Pricing cannot be an afterthought

I wrote yesterday how the notion of app ideas is still fairly romantic, and challenged anyone exploring building one to really give it some thought before actually doing so. I don’t mean this to say “don’t experiment and hack things,” but as someone legitimately concerned for your well-being, how are you going to survive, dude?

If a friend came up to you and said he wants to write a book and get it into Barnes & Noble, would your first piece of advice be: Dude. Just start writing. Go. Now. Start writing.

It might depend on the audience. But my first reaction to that would be: Now wait a minute. You sure you want this? You sure you know what you’re getting into? Not a lot of authors make money.

As someone who has hacked away on hundreds of (failed) projects in the last decade, I can, based on my experience, wholeheartedly tell you: Now wait just one minute. Before you start hacking away, there are a few things you need to know. Not a lot of indie developers make money.

The most important thing I always, always got wrong was making pricing an afterthought. Because why spend time on pricing if you’re not even sure the project is going to take off? No, I’m going to build the app first. Then if it does well enough, begin introducing a revenue model. Right?

Here are a few reasons why this is a dangerous mindset to have, and why pricing cannot be an afterthought:

  1. Having a pricing model at first launch can affect whether the project is successful or not.
    Besides supplying you with the fuel needed to continue doing work on the project, having a pricing page and revenue model can also have subtle psychological effects on both you and your users. For one, a customer may be willing to take you more seriously if they know you’ve thought about the long term plan for your company. You say “I’m going to build this app that a user will use for the next five years,” but a customer says “How can I trust you’ll be around five years from now if you don’t even have a revenue plan in place?” Customers are smart. Personally, I take companies with revenue models far more seriously than those who just have a free product without any clue how to monetize it. I trust paid products more.

  2. Believe me on this: you will lose the motivation to build new features at some point, including pricing.
    This may not be permanent, depending on your level of perseverance, but your levels of motivation for building new features, especially something as uncomfortable as pricing, will waver tremendously. Because in most cases, at least for me, the initial response to a side-project launch is always underwhelming. You need to amass users over time, through lots of hard work. It’s definitely achievable. But when you’re down in the slumps, not having acquired enough users and certainly not making any money off this, the last thing you’ll feel like doing is the hard and laborious work necessary to integrate a payment and subscription system. I know so many startups and small companies who put out a free product thinking they were going to monetize it later, but lost the motivation to do so far quicker than they imagined. If building pricing seems tedious compared to the rush of building the actual app, do it first, as early as you can, and, if at all possible, always, always launch with a revenue model in place. Future you will thank you.

  3. Strategizing around pricing models teaches you to be a better entrepreneur.
    At the end of the day, in order for your project to be successful, you’ll need to learn to be more than a software developer. You’ll need to learn to be an effective marketer, accountant, strategist, and operations manager. These are very hard things to learn, and something I still struggle with as a developer. Mostly, I struggle with these areas because I have no practice in them. All my shipped projects have only been technical feats, and not marketing or business problems. If I had practiced optimizing pricing and keeping users engaged with all my products, I would have had a much easier time doing the same thing now. And make no mistake about it: marketing (including user acquisition, retention, and churn) will be absolutely essential to master for your company.

Ultimately, there’s still a lot of room for blind experimentation and hacking, but only if you truly don’t care about the outcome. If you do care about the outcome, namely, that you want the project to be successful and provide you with a little bit of income, you can’t defer pricing to the future. You can’t defer the “business” stuff. Build it in from Day 1. And on Day 365, you’ll have a well-oiled, functioning business machine. Worst case on failed projects with built-in revenue models: you become a far better entrepreneur.

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