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September 18, 2008


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Do you have a rough cost per customer? i.e. how much it costs to host a paying customer on your infrastructure? Hard to quantify but something rough might help. And also help you drive that cost down, improve efficiency over time.

I'd use that figure to help set the price.

Somehwat related; Based on my buying behaviour over the past month or so with the iPhone App Store I'd say 10 is a "have to think hard about buying it" decision. 5 and under I don't think about it.

10 a month would make me think. 120 a year.
5 a month. 60 a year. No problem.
7 a month. 84 a year. Palatable, I'd pay that.

(This is all without knowing much about the dbtwang service offering. Guitars aren't cheap but I'd still think "what does 120 a year bring to my obsession?" For instance I happily paid for a Flickr Pro account every year.)

Hope this wandering comment helped :)

Thanks Paul. Only incremental cost (as you know) would be customer support. The exercise to split tech costs over paying customers would be difficult and probably pointless because of the endless variables. IMHO.

Mostly it is mind games and your comment is useful in that context. One option we have discussed is starting low for early joiners and watching the numbers, feedback and dynamic.


I'm sure you've heard this a number of times Keith but one lesson that still rings out in my ears from ye olde Grad. Dip. in Marketing was to set the price as high as you can, because while it's easy to reduce prices it's very, very hard to increase them!

(In other words you're right and the lads are wrong! ;-)

Before I start suggesting it... Is this your way of conducting the market research? It's the best way to do it. Just ask!

Once you figure out what the costs will be, say per 100 customers, match that with the plausible demand (i.e. how long will it take you to get to 100 customers...) and figure out for yourselves if that is an acceptable income for that revenue stream within the time period.

I agree 100% with James - put your price at as an acceptable level as you can right from the off, then you can consider rewarding long standing customers in the future by bringing the prices down for them, once you have enough people online. Going in cheap right from the start puts the new business under too much cash pressure.

That said, the tenner-per-month going over $100 might be a psychological barrier to new users - especially for a hobby item in this particular climate. Keeping it below $100 p.a. might just do the trick! Or if you want to keep to the double digits per month, suggest that if they sign up for one year, you will give them 2 months free...

Oh it's so exciting starting up a new busyness! Besht of luck ;)

Set it too high initially and it may look like desperation when you start dropping it every month hoping to hit the sweet spot. "I'm still waiting to buy that XYZ as I see it drop in price each month."

There are apps in the App Store I haven't tried because the price is too high (usually over €10.) But I've tried, and discarded, quite a few apps that were €7 and €5. The costly ones I am not going to keep monitoring in the hope they drop in price.

One thing I remember that Flickr did well was to offer beta/early-adopters a discount and they also offered giftable subscriptions. I've bought quite a few Pro accounts for friends and family. After a year of using Flickr they realised its worth and kept up the subscription themselves.

Had the same dilemma recently. Although the application is different and our model does not apply. Perhaps in your case you could adopt a standard access and a pro-access offering. Given good traction, serious traders will want to engage and will understand the value prospect. I think pricing thresholds might be used as a method to filter time-wasters out and build a more valuable (if smaller community). There could be other revenue lines sold into this community such as organised trader-events where you could charge a per seat cost. (look at how successful star-trek conventions are) .... regards, Jere

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