Listening to your customers about pricing early on

priceKevin goes into some detail here about how to figure out your pricing model during the Customer Development phase.  The key is to find some early signals that show a customer’s intent to pay,  The key question he asks is “What kind of X do you buy now?” to learn all kinds of things about the customer and your competition.  It is a way to really observe their historical behavior as opposed to what they tell you their behavior will be.  Very often those two things do not match, and you end up with much less adoption than you thought you’d get.

I think this applies to rolling out advanced features of an existing product as well, or tiering your product.  You have to make sure that the value proposition is there to support any higher prices you may charge.  Finding out early that customers perceived values are different than yours can help you avoid failure.  In some cases, you can also find out that you weren’t planning to charge enough, because perhaps who you thought the competition was is different than who your customers think of as a substitute product.

There’s also the old “A/B test your pricing page” idea – which you can do, but can cause problems if your customers ever figure out that their neighbor is paying less than they are.  You have to be careful there – making the price a promotional price if the customer has a promo code, for example.

What do you think – are there other ways of testing willingness to pay?

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