Episode 14: Pricing Your Software Product

We are still working hard to keep Software Funnels progressing, but we don’t have any drastic updates this week. We did get the Help Desk development started, but outside of that we are just trying to wrap up Wireframe and keep the other tools coming along too.

Our main topic for this episode is pricing. In this episode we talk about When to Start Thinking About Pricing, How To Price Your Product, and Increasing Your Prices.

Here’s a quick summary for each of those three points:

When: After you complete the 12 Getting Started Steps from the Software Secrets Book

How: Look at your competitors and look at the other software you utilize to help you formulate multiple different options. Ultimately it’s a guess.

Increasing: We’ve always at least stayed the same in revenue or increased in revenue when we’ve increased our prices. Often times we found we established a better clientele when we would increase our prices.

Listen next week as we wrap up the pricing topic by talking about Churn Rates and what to do when customers cancel.

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Click here to read the podcast transcript

Garrett Pierson: Welcome back. This is Episode 14. Today we are going to talk about pricing, how to price your software or your app or whatever it is, and some mistakes we’ve made in the past, some interesting things that have happened, just even in the last couple weeks with some of our companies, and we’re going to give you a status update as to where we are with Software Funnels. I’m Garrett Pierson.

Lindsay Halling: I’m Lindsay Halling.

Scott Brandley: And I’m Scott Brandley.

Garrett Pierson: Ooh. That was exciting.

Scott Brandley: I’m excited to talk about pricing.

Garrett Pierson: Pricing is fun. A status update on Software Funnels. Not a lot has changed, actually, other than the programmer that’s going to work on the help desk tool will be getting going on that soon. We got a new programmer. He will be working on the projects tool, because he’s more of a … The funny thing is, our lead developer, kind of senior developer that’s over everybody, he called him a “mean stack developer.” I didn’t know what the heck that was.

Scott Brandley: I had never heard of it either.

Garrett Pierson: It just shows you that you can run multiple software companies and not even know what your …

Scott Brandley: What is it?

Garrett Pierson: I don’t know. Something? I guess basically it’s, because the project’s open source is in Meteor.js. That’s the language it’s built in. I guess that’s a mean stack development language.

Scott Brandley: “That guy develops a mean stack.”

Garrett Pierson: Anyway. We are joking, but, funny enough, literally you do not have to be technical to run a software company. We don’t know what those things are. We just know what we want the software to do and we tell the programmers what we want it to do.

Scott Brandley: They know.

Garrett Pierson: Yeah. Exactly.

Scott Brandley: That’s the important part.

Garrett Pierson: Right. Anyway. He started this last week. He’s been working for about a week now. The other programmer that was working on it has helped him get things in order and get things going. Then, that developer is a Ruby developer that’s moving, that’s just another language of programming, is moving to the help desk software. He should be there in the next couple days, once he helps this other programmer get everything all set up.

Lindsay and I spent even more time on the help desk details. We went back through even again the chat details. What I mean by “details” is before we have a programmer start working on everything, this is what we teach in our program, is we mock it all up, we have it all essentially designed out. With this open source stuff, it already was designed out. But we go through every page, every aspect of the software, and write down all the changes we want, all the feature adds we want, everything, functionality, design changes, literally with a fine-tooth comb. We find all, even just little text changes, anything that we want changed. We put that all in Trello in chat’s checklists, as we’ve talked before.

Scott Brandley: With screenshots.

Garrett Pierson: Yeah, with screenshots, arrows pointing to it.

Scott Brandley: Step by step directions.

Garrett Pierson: So that’s all ready for the programmers to come in and just get going. We spent a lot of time this last week finishing that up and getting that done.

Scott Brandley: If you’re just joining with us, one of the reasons why we tell you guys what we’re working on every time we do a podcast is because you’re probably never going to get to the level of complication that this project is. But it’s good for you to see what we’re doing so you can get a feel for what’s possible. I think that’s one of the reasons why we like to give you a recap of what we’re doing and where we’re at, so you can see that we’re real people trying to come up with solutions to build a software company.

Garrett Pierson: If you’ve been listening the past 13 episodes, you’ll see that we’ve made mistakes, we’ve made decisions on the fly.

Scott Brandley: We’ve hit a bunch of obstacles we’ve had to overcome.

Garrett Pierson: Exactly. That’s just part of building software. In fact, in my Facebook live video today I talk about my little baby, Wyatt, who is … He just turned seven months old. He’s been crawling ever since he was about five and a half months, which is crazy. But he goes straight to the stairs. He crawls straight to our stairs to upstairs. He always gets on the first and second stair like he’s standing up. This kid’s going to be walking soon. He falls at least four or five times and bonks his head and he starts crying. But every time he does it he gets right back up and climbs up the stairs, and falls again, gets right back up. He will not give up. In my video today, I talk about that saying, “Look. Building a business is the same thing. You’re going to fall down hundreds of times. You’re going to have obstacles in the way. You’re going to bonk your head. Things are going to happen. But the successful people keep getting up. They keep getting up, no matter what.” That’s a huge piece.

We’re running into that all the time, and we knew we would. We knew we would run into these obstacles. Yeah, this Software Funnels is a little bit different than most projects are because we’re tying in about six different open source things into one area, and so it’s very unique. But, either way, your project’s going to be just as unique in its own right. It’s going to have roadblocks. It’s going to have obstacles. You’re going to fall and bonk your head. You just got to keep getting up. Anyway. If you want to watch my Facebook live videos, go to Facebook.com/SoftwareSecretsBook. You can like us there and you can see those daily videos that I do. I took a little hiatus there when we went to Guatemala, but back and doing those.

That’s a little recap of where things are. Things are a little bit behind, to be honest. We’re a little bit behind, but that’s okay. Hopefully we’re not saying how scared we are. Hopefully we’re teaching you that if you stay calm then everything will work out, and it will. There will be a point where we’ll probably not make our dates, and it’s not going to be the end of the world. We’ll just keep going until we can get launched.

One thing that we’ve tried to teach you guys and what we try and teach in the Software Secrets is don’t ever try and be perfect, or you’ll never launch. Even though we might go over maybe a couple weeks or even a month on the development, what we don’t want is people to go three months, six months, a year over. Stick to the minimum viable product. We’ve said that 100 times. Launch the software, because that’s where you’re going to figure things out.

Scott Brandley: Even with the track that we’re on, we already have contingencies to hold off on some of the tools if they’re not done in time. But we’re still building them and trying to hit our deadline. By having those deadlines and by having the process in place that we’ve worked through, we’re pretty dang close to where we want to be.

Garrett Pierson: We’re just a little behind, and that’s okay.

Scott Brandley: It’s because of those processes that we’re on those tracks.

Garrett Pierson: We make adjustments and stuff. Now, on to the topic for today’s podcast, and that is pricing. We’re going to talk about a couple different angles. The first thing I want to talk about is when do you price your product. The second thing we’re going to talk about is how to price your product. The third thing we’re going to talk about is increasing your pricing. The fourth thing we’re going to talk about is when people cancel. Then we might continue that on to next week’s podcast.

When should you start thinking about pricing? Why don’t you chime in, Lindsay, a little bit on what your thoughts are on this? When do you think you should price? Because we never really even talked about it with you.

Lindsay Halling: When we first started with Software Funnels, I was actually just wondering what we would charge in the back of my mind. But I never dared, I guess if it’s the right word, bring it up, because I didn’t … It seemed too far in the future. Then, the next thing I know, I’m at home working from home for a week due to my knee injury, and the next thing I know Garrett’s Slacking me saying, “Hey. We figured out pricing.” I guess the answer to that, from that example, would be that you can start earlier than you might thing.

Garrett Pierson: However, with a caveat. There’s not an exact time in the process we’re going to say, “Now’s the time to set your pricing.” Here’s our rule of thumb. You shouldn’t even start thinking about pricing till all 12 steps are done, the first getting started 12 steps. We’ve gone through those many times on these podcasts, in my daily videos. Lindsay talks about them sometimes in her daily blog. If you don’t know what those 12 steps are, you need to go to SoftwareSecrets.com and opt in for when we launch and in our training and everything, and go to our Facebook and you’ll see the videos where I go … I went through every single step.

Those 12 steps essentially are getting the project rolling. Really, until those 12 steps are done, you shouldn’t even think about pricing. When we started doing pricing, we had already gone through all those 12 steps and the programmers were going. That’s basically what I’m getting at, is don’t even start thinking about these things.

Scott Brandley: You’re almost counting your eggs before they hatch at that point.

Garrett Pierson: It’s not just that, it’s you’re wasting your time. Because you need to be focused on getting this to the programmers. You can’t get it to the programmers until you’ve gone through all those steps. Wire frame, mocking up, designers designing it out, HTML CSS, all of that, and then all the details. You’ve got way too much to do that you need to do to even get this product out to market before you even need to start worrying about pricing. Once the programmers are working, once you get to that point, that’s when you have a little bit more time, too, because they’re doing their thing every day and you’ve got open time while they’re programming where you can do this. Hopefully that makes sense. That was a long route to the answer. But you really shouldn’t even think about pricing or anything until you get to that point. Even then it’s a guess. It’s literally a guess. Let’s get into the how, and we’ll get into a little bit more of why it’s a guess.

What we did is we went and what we … This is, again, the how, so you should be taking notes, what we believe you should do. We went and we created a Google Doc and we essentially wrote down all our main competitors. You’re going to want to look at the competition. You’re also going to want to … Competition. That’s still not the end-all, because you might be servicing a different type of market. You need to then look at, “Okay. What is my target market? Where are they at?” At this point you can even go and ask your target market. But right now you just need to set something in the … put the stake down. You can move it later. Getting all your competition, seeing where they’re at.

Now it’s just coming up with some ideas. What we did is we came up with four different pricing ideas. We went even from … It is going to be different for your software product. If you’re an application, like an app on a phone, then that’s going to be even more different. You’ve got to know what people are willing to pay for the value that you’re providing, essentially.

Scott Brandley: What we did for Software Funnels, for example, because we are combining multiple tools into one tool, we went to the competitors and priced out what all of those tools would have cost, on average, based on what our competitors pay, and added all of those up to get an overall value cost. Then we, from there, we started to come up with these scenarios as to how we would charge.

Garrett Pierson: From a SaaS per user example, that’s how we’re pricing it. With our Shopper Approved, Scott, tell them how that worked. It’s evolved.

Scott Brandley: With Shopper Approved, and with some of our other software companies too, we started out with our prices quite low for a few reasons. One, it was our minimum viable product and we wanted to get people using it. Two, it wasn’t amazing. It was good, but it wasn’t outstanding.

Garrett Pierson: Not yet. Just because it was our minimum viable product.

Scott Brandley: We weren’t quite confident in the higher pricing at that point. We would start low and prove out the system and slowly build our customer base, get the bugs out. Then, from there, once we’ve added some additional tools and some additional value into our software, we started raising the prices. What was interesting is, a lot of times, people are worried that if I raise my price people won’t buy. But in almost every case in almost every business that we’ve built, when we raise our prices we either make more sales or stay the same. With Shopper Approved, for example, we started at $14.95 a month, or something crazy like that. Now our minimum is $99 a month and it goes up to thousands of dollars a month, depending on the client.

Garrett Pierson: The example of Shopper Approved was pay per review, for example. Per review. That’s where I was getting at. This one is per user. Software Funnels is per user. Shopper Approved was per review. It’s like even where you pay for e-mails, how many e-mails can go out with a lot of those companies. It’s a tiered … You pay for the more you use the more you pay.

Scott Brandley: Cart Rocket was pay per action.

Garrett Pierson: Cart Rocket’s that way, too. Pay per kind of how much you use. You’re going to pay as you grow. That’s one way to do it. Then you’ve got per user. You’ve got monthly or yearly that you can think about.

Scott Brandley: You’ve got options where you add more features, based on …

Garrett Pierson: Add-ons, a la carte.

Scott Brandley: You got a basic plan, a medium plan, a high-level plan.

Garrett Pierson: There’s enterprise-level plans. The next thing that we suggest that you do on the how is that you go out and look at all the software that you’re using. It doesn’t have to be competitors. Go and make a list of all the software you’re using and see what their pricing models are and just start seeing. Because, again, the how is really just a guess. You’re guessing. We came up with the four ideas. One of the ideas was $47 a month up to three users, $97 a month up to 10 users, $197 a month for unlimited users. Idea number two was just really we were trying to make it super simple, so unlimited users $97 a month.

Scott Brandley: With the idea being that would … We came up with how many average users would use it with any given company. We were like, “Well, if we go with a sweet spot of $97 maybe we can maximize our revenue.”

Garrett Pierson: Then we kept thinking. Idea number three was just $20 a month per user. Then we came up with idea number four, that we all liked the most, which was it’s $20 per user or you can get unlimited users for $297 a month. That’s our best guess. That’s where we’re going to start out pricing Software Funnels. There’s going to be some other things. When we launch Software Secrets, more than likely the people that purchase Software Secrets Training Program will get three or six months free. We haven’t figured all that out yet.

If you are interested in Software Funnels, you’re going to need to go to SoftwareFunnels.com and get on the early bird list, because we’re going to be giving discounts out to people that sign up early and are early adopters. That’s where we got to that idea. We just started throwing things up on the board. What we liked the best, again, it’s our best guess. It’s going to change. Scott gave you the story of Shopper Approved.

Even Cart Rocket, almost every business we’ve done, we’ve increased the prices. It was all just a guess, Cart Rocket more than anything else, when we got salespeople selling it, we changed our pricing probably 10 or 15 times. It’s still evolving. It’s still, to this day, because we’ve just added two new product lines to the Cart Rocket brand, and so pricing is changing again. But, again, it’s just always your best guess.

Your market’s going to tell you what they’re willing to pay. But even that’s not very accurate all the time, because we’ve seen some of our salespeople on Shopper Approved and even Cart Rocket close some huge deals. It’s not that we’re not giving the value, because we are. It’s just that these are way bigger companies. Things can change. It just depends on the market you’re in. Just remember that. It depends on the market that you’re in.

Scott Brandley: One thing we do, too, is we tried to grandfather in people when they sign up for a certain price, pricing tier. We just feel that that’s fair and that’s how we’d like to be treated. Our clients seem to really appreciate that. If they end up buying additional products or up sales from us, then we charge them the new higher rate for those.

Garrett Pierson: For those specifically.

Scott Brandley: Whatever they buy initially we lock in.

Garrett Pierson: That’s been good. That’s been very good. Something we learned that has really played well. The other thing, too, is when we say it’s just guessing, we’re not kidding. It’s literally a guess. But that doesn’t mean you can’t make your best educated guess. You can do your best to see where you should be, price wise, how you should price. Don’t just take it as we’re saying it as, “Okay. It’s $1 per person.” You’ve got to also look at the economies of scale, what your expenses are, what it costs. A lot of times, even with these third party things that are coming into software that you’re tying into, or whatever, you have to think about all those costs.

For example, from the Software Funnels part, we’ve got a lot of costs that we don’t even know about yet. We don’t know exactly what our server costs are going to be. We don’t know exactly what SendGrid sends out all the help desk e-mails and some of our other things, what that cost is going to be. We don’t know all the exact costs, so we might have to adjust and increase prices based on what it costs to run these things.

Scott Brandley: The other side is value. You can adjust your price based on the value you provide over time. As your company grows and you add more value, don’t be afraid to raise your costs. You’re not going to offend anybody. In fact, most likely you’ll get better clients. We found that the more we charge, the better clientele we have, the less problems they give us, the less support tickets we get, because they get it and they really understand the value that you’re bringing to the table. It’s actually, every time we raise our prices we get better clients, it seems like.

Garrett Pierson: One tip might be to, or in our perspective, would be to start low and go high. I’ve heard a lot of podcasts lately and in the software world that they’re saying price as high as you can from the start. We don’t agree with that. But if that is what you want to do, then go do it. We like to start low and go from there and start increasing incrementally from there. That’s what we’ve learned. But these are just a couple little things.

We’re short on time. We wanted to talk about … Maybe we’ll just turn it into a churn podcast next week, losing clients that are paying you hundreds, thousands of dollars a month, or whatever you’re pricing, losing clients in what is called “churn” and the ins and outs of churn and what we’ve learned about that. We’ll do that next week, then, because we’re already past time.

Scott Brandley: That’s a good idea.

Garrett Pierson: Thanks for listening, everybody.

Lindsay Halling: See you later.

Scott Brandley: Have a good day.