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Pricing Theory In The Age of Businesses-As-Consumers

As a small team of developers we're in a similar position to some of our smaller clients - not enough time to answer every email, or to complete projects, as quickly as we'd like. At the same time we don't have enough revenue to hire more people to the team, and find ourselves in a Catch22 situation. Here's the interesting thing - if we did hire more team members, that would directly help the majority of our clients each make more money than each new team-member would cost. We seem to have a problem with pricing!

We field a nice mix of emails, with a fair few saying we're underpricing ourselves, but to date the louder people who'd prefer lower pricing have dominated the discussion. In my mind it should be easy - if you price your time at lets say minimum $150/hour (and if you're the CEO, even in an unfunded bootstrapped startup, I would hope that's on the low side).

As a CEO you shouldn't be every day wasting time packing orders inefficiently, training people how to use a difficult system, or wondering whether you should have used Shopify : you should be expanding the business, and each hour of your time should easily generate more sales than that in the long term. The beauty (we like to think!) of our extensions is that they provide a real & immediate time-saving, efficiency-improving, and even sales-increasing, benefit to your business. They literally save hours every day from even low-volume stores - ie. the value of the time saved should be more than easily covered by the Business Maintenance Plan, many times a day. If you're a boostrapped startup then the Bootstrap Maintenance Plan should still be a no-brainer decision.

But some of the emails that we get - the idea of charging, so that we can help folk save time and make more money, seems to get some people really riled up! These guys are in the extreme minority, I can count them on one hand, but the loudness of their complaints has made us think twice about our pricing theory.

Luckily the reasonable people prevail - we just had a message from a client who uses our extensions with some great thoughts on pricing.

It is usually very easy to undercharge.

The challenge is that people don't realise how much time and cost are involved. On the other hand, if you charge more, you end up dealing with fewer, better clients. Every time we agonise over a price rise we are then astonished to find that hardly anyone even notices.

I'd have thought that if you charged more, you might lose some clients (who were losing you money anyway) but the remaining few would come back again and again for a reliable, quality service. Speed and quality are usually worth more than the money for a successful business.

I think that's great insight.

I think you see this in Enterprise pricing (I don't mean specifically Magento Enterprise, but services targeted at businesses) - it doesn't make sense to delay implementing a service if it's immediately going to save (or generate) money, or helps to provde a quality service.

The same client came back with another great quote:

I found this really interesting, and it actually was a 'light dawns' moment reading it! I suddenly was able to place the emails we get from some clients in the correct context, they are looking at our software as though they are a consumer and not as though they are a business getting a tool to help them.

I really love helping out small businesses - it's great hearing how we've helped transform their processes and really some stories we hear are just amazing, but for sure the amount of time needed to get them up and running is significantly more than with more established companies. These are small businesses, trying hard to make a buck, learning as they go, and haven't yet got reliable processes down for business-critical activities (eg. in our sphere, upgrading software using things like staging servers, repo-based development, etc.). As a result they are making changes that are more likely to cause site uptime issues, and have more to lose (on a personal level) than a bigger business.

I'm not totally sure the result of this post, but I do find pricing theory interesting, and we clearly have to change ours somehow. But it's quite scary! Add your thoughts below!

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