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Guest Post: How to Price a Pre-launch Product
A step-by-step guide for figuring out your initial pricing strategy
By definition, when you’re building a new product and especially if it’s for a new market - figuring out your initial pricing can be very challenging. We iterated our initial pricing strategy about a dozen times over the course of a few months until we found something that stuck. Arda provides a very practical approach to figuring out your initial pricing so you can hopefully hit the mark faster.
“Scrintal is a web app that combines mind mapping with the power of networked note-taking. Organize & connect all your thoughts in one place. As if Miro and Obsidian had a baby.” 📽 Scrintal video demo.
As first-time startup founders, my business partners and I at Scrintal felt firsthand how difficult it is to turn uncertainty into something tangible.
It feels as if almost everything we do happens in a chaotic context: deciding which go-to-market strategies or growth tactics will work, identifying new feature ideas, and of course pricing. Not to mention we’ve already pivoted a few times.
One thing that remained the same throughout the course of multiple pivots was our user-centric approach that placed early users at the center of our decision making process.
In this article, I’d like to share step by step how we came up with Scrintal’s early access plan price. I’m aware this might not be suitable for everyone, but I hope some of our learnings might save you a ton of time and help you avoid mistakes.
Step 1. Start building your audience early on
Even before we started building Scrintal, we spoke with 100+ knowledge workers from all kinds of backgrounds.
The action that got us to meet the most relevant people was to search other productivity tools’ Twitter accounts and listing the people who were active within the “productivity” and “app” space. I can easily say Twitter was the best channel for this.
So our team and I spent a considerable amount of time identifying qualified people, reaching out to them either via Twitter DMs or emails (also spent time on finding emails online) and booking 1-on-1 online meetings.
Those meetings helped us build genuine relationships so much so that some of those people became our friends and/or early power users. This effort was a combination of Paul Graham’s “Do Things that Don’t Scale” and what Lenny Rachitsky shared in his “How to kickstart and scale a consumer business” newsletter series, “Go where your target audience hangs out”.
We later tried different set of actions that brought our waitlist to almost 30,000 people by August of 2022.
Step 2. Involve your early users in your decisions
Involving your early users in pricing decisions is key. Without having a genuine relationship with the people who use your product in the early days, you will struggle in several situations where you need to test a hypothesis.
We released the first version of our product on December 3, 2021 with the goal of providing a visual knowledge base that empowers knowledge workers to plan, ideate, develop and share ideas without friction in one place. We carefully chose 12 people based on their user persona, needs, and knowledge level of similar products.
To give you an idea, this is how our first MVP (minimum viable product) looked then. Nothing fancy, no colors, nothing!
But even that was enough for a small group of people to get some sort of value out of it.
Building a product or a service together with an audience has its perks because you get to understand what is missing when your product is put to action.
Now, that doesn’t mean you won’t pursue your vision and plan. I think you should always have a direction, a why so when even in tough times, it helps you find your way. But you can learn a lot during the process, test your assumptions or even realize key aspects you missed out — by involving your users early on.
Step 3. Pricing research
As a continuation of Step 2, we decided to involve our users in setting our early access pricing. We thought we should not impose such an important decision in a top-down manner so we chose a collaborative effort.
Since there was already a large pool of waitlisters who were eager to try Scrintal, the only thing we had to do was to create a short survey and ask their input. We used Typeform for that and started with the following question “Would you pay a monthly subscription fee to use Scrintal?”
We set up the Typeform logic so people would see only the relevant follow-up questions depending on their answers. For instance, if someone said “No” to the question above, then they received another question “What can we do to make you consider using Scrintal?”.
Those who answered “Maybe” received the question “What hesitations do you have about using Scrintal?”. The reason we asked this was to understand user anxieties that we can address quickly and things we can include in the pricing page/email.
And if someone said “Yes”, we directly asked them their price preferences.
Setting up this logic flow allowed us to shorten the time it takes to complete the survey, but still ask tailored questions to different groups. At the end, 1,400+ people completed the survey. I don’t think this would have been possible without steps 1 and 2; or it would have take a lot longer to learn those insights.
In my opinion, the most valuable piece of this survey was asking open-ended questions. If we would have given them a closed range of options, we would probably have missed out on a ton of valuable insights.
In his book Running Lean, Ash Maurya talks about the importance of validating qualitatively before verifying quantitatively. In simple terms, in the early stages when there is little or no data at your hand, it is best to ask open-ended questions first to be able to create testable hypotheses. Later, this makes it easier to create the right multiple-choice questions.
Step 4. Competitor research
As a complementary step, we researched the pricing strategies of similar products as well as other SaaS tools outside of our industry. Some of those companies have been around for many years and have iterated on their revenue models many times. They probably possess 10x more data than what we have today. So why let it go to waste?
We created 3 categories: visual tools, note-taking apps and other SaaS products (e.g. Slack).
We not only looked at their price, but also the trigger points (features they placed behind a paywall). I’d recommend anyone doing this research to benchmark relevant tools; for instance for us observing the visual tools and their trigger points was specifically helpful.
Step 5. Find the sweet spot in line with your company goals
Based on the survey results, those who tried Scrintal were willing to pay 60% more than those who haven’t tried it. This was great news of course, but at the same time, there was also a large audience out there who hasn’t tried Scrintal yet still wanted to use it.
Understandably, their price sensitivity was different. It didn’t feel fair to charge a lot for something they were interested in but haven’t tried yet. As we scrolled through the answers, we realized $5 / month seemed like the sweet spot in which many folks felt comfortable.
Why $5? Not more not less?
It just felt right for us – even though the product can do many things, it is not like we put years of development in it. Charging $8 or more at this point wouldn’t really change much for us.
Why annual subscription?
As an early-stage startup, it is key for the development team to have an audience that uses your tool and provides continuous data regarding which features they appreciate more and the ones that are not used. This is key to avoid feature cluttering and to enhance usability.
Second, everyone knows that your product is in beta and it will have its flaws. It doesn’t have all the features at first. Key here is to find people who don’t mind these flaws and yet still get value out of it.
Third, in relation to the previous point, it gets you closer to the early product-market fit by helping you realize who is really using your product frequently, why they are using and what problems does your product help them solve.
Based on our research and competitor analysis, we thought having an annual subscription at a lower price point would serve us best in terms of having a large base of users from whom we can continuously learn. That way we could improve the product 10x faster.
This decision is subjective — no one can tell you what you should do or what is the best course of action. The reasonable action is to do your research and align those insights with your product roadmap and vision.
Step 6. If you know someone more experienced, ask them
This step is optional but can be extremely helpful. I reached out to one of my friends, Sven Ahrens who is now the Director of Global Growth at Spotify. We had a 1-hour workshop with him to validate our way of thinking and see if we’re missing out on something. His feedback and suggestions confirmed most of our reasoning so the last piece of the puzzle was complete.
If you don’t know anyone like Sven who has years of experience in this field, you can still reach out to similar people either on Twitter or LinkedIn and ask 20 mins of their time for feedback. Not everyone will be receptive but why not give it a try. The upside is quite positive.
To sum it up, you don’t need to wait until product launch to price your product.
These are the 6 steps that helped us tremendously. They might apply to you 100% or not at all. But if you’re building a new digital product with limited time, financial and team resources, some of the steps can be of great help.
I hope you find this piece helpful. If you have any suggestions or improvement to this approach, please share them in the comments so I can learn from you. This article is a deep dive of the Revealing Scrintal’s Early Access Plan post published on July 28. I won’t brag about or ask anyone to sign up with Scrintal but if you’re interested, this is where you can find us.
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