Essay · long read

The Price Is Right: And for Early-Stage SaaS Companies, It Needs to Be

Steven Sinofsky · Andreessen Horowitz Free Beginner

The bounding method for a first price (cost to serve as the floor, cost of a heavy power user as the ceiling) plus the advice to keep pricing changeable in the product. Written for founders who are about to underprice, which is most of them.

• Founders underprice by pricing against thousands saved when the product actually saves hundreds of thousands.
• In enterprise direct sales, 50 percent or more off list is not unusual and is often required.
• The SaaS norm is a 3 by N matrix: three plans across N attributes, which can imply dozens of real price points.
• Wait until the last possible moment to publish price, because post-launch price changes are never read as good news.