New startup, Price Intelligently, wants to help mobile developers and SaaS companies figure out whether their pricing is right
"Most people will base it off of competitors' pricing, or do cost-plus," says Campbell, right. "But value-based pricing — finding out what a product is actually worth in the customer's mind — is really the gold standard. We're making that easy to do."
Campbell is leaving the online retailer Gemvara to launch Price Intelligently; his two co-founders, Aaron White of Boundless Learning and Christopher O'Donnell of HubSpot, are keeping their day jobs. (White and O'Donnell have been pals since their prep school days at Phillips Exeter.) The trio started developing the idea for Price Intelligently earlier this year.
"You can hire an expensive consulting firm to go out and interview customers, but we wanted to create a less expensive approach that'd be equally good," says Campbell. They've developed a five-question survey that, if sent to 40-60 prospective customers — or users who've been participating in an alpha test — can provide a price range, or help structure different pricing tiers. "You can't ask what the price should be," says Campbell, "but you can ask things like, 'At what point is the product starting to get so expensive that you might not purchase it?' or 'At what point is it so cheap that you question the quality?'" The survey also asks how likely the respondent is to purchase the product on a scale of 1 to 7: not likely at all, or extremely likely.
Campbell says the company looked at Yammer, an enterprise social networking tool, as a test case for its product. The company's "premier groups" offering is currently priced at $79, "a number that they more than likely calculated based off arbitrary margins on their minimal relative costs, some competitor benchmarks, and then some A/B testing over time," Campbell says. "After running Yammer through the product, we actually found that Yammer is leaving an additional $20 per month on the table in the U.S. and $30 per month on the table in the U.K. They're rumored to have 800,000 paying users. Even if we conservatively estimate that only 100,000 of them utilize the Premier Groups offering in the U.S., Yammer is leaving $24 million on the table right now — all because of poor pricing."
Campbell says the company will start out by targeting companies that sell mobile apps or SaaS products, and will expand later to enterprise software or e-commerce. Price Intelligently will sublet space in Boston from the dev shop Terrible Labs. The founders have been bootstrapping the business so far, but plan to start talking to investors this summer.
Campbell tells me the company already has paying customers. And yes, they used their own product to figure out the optimal price for their product: $600 a year.
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About Scott Kirsner Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.
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