How to price a SaaS product?
Four approaches to subscription pricing and the pitfalls to be aware of
In 2011 two professors from UCSD Ayelet and Uri Gneezy got themselves hired in a local grocery store. With the goal to set an experiment on pricing. And sell some Cabernet bottles.
The results of their experiment were groundbreaking. What they found out will definitely help you to decide how to price your product. Here’s the story.
Professors did not want to overcomplicate things. They took several dozens of cabernet bottles and were about to sell them — every time with a different price tag. On certain days they sold the wine for $10; on others, they priced it at either $20 or $40.
You might assume that they’d sell the highest number of bottles at $10, since that’s the lowest cost. Nope. It turned out that demand did fall off at $40, but the store actually sold more bottles of its Cabernet when the price was $20 than when it was half that price ($10).
The crazy part? There was also an improvised in-store tasting. The customers who tasted Cabernet with a price tag of $20 were much happier with the wine than customers who tasted the same wine but saw a lower price tag! The wine never changed its label (or taste), still people perceived the wine to be more valuable when they…
