While reading SamsMojo earlier this week I was surprised to learn the prices of the top 10 selling iphone apps for 2009. In fact, the price for the top seller was more than 10 times what I expected at $99 – The TomTom navigator app. Not the $3 we’d get as a response if we asked a random sample of people.
Sure, it’s a high price as far as iphone apps go, but it much cheaper than a $500 TomTom. The point for startup is this. There is no such thing as expensive. There is only expensive in relation to the set of relevant substitutes. And when we are pricing our brand or startup all pricing decision need to be made relative to the alternatives.
Pricing is a difficult thing to get right in the marketing mix. Often we get all other 3 P’s (product, place promotion) right and that wrong…. and instead of revisiting it, we mess with the product.
There is no hard and fast answer on how to price a product in a startup or a web service, especially as it pertains to pricing models. But there are two simple pieces of advice I can give.
1. If there is an established pricing method which is accepted and liked in the market, go with it.
2. If consumers generally despise how things are priced in the category you are entering, change the model, and let everyone know about it.
In the first example the ethos is this: It’s hard enough gaining cut through with our product without adding unnecessary complexity to the decision making process. Especially when you have a new and untested offer.
In the second example the ethos is this: The pricing model becomes the main feature. It’s the reason for the switch to you, other parts of the marketing mix will then require far less innovation to gain the cut through a startup needs.