The objective is to create a financial structure that mirrors reality. If you code a very useful premium function that is barely used you might earn the same as from a very basic function that is used a huge amount.

This is in itself an application, a micro billing platform that allows users to pay for what they use.

I have to admit I’m always curious about interesting projects; I have since found a good position, however. The post was in July, and I started work at the end of September.

If you want to talk about your interesting project, feel free to email me at gmail.com. ‘cyberfox’ is the user name. If I can’t help you, maybe I can point you to some other resources.

– Morgan Schweers, CyberFOX!

Tony Wright: I think geeks are pretty unsophisticated about segmenting

I agree strongly. We (geeks) default to looking for areas in the code that can be tuned to enforce segmenting. When I worked for McAfee Associates, we didn’t impose any code limits, we just…asked how many machines they had when they called, and quoted them a price based on that. We also gave the program away for free, with a little message that said that companies, government agencies and educational institutions were required to site-license the application. Made millions…

Coupon codes (pingdom!)

Pingdom totally bought my business with the 70% off thing. They carefully didn’t say if it would last until the end of the 30 day trial period, and so I felt pressure to sign up. Plus, it was a low cost of entry, and a tool that was useful to me. I was very impressed by the sales process, and it was entirely scalable as it was zero-touch.

Affiliate marketing (get someone else to sign up and pay for 2 months, you both get a free month) works nicely (see: ServerBeach, whom I recently upgraded my server with), also.

As for A/B testing…I don’t know. I heard recently that NewRelic RPM had signed up their 2000th customer recently. While that’s good money, that’s not a good sample set for A/B testing pricing. Plus, as Amazon learned, when you test pricing like that, folks tend to talk…and you can get bad publicity.

You’re very right about the cost sensitivity of businesses, though. Everything in my experience shows that if you’re selling into companies (and they want what you’ve got) there’s two segments: ‘everything under $500′ (where ‘$500′ is fungible depending on your field), and ‘we need authorization for that’. (If they already REALLY want it, authorization is easy.) Business pricing is probably easier, but may end up being higher touch, the higher the price goes. My current stuff is more targeting individual users, who are very sensitive to cost, though. Thus the analysis of the companies above who are…mostly targeting individuals in the pricing levels I looked at, if not the broader category of ‘consumers’.

I feel like I should come up with a pricing strategy that feels fundamentally fair, and then shift all the service levels up one notch in cost.

– Morgan Schweers, CyberFOX!

I’m also launching a SaaS offering and pricing has been a major issue.

It’s really one of the surprisingly difficult things; something that most people just don’t think about, but turns out to be freaky hard.

Tony’s got a good point, though. If you’re targetting businesses, they often won’t balk at what we might consider steep prices. If you’re targeting consumers, like I am, then they’re much more price conscious IMO. Many of the companies I profiled target a mix of consumer users and business users, and that makes for a more difficult mix. It reminds me of the first company I worked for, though, who offered their application free for personal use, but companies, agencies, and institutions had to get a site license. (The application didn’t have any way of checking, it just put up a message to that effect.) They were making more than $25 million/year by the time I left. And had gone public.

part-time start-ups are fraught with a lot of risk

I know that’s generally true. For me, right now, it’s less so. I’m unemployed, so it’s not really ‘part time’, and it’s a niche of a niche, so nobody is going to be beating down my door to give me money that I’ll have to think about how to repay. I’m very debt-averse, and always have been, but that’s not a risk for me right now.

The obligations I will have are to my users. I don’t want to disappoint them; my last desktop version has over 80,000 downloads. Getting .5% of those as users of the web app would still mean 400 users, and that leaves me in a form of ‘debt’ to them. My biggest fear (with regards to spinning up this application) is that I won’t be able to keep it up, and I’ll have to wind it down and disappoint those users.

This is not me trying to change the world. This is me trying to learn what it means to do everything; ’sales’, seo, marketing, billing, accounting, product management, development, UI, UX, front-end, middle-tier, back-end, and support. For the last 20+ years I’ve been focusing on the software development (middle and back) tiers (and doing support for my own app). I’ve dabbled in the other parts, but never seriously trying to push a money-making product out the door by myself.

This way, when I do want to change the world, or even help someone else change the world again, I’ll be even more ready.

Seriously, though, I appreciate the warning. It’s a good thing for folks to keep in mind. Try very hard to avoid incurring debts that will last if the business fails.

– Morgan Schweers, CyberFOX!

Also, and I know you didn’t solicit this, part-time start-ups are fraught with a lot of risk. I wish you luck with it, but be sure you can close it up with no long term financial obligations.

I think the only way to really nail down pricing is to A/B test it– which for small vendors with lower traffic is pretty time consuming. Present a page with a price and a buy button. Measure CTR. Adjust price. Repeat.

In general (especially when selling to businesses), I think people overestimate cost-sensitivity… The scarcest resource for a business is generally time and the difference between $10/mo and $200/mo is virtually nothing.