How do you determine your pricing?

What's your strategy of approaching the problem? It's quite a complex and tricky topic so how do you plan to go about it? What kind of product it is and who is it for exactly? I'm asking because pricing has been a problem I've faced before and it's pretty much something that you don't even know where to start from.

Some of the most important factors include the following:

• Cost of goods sold which is the cost of materials, labor, and other expenses directly associated with producing the product or service.
• Your target market is important; who are you selling to? What are their needs and wants? What are they willing to pay?
• Competition is also an essential element; You should know what are other businesses in your industry charging for similar products or services. It will give competitive edge to the company.
• Lastly, your profit margin is important like how much profit do you need to make in order to be successful?

We are fairly early and are still going through this method. But for us, it depended on the type of client. For enterprise clients, we would pitch every single one a different price, some said maybe, some said F off, and some said yes. Every time we got an answer, we would go back depending on what they said, and adjust that price. From there, we had our baseline top price for the biggest clients, and then just formatted it for monthly small business clients. To this day, we are still shifting things around.

I wrote a google doc* all about starting/growing a startup past 10k/mo and there is a whole section about pricing. Someone else mentioned value based pricing, and that's what I'd recommend as well.

I use the value equation for relative testing and it helps a lot in coming up with a good starting point. From there, iterate based on ease of sales - until CaC/LTV is what you want.

The value equation takes into account the perceived probability the product will work for the customer, and the time/effort the customer will have to put in to get their optimal outcome (the problem your product solves)

• doc https://docs.google.com/document/d/1S5-jacIQ0WucHQ6CpDp-b0tQnWzEXmo20hVNzKCHUi8/#heading=h.uwvc70tnk229

We did a lot of competitor research and priced our product slightly lower than major competitors.

This is an interesting problem you are trying to solve. But generally, the pricing is determined by calculating simple margins or market trends or a premium if its something new.

In one of @robfitz 's talks, he suggests doing outbound sales initially and keep doubling the prices for every customer until someone calls you out on it, he mentions "It's binary search guys!". But once that first phase is gone, PLG companies often change tier plans (like dropping a current low-price plan) and see what effect it has on Acquisition and Monetization metrics.

But here is my way of doing it, how I am currently planning to do for my recent SaaS TalentMama. I have a clear picture of the primary persona using my product. I search what is the hourly salary of such a persona. Then I see how much time I save each day for that user or for a team overall. For example, I sell a product that recruiters and hiring managers use for candidate screening. So I see how much time would it take to go through 150 applicants for a job opening for a TA and scan through their resumes. Or if they give any questions beyond online coding or MCQs, how much time would it take normally to evaluate them all? Then I see how much time my tool will take to do it. If I am saving 2 days of TA+HM time I can easily charge a TA 1 day's salary.

A helpful approach is to use an A/B/.../X testing method to find what the customers a willing to pay. This can be done my having many different pricing plans for different customers. The perfect price maximizes your revenue (hence profit), therefore also the cost functions need to be considered.

Think of the value, rather than the cost.

@patio11 wrote a great guide here: https://stripe.com/gb/guides/atlas/saas-pricing