For me — $10 for a simple service seems a little pricey, $9 is basically $10 still, $8 is still a a tiny bit high — but $7 is the sweet spot! Same goes for higher prices too — I like $37 rather than $40. I'd think less about paying $17 for a service than $20, $19 or even $15!
Not sure why, maybe its because the $7 on the end becomes my focus:- its still technically pocket change — but also in the higher end out of 10...and I think about it more than the $30?
(plus if your picking smart numbers for prices, check out the "common" exchange rate people think of without checking. For me, I think of a dollar being worth £0.50p, so $37 is around £18.50, when in fact its over £21; for some it may not make a difference, but for others, the extra few pounds to nudge it over £20 may be enough for them to pick a slightly cheaper plan. And I would imagine a similar thing happens with the euro and other popular currencies also.)
From the inside it's really easy to undervalue what you're doing. It's a big mistake too, because if you're solving a hard problem for someone they really don't mind trading money for it.
I think 37 signals emphasis on creating products you can charge for is their very best advice. Paul Graham didn't go for eyeballs with Viaweb -- he charged something like $300/mo for an online store application.
Working on a product that makes money is entirely different from working on a free one. In a thousand little ways. As a business I definitely prefer charging users directly and probably won't ever try to create another free (to users) business again.
Yes! Coming from the world of open source software... that's something that doesn't fit into my mentality. Other people in this thread are talking about how the 37s people were probably able to envision paying X $ for something themselves. I would have trouble with that - there are few things I pay for online besides domain names and hosting.
So how did it work out for you?
Don't charge based on your (marginal) cost; charge based on the value you are delivering to your customer.
But it's been wildly successful for them. I guess the point here is that all the kinds of management training you see in traditional companies pales in comparison to having smart people with great intuition running the show.
Given that an individual freelancer is the most common scenario as far as their potential users, they are probably severely limiting their sales by setting their pricing the way it currently is. Personally, I subscribe to their backpack service only. I would like to use their other services but the high price tag keeps me from doing so.
Or how about this from their Highrise website:
Basic plan - 6 users - $24
Solo plan - 1 user - $29
Does that "feel right" to you?
Take a 3-person team, each making $50k/yr (that's really low for consulting professionals, but hey-- let's aim low). Add burden/benefits/support costs and a fully loaded person is generally 2x-3x in cost. Let's say 2x (again, aiming low- maybe they pay for their own hardware/software/work from home and have modest benefits). That's $300k in employee cost per year. $70/mo is a drop in the bucket next to $25,000/mo in employee cost.
So I guess it depends on what kind of company and what "truly small" means for you. But if you're really talking about COMPANIES (with payroll, expenses, revenue, and a smidge of profit), they've priced it at "impulse buy" level where any shmoe with a biz credit card could thoughtlessly buy it.
If you're talking about "3 startup guys with no revenue living on rice and beans", then it's a different story... But that's such a tiny market that it's really not worth mentioning (or catering to).
Of course there are some bigger clients for whom $70/month is not a big deal but I was talking scale. Would you rather charge $70/month to a 1,000 clients or $25/month to 10,000?
(And let's please not make sophistic arguments about "3 startup guys with no revenue living on rice and beans". It doesn't make for good discussion when you pretend that I made an obviously ridiculous statement and then refute it).
