How much should you charge for your first product?

How much should you charge for your first product?

Charge a price that is clearly smaller than what the problem costs your customer today, and high enough that a "yes" means something. Start from the customer's current workaround: the hours, tools, or lost deals it costs them each month. Pick a price well below that cost, write it on a real offer, and see who accepts. The first price is a test you will change, not a decision you have to get right.

It is tempting to start with a very low price. It feels safer, but it hides the information you need. If someone accepts a price that barely costs them anything, you learn very little about whether the problem matters.

Why cost-plus and competitor pricing mislead early on

Two common methods give you a number quickly, and both point you in the wrong direction at the start.

Cost-plus pricing adds a margin to what the product costs you to run. For software, that cost is often a few euros a month, so the price ends up tiny. It tells you nothing about what the result is worth to the customer.

Competitor pricing copies what similar products charge. It is useful later, as a check. Early on, it assumes your customer sees you as a direct replacement for that competitor, which may not be true. If your customer's real alternative is a spreadsheet and half an hour every Friday, the competitor's price is not the comparison they make.

Start from the cost of the current workaround

In customer interviews, ask about what the problem costs today, not what people would pay. "How much would you pay for this?" invites a guess. "What did you do last time this happened, and how long did it take?" gets a fact. The customer discovery interview guide has questions for this.

Then write the cost down in one line. For example:

• Time: "About 3 hours a month chasing unpaid invoices."
• Money: "Pays a virtual assistant 200 euros a month to do it."
• Lost revenue: "Loses roughly one client proposal a month by not following up."

If your interviews cannot fill in this line, you are not ready to set a price. You need to know what the problem costs before you can say what solving it is worth.

Pick a price you can explain in one sentence

Choose a price that is a clear fraction of the cost and easy to justify. A useful sentence to write is: "This costs less than [the current cost] because it [the result]."

For the examples above, that might be:

• "29 euros a month, less than one hour of your time spent chasing invoices."
• "79 euros a month, instead of 200 euros for an assistant."
• "49 euros a month. One recovered proposal pays for a year."

These are illustrative prices, not recommendations for your market. The point is the shape of the argument. If you cannot write the sentence, the customer will not be able to either.

Test the price with a real offer

A price only becomes evidence when someone acts on it. Choose the strongest behavior you can honestly ask for at your stage:

1. A priced landing page. Show the price on the page and count clicks on the button that names it. Say clearly what happens next and that the product is not ready, if that is true. See how to test demand with a landing page.
2. A pre-order or deposit. Ask for payment only if you can deliver or refund. State the timing and refund terms.
3. A paid pilot. Offer a small group the result by hand for a fixed fee, before the product exists.

Write the decision rule before you start: for example, "If at least 3 of 20 qualified people accept at 49 euros, keep the price and build the first version. If none do, ask the ones who said no what they compared it with."

What to do when people say it is too expensive

"Too expensive" usually means one of three things, and each needs a different response.

• They do not see the cost of the problem. Then the value proposition is unclear, not the price. Go back to how to write a value proposition.
• They compare you with a different alternative. Ask what they compared you with. That alternative is now your real competitor.
• The problem is not costly for them. They may not be in your audience. Check whether they match the people who did accept.

Lowering the price is the last step, not the first. If you lower it straight away, you will not learn which of the three reasons was true.

When to raise the price

Raise the price for new customers when most people accept without hesitation, nobody asks a question about it, and the people who pay are using the product. That pattern often means the price is below what the result is worth to them. Keep the existing customers on their price if you promised it.

Marketing Loop is in development. It is being built to keep each test, its result, and the decision it led to in one place. If you want to know when it is ready, join the build updates.

FAQ

Should my first product be free?

A free version can help people try the product, but it is a poor test of demand. If you want to learn whether the problem is worth solving, ask for money early, even a small amount. Free users tell you whether the product is usable. Paying users tell you whether it is valuable.

Should I offer a monthly or a one-time price?

Match the price to how often the problem happens. A problem that comes back every month suits a monthly price. A problem solved once, such as setting up a template, suits a one-time price.

How many pricing tiers should I start with?

One. Several tiers make sense once you know which customers value which features. Before that, each extra tier is another guess to test.

Should I show the price on my landing page?

Yes, if you are testing whether people will pay. A page without a price measures interest. A page with a price measures something closer to a buying decision.

Write the price sentence today

Take the cost of the workaround from your interviews, choose a price below it, and finish the sentence "This costs less than ... because it ...". Then put that price on one real offer and count who accepts.