I saw a post from a developer offering full-stack services at just $5/hr. His portfolio seemed solid, but people were skeptical since the rate was way below the industry average (~$50/hr). On the other hand, I’ve also seen someone running a small blog, Pat-Starter Story, charging $10K to $150K per month for ad spotscrazy numbers!
It made me realize that pricing too low can scare off customers instead of attracting them. People often suspect there’s a catch or assume the quality is low. I had a similar experience with my business, Mentio (AI marketing agents). We started with three subscription tiers ranging from $12 to $87, but surprisingly, everyone opted for the higher tiers, and the basic plan performed poorly.
I wanted to bring in more revenue per client without increasing prices for the same service. So, I introduced higher tiers at $200 and $500 for enterprise customers, and it worked. It boosted the perceived value of all offerings, and finding high-paying clients turned out to be easier than targeting a broad audience. The average revenue per customer jumped from $40/month to over $150/month.
I realized that the fear of raising prices was just in my head. Higher-priced options anchor value and make other tiers look like a good deal. Pricing isn’t just about being cheaper than competitors; it’s about how customers perceive your product’s value. Charging more can actually make your offering more appealing a win-win for everyone involved.
I’m preparing to increase my lowest tier by 3.5 times and introduce two new tiers that are 7 times and 10 times higher than the current lowest tier.
I’ll be adding a value metric based on active jobs and implementing feature gating, meaning some users on the lowest tier will have to choose between a 3.5 times increase with fewer features or a 7-10 times increase to maintain their current features.
I’m really nervous about this change; I’ll grandfather them in, but I expect some backlash.
I recently partnered with a subject matter expert who will serve as a sales and product consultant. They were surprised by my pricing and pointed out that I was leaving a lot of money on the table, so we developed this increase partly based on their industry insights.
I knew I was undercharging, but I had this mental block where I wanted to attract users, so I offered a better deal. You’re right about how product perception works.
When something is under $10, I don’t even want to consider it. At $50, I might think it’s worth exploring, and at $200, I see it as serious and likely to solve my problems.
It appears that you are competent and have already set out the route. My primary concern in this situation is that introducing the 3.5X price increases to current customers will result in a significant increase in customer turnover.
People don’t want to pay for stuff they can get for free, like as the Marques Brownie wallpaper app, therefore I would try to add more features and hide them behind a paywall.
It’s important to make sure the $999 plan gives true value even though it can anchor value. Otherwise, credibility could be compromised.
A “decoy” mid-tier option could be a good way to get consumers to upgrade to your desired plan. When compared to extreme anchoring alone, this can be more successful.
That is true. I have heard that you’re not being forceful enough if your price increase does not result in a 5%+ decline in conversions.
Pricing should focus on value rather than undercutting. Expensive pricing can increase perceived value and draw attention to other tiers.
I completely agree that how customers view the products matters a great deal. I would like to know how much you think an improvement in your company’s brand perception is worth.
This is ambiguous, what impression? Could you elaborate?
You see, I am aware that many SaaS companies have an animated 2D or 3D explainer film on their homepage that effectively summarizes their business and is followed by a compelling call to action. An explainer film demonstrates the company’s professionalism and caliber. According to a survey, 89% of respondents said that videos affect their level of trust in a business. Returning to my first query, what is the value to you of a higher perception of your company’s brand?