CREATE: How to get your pricing right
With Sebastian Voigt who is ‘Director Business Development & Operations’ and Christoph Röttgen who functions as the ‘Team Lead Pricing & Monetization’ at Axel Springer, we invited two excellent pricing experts to advise our guests on one of the toughest topics for founders.
Last week we hosted the third and last sprint of our CREATE event at APX. At CREATE we welcome creative startups to listen to interesting speakers and mingle with other founders to learn, share ideas and find inspiration for their businesses.
Christoph and Sebastian, what would you advise the founders who want to start charging their users for the first time?
Sebastian: Do it as late as possible because first, you need traction and publicity. Get as many users as possible with the free version of your product or service. Secondly, once you have to charge your users, don’t be too harsh. Give them choices to upgrade over time, the more they use your service and try to leverage them as evangelists for your product to win new customers, offer discounts if they attract more users because oftentimes volume matters most and not necessarily the optimization of single revenue streams.
Christoph: I would recommend to just do it. You can think about this for years but in the end, maybe you missed the right point in time.
Sebastian: That’s actually true. The longer you give your product or service away for free the harder it will be to implement the price. Once our product is ready: charge your customers for it!
Is there a different pricing strategy when it comes to digital products versus physical products?
Sebastian: The cost side is different. If you produce a newspaper, you have lots of variable costs, for example for printing. In digital, this is not the case. So you should look more into what value your product is delivering to define your customers’ willingness to pay.
Video: If we gave you 25k EUR, which startup would you found?
What would you say is a typical mistake that young businesses make when it comes to pricing?
Christoph: I think they invest a lot of time finding the price level. Should the price be 0,99€ or 1,99€? But this is only one part of pricing. There are many many other options they have to consider. The right price model, the billing interval, bundling, packaging, upsell strategies and so on. All this is part of a successful pricing strategy.
Sebastian: Moreover, I believe many founders are too modest, too shy. But they should not: They develop a product that, in most cases, is something brand new and should be properly monetized
What do you think is more important when you set a price strategy: Users’ psychology or data?
Christoph: It really depends. If you’re a young startup, collecting data can be quite difficult. Especially in the beginning. I would highly recommend focusing on the psychological aspects at first but in the long run, you should definitely consider the data side.
