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The "Set Your Price" Lesson is part of the full, Guide for Launching Your Next Big Idea course featured in this preview video. Here's what you'd learn in this lesson:

Paul outlines the pricing options available and shares the benefits and challenges for each. The pricing models include freemium, subscription, usage-based, per-user, and feature-based.


Transcript from the "Set Your Price" Lesson

>> So once we've kind of decided, okay, which of those four or all of those four we're gonna use, whatever combination of different calls to action, we've got a calls to action, so the next big problem we got is price. Boy, this is a tricky one, so let's run through some of the options that are maybe available to you, there's the freemium option, okay?

So you provide a free basic piece of software with the option to upgrade or add additional features. Benefits, great for user acquisition as it reduces the barrier to entry and lets you build a big user base very quickly. Challenge, getting those people to then become paying customers, and there could be obviously a big overhead potentially to support those free customers and without you making any money out of them.

So, freemium has got its place without a doubt, but it does come with its challenges. The subscription model is basically a reoccurring fee, either annually or monthly, often tied in with tiered pricing based on features, users, usage limits, etc. Benefits, as Mark said earlier, predictable revenue that can scale with the size of the your business.

And it also encourages you to commit to ongoing development and support which is a good thing. The challenges is that it can cause problems with expectations and billing and unexpected billing and unpredictable elements to it. So I don't know, let me give you a good real example of this, Figma, has anybody ever found themselves paying both monthly and annually because they've accidentally added an extra person, an extra seat?

I seem to do it all the time, everybody's looking at me blankly, obviously it's just me, I'll shut up and move on now [LAUGH]. Then there's usage-based, I feel silly now, charging based on usage, pay-as-you-go models, you know the kind of thing. Benefits, fair to users since they're only paying for what they actually use, can be a really strong selling point, and there is a direct relationship between the cost and the value received.

Challenges is that you have to continue to provide value or you will see a big churn. And it can be important to have clear tier differentiation and manage your features really well, otherwise people don't necessarily see the value in going for the posture service and moving up the chain.

Per-User charging, this is often used in B2B products quite a lot, easy for your customers to understand and scale well with the size of the customers team, which works great. Bigger companies pay more, it seems, works really well, it can discourage adoption within larger teams because they don't wanna pay for lots of different seats of it.

And it can lead to things like account sharing which reduces security and those kinds of stuff. Then there's feature-based, there's so many ways of splitting this on there, more than you think, right? So, you pay for different features at different levels and this is great cuz it allows customers to pick a plan that fits their needs and their budget.

But it has got the downside of it, can be tricky to see how the tiers are different from one another and you risk overwhelming users with too many choices. And then of course, there's a hybrid of all of the above basically, where you can combine elements from different ways of doing things, which is super flexible, but can be difficult to communicate.

So those are all the different types of packaging, but I haven't answered the question well, how do you decide on how much to actually charge? And obviously, I can't give you a solid formula for that cuz I don't know what your product is or anything else, but I can give you the factors that I use to influence that decision.

The audience, how much people are actually willing to pay, [LAUGH] no-brainer, really, that one. The competition, what the competition charges and how they structure their pricing plans, I often use that to influence me. Flexibility, does your pricing allow enough flexibility to offer discounts or changes over time? So a regular thing that you see happen is that people underprice the competitors and then they've got very little wiggle room to do a, I don't know, a Cyber Monday discount or whatever else.

That can be very valuable in scenarios or offer a student discount or things like that. So you wanna leave enough legroom in your pricing to be able to do some discounting or to adapt over time. Cuz it's a lot easier to offer a discount and lower your prices at specific times than it is to say, hey, guys, we're gonna charge more now, things go bad at that point very quickly.

And then, of course, there's costs, will your price cover your cost? Shocking thing to consider, but yes, you definitely need to think about that as well. So, what your call to action is, you're gonna have a crack at a certain pricing structure, and again, you could run multiple different pricing structures on different landing pages, either all at the same time or run one campaign and then run another, etc.

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