Choosing the Right Pricing Model For Your Minimum Viable Product
Let’s talk about how pricing models can help build a relationship with your customers.
Your product isn’t just a product. More often than not, it defines the relationship between your company and your customer. Your Minimum Viable Product (MVP) is your first impression in that relationship. And how you price your MVP will determine the length and the depth of that relationship.
So it’s imperative you get the model right on the first try.
Most of the advice I’ve seen on pricing an MVP is pretty pedestrian: Know your costs, know your market, know your customers. I’m not shocked at the simplicity of that advice, because you’d be surprised at how many companies ignore, forget, or just plain misjudge those simple things.
But we’re also well past the days of a single price for a one-time transaction with an anonymous customer. Over the last 20 years, I’ve built and launched dozens of products for all kinds of different customers, and I’ve learned that each customer comes with their own use case. I’ve also learned that how much they pay, how often they pay, and when they pay are just as important as settling on a number.
Recently, I’ve seen a lot of companies choose a pricing model as a means to an end — the one that feels like it will generate the most revenue the quickest for the longest time. But the selection of a pricing model should always be made solely on what makes the most sense for the customer/company relationship.
The Subscription Model
Subscriptions are the hot thing at the moment. They’re also the most misunderstood. So here’s what they are and what they’re not.
Let’s start with a stone age subscription model. It used to be you subscribed to magazines — pay five bucks for a single issue or subscribe and pay $50 and get 12 issues over the course of a year, mailed to your door.
That’s the perfect example of how a subscription model should be used — when a customer wants the same serving of our product at known intervals. But as marketplaces go digital and delivery closes in on immediate, we’ve seen the subscription model evolve with varying degrees of success: