Seth Godin recently blogged about pricing. He made an interesting point that half of you pricing consideration is the story it is telling. His example was luxury goods vs. value.
For web startups this particular example doesn’t ring true. Rarely are we portraying our web site as luxury. Web sites and apps are commodity. They have revolutionized the costing structure of most goods and services by delivering them cheaper and on a larger scale.
But our pricing still tells a story. In the web world there are 3 common pricing strategies: Fixed price, A la carte, and Metered. Each of these strategies tells its own story.
- Fixed Price This is the most popular pricing aimed at consumers. It emphasizes the value and simplicity of the product. Think Apple’s music match or Dropbox’s pro pricing. It says we’re the experts and have taken care of everything for one low price. There are no customization options, no setup required.
- A la Carte This seems most popular among professional services. In this strategy you offer many services separately, each for an incremental cost. Companies like HootSuite and Heroku have used this strategy quite well on top of a product that is basically free. Here the story is switched from fixed pricing. Your the expert. You know exactly what you want. You can have it tailored made if you tell us what you want.
- Metered Finally, metered pricing is one that fluctuates based on your usage. Metering comes from utility products, so this model best fits infrastructure services. Shopify and Square are both doing very well with metered pricing. The beauty of this pricing model is it says we’re partners in this. If you don’t succeed, I won’t make any money from you.
Is your pricing and market story aligned? Are you selling to experts with an inflexible, one price fits all model? Or are you expecting your computer novices to pick from a wide array if services? Do you tell your customers we’re in this together, but only if you pay up front?