Aligning Software Pricing and Value

Not everything is worth a subscription.

We all know what it’s like to start using a software product only to see the paid plan is $20 per month. It’s one small feature we use but the cost is twice what I pay for Netflix. It doesn’t feel worth it.

The value of the tool and what it costs are misaligned.

The Flip Side

While some technology feels overpriced, there are others than feel like a deal. At polar notion, we spend over $300 a month for Slack. Our team and clients use Slack as a continual communication tool. It facilitates all conversations. Slack saves us hundreds of hours combing through emails and tens of thousands of dollars in efficiency.

We pay a lot for Slack, but we get more than we pay.

The Tension

How do we reconcile this when building technology? Someone has to pay for it to get built.

Increase the value before the cost. It’s not a matter of adding features. Rather, it could be providing more detail about other use cases. I use a recording and dictation app that began encouraging me to record meetings. I sync my calendar and the transcript is auto-named to match my calendar invite.

Charge differently. Subscriptions are popular but it is not always appropriate. Technology companies existed for decades with upfront pricing and charging per version.

Embrace ‘quid pro quo’. Dropbox grew rapidly through allowing users to increase their storage space by referring friends. It engenders customer loyalty and expands reach.

Wait. The most lucrative financial model is likely not the most obvious. Figuring out creative funding strategies to postponing charging customers will allow you time and experience to create the most valuable plan. When we launched Startup Picture Day,  it was obvious that quality headshots were important for startups and entrepreneurs but the cost they were willing to pay was insignificant. So, we funded it ourselves and through generous sponsors.

The Point

It’s not enough to slap a double digit subscription on your product and expect customers to pay. The value has to be in alignment. When in doubt, make sure the value is weighted in favor of the customer or start with charging nothing.