it Wrong in some particularly easy to recognize (in hindsight) way.

The book’s a quick read, maybe 65 sparse pages of content, a two page summary checklist, a bibliography, and some advertising content at the end.

First, when I took another look at my pricing comment about your business it was unfairly harsh and I apologize for that; I was looking at it as a potential customer who has to set pricing and who might want help and you are correct, my criticism was rather blind. I was trying to say that it could appear that way to some not that it is. The post you referred to had some higher price points and I’m glad. A report with an analysis based on checklists and low-hanging fruit for $100-200 could be very valuable but it is clear from reading your post that this is only the start of the range of services you offer.

I appreciate your follow-up comment and look forward to your future posts on this topic.

Thanks – Doug

To your point, I’ve put together a “pitch” for the service over on the Sixteen Ventures blog. I didn’t think this was the right outlet for that. Hopefully it answers your concerns and even more, puts to rest your belief that it isn’t useful because its too cheap (or that we don’t know what we’re doing because of the low price point). You can see that post here: http://sixteenventures.com/blog/introducing-the-pricing-page-tune-up-service.html

By the way, thank you for calling me out on the lack of information on our landing page and the services’ pricing. It certainly made me sit down and write the post that I linked to which should answer your questions. But your blind criticism of our service and its pricing is as unfounded as me taking a cursory look at Skritter and saying that since its only $9.99 a month it must be worthless. I don’t know your market. I don’t know how your customers buy, what they’ll pay, how they’ll pay; that is your job. A statement like the one you made just doesn’t seem fair, does it?

Thanks again for reading.

- Lincoln

Excellent post. I like your idea of using an analytical framework (the five bullets you present late in the article) to make sure that no important considerations have been left out of the pricing discussion. The discussion itself can be a very useful exercise as it forces you to think of what sorts of customers you have (and want to get) and what sort of features you have (and want to have) to see if customers and features overlap.

With respect Tawheed’s comment, I do think that adding some concrete examples of poor pricing would be really interesting and make a good follow-up post. On Tawheed’s post that he links to, though, I would have to say that what Tawheed says are principles are really specific pricing tiers that may or may not work for your specific business. The 7 SaaS revenue streams article linked from the post provides several different models besides the ones laid out in that post.

Three concrete examples from two of the most successful web service companies and a newer service will illustrate the point. Hotmail’s (HoTMaiL when I signed up) web-based email application and Google’s web search both fit the SaaS model and are both pretty much entirely ad-based (though both have corporate versions that are not free). Google App Engine is another example where the cost is not tiered but based on usage. Dropbox has tiers but they are based on size and has an extra option if you want backups (the “Packrat” option) that you can add to either paid version.

My point is that pricing of SaaS has a lot more successful options than simply the tiers laid out in Tawheed’s post. At the same time, the tier system Tawheed describes is a good model for many SaaS companies and he does describe the tiers and the reasons for them nicely in a concise blog post.

On your marketing message, Taweed has a very good point, it is not at all clear what you get out of the pricing analysis. Further, for $99 or $149, I would expect the process would be almost completely automated – for me the pricing indicates that the amount of human interaction would need to be low given the low cost so I would think that the process would mostly be automated with maybe a custom report and some whitepapers thrown in. If you are trying to target companies where their management needs some education I would think that you would need discussions, meetings, follow-up meetings, maybe some market research, etc. and that means $149 is far too low.

I’d actually be quite interested in a follow-up comment that was you pitching your services. From the blog post and comment (but not your site’s home page given, ironically, its pricing model) it seems like you know what you are doing and have a valuable service. I’d love to hear a pitch here that was customized.

Thanks – Doug

I am trying to bring the message about Pricing to the startup community since it is obviously missing. And if that means I get to tell you about some services we offer, so be it.

As Walter stated, I wrote this post because these things are clearly *not* obvious to many entrepreneurs. I’m happy to hear that you are so many streets ahead of everyone else, but there are still a lot of very intelligent folks out there who have built great products but really have no idea how to get started pricing them. So what they do is Google for answers, read blogs of startups that are trying to figure out pricing, look at people showing off pricing page designs or showing how the pricing pages have changed using the Internet Wayback Machine. Then, finally, they pull out a spreadsheet and start running numbers to get to some profit margin that will please investors or just their wife.

I think this post is a great addition to all of the other work we’ve done at Sixteen Ventures. As we’ve seen lately, there are a lot of entrepreneurs posting about their journey through pricing and it tells me there is a huge demand for information on how to do it right. Unfortunately, many of the posts that I just cited add little value and in fact, send people down the wrong path.

I did read yours and I would put your blanket statement about what “pricing tiers” everyone should have as one of those posts. It might work for you, but please don’t say it will work for everyone. In fact, I encourage anyone posting about their experiences to remind people not to copy their work without doing their own homework. This was the basis for the creation of our services aimed at helping startups. And the feedback has been wonderful.

Again, Walter was right that there is a process listed in this article and I think it is far more powerful that it looks on the post. When you pull it out and start exploring those items, it can change the way you think about your business forever. But the other thing, the item that you called “bad advice” is “don’t copy 37Signals pricing page”. Why would I say that? To get people to pay attention. Its a gimmick; and it works.

You see, we do a lot of pricing page analysis and I can assure you, most people don’t even go as far as to completely rip off the pricing page for Basecamp. If they did, they’d probably be better off than they are. But why I say that, other than to get readers to react, is unless you are building a horizontal collaboration product in the same market, and have the same market position as Basecamp, aside from that you just shouldn’t do, it makes zero sense. The Basecamp pricing page might work well for them, but you need to know what you want to happen and then design a page around your goals and your market. Taking their layout and drop shadows is one thing; I’m talking about using them to figure out your pricing strategy.

Something I’ve written about a lot in the SaaS world but realize I’m talking to a new audience here is to your point of 37Signals being “one of the most successful SaaS companies.” Remember this, SaaS is not a market; its a business architecture, delivery method, business model. Whatever you want to call it, but its not a market. Collaboration, CRM, ERP – those are the analogs. The markets are Construction, Healthcare, Automotive. So, if you have a SaaS Automotive ERP and are competing against Plex, you should look at their pricing to know what the market expects; and then come up with your own. This is the problem when you think “they’re a SaaS company, I’ll just copy what they do.” It doesn’t work that way.That is what I mean by “don’t copy 37Signals.” Can this be argued against? I’d love to hear it.

Finally, thanks for the feedback on “its not clear what I’m selling” – hearing that makes me eager to go back and see where we need to be more clear on our marketing. Thank you. I don’t want to go into it too much in case it looks like I’m pitching our services, but yes, we can help you with your pricing including talking to your customers, although it is usually best if you do that with our guidance. Our Pricing Page Tune-Up service is not automated and certainly does not spit out generic results. It is just our pricing page review service that we’ve done for many consulting clients in the course of a greater pricing strategy that we packaged up nicely in an affordable and scalable way and spun out of our consulting practice. We’re pretty transparent about the process so that you can easily fix the problems that we identify. Probe away.

Thanks for reading!

- Lincoln

Walter
http://xeesm.com/walter

You end up pitching your product, but you fail to answer any real questions about what your framework is for getting to a better pricing model, and you also fail to establish any credibility around why you’d succeed at this. Most importantly, its not really clear what you’re even selling: are you going to talk to my customers? Do I get to talk to you (an actual person) or is this an automated wizard that gives me some generic recommendations? Do I get to probe you on your process?

My overall feedback is that from so called “experts” in pricing, I expected some content here that was original — not stuff that comes out of most marketing books.

I’d really encourage you to do a follow up post on how you go about analyzing a pricing page, common mistakes people make — instead of saying something like “Don’t copy 37Signals pricing page” — which I think is bad advice. Considering they’re one of the most successful SaaS providers in the space, I would think their page is the first page you’d want to start your experimentation on.

I’m pretty passionate about this, because I think pricing is an integral part to any startup — I’ve even done a ton of research into this and tried to distill my own principles on how to go about defining my pricing tiers: http://www.tawheedkader.com/2010/03/principles-behind-a-freemium-pricing-model/.

Looking forward to hearing some real substance next time.