OnDemand WTP Pricing Research

How the gap between value and price affects goodwill | Nathan Barry

Think about the difference between the value you receive from a product and the price the company charges for it—often referred to as consumer surplus.

A company with a low price that provides a minimal amount of value would look more like this:

Customers are happy to pay because the value still exceeds the price. A $9 product doesn’t have to deliver that much value to make it worth purchasing.

Charge more is common advice because many small companies often provide an incredible amount of value and charge a low price. Take Basecamp for example: their price is $100 per month.

With 38 team members my first thought is, “per user? That’s a quite high!”

But wait, they mean $100, flat. For everyone.

At ConvertKit we get so much value from Basecamp that if they doubled their price we wouldn’t blink. Really, they could 10x our price to $1,000 a month and they would still provide more value for us than we’d be paying.

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How the gap between value and price affects goodwill | Nathan Barry.