Wednesday, October 21, 2009

Pay for your own dog food

By now you probably haven't missed someone extoling the virtues of eating your own dog food. Just in case you have, all this means is that you use your own product.

Using your own product comes with a ton of benefits, because you become your own customer. The quality of your product likely increases because you can't ignore it's problems. They aren't just your customers problems. They are your problems.

But I know a ton of people that don't actually pay for their own dog food.

Starting a new product or business can be tough. One of the challenging debates is:

"How much should we charge" or "What should our pricing plans look like"?

Pricing can be a complicated discussion. Especially since you want to make sure you make profit over the costs of running whatever it is your selling.

But the best way to short circuit some of the debate is to simply ask:

What would I pay for this?

At Inkling we don't just ask.

We've gotten in the habit of actually taking out our own credit card and using it on our own account sign up page. Yes, it's a bit silly when the credit card processing takes some money off the top. But it makes the feeling very real that you are paying for this, and now it's an expense just like it's going to be an expense for your clients.

So when we started Tgethr (our simple tool to collaborate with groups over email), I stuck my credit card in to pay for the plan that met our own team's needs. Through doing this, I found I was paying $99 just to support the groups of family and friends and the folks at work with this software.

After a couple months of getting dinged that $100 for my particular situation, it didn't feel right. We were charging too much. So we tweaked the plans to offer more storage, more groups, so that I could move myself to a smaller plan and now start paying $49 a month, which feels much more realistic or fair to me as a customer.

So if you are debating how much you are going to charge for something, I'd start with doing exercises like this. If afterward, you find your pricing + customers don't support your costs, then you are going to have to provide much more value to justify raising prices.

(Part of this is a cross post of an answer I gave at, a new and pretty useful site for startups who want to ask other entrepreneurs questions.)

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