[00:00:00] Amber Hinds: This season on WP Product Talk, we're diving into the journey of creating new software products and discussing the process one step at a time, from ideation to building a thriving business. But unless your WordPress plugin or theme is a hobby or a fun way to give back, you know, it might be, but it probably isn't.

So getting revenue is the number one priority on a product founder's journey. As a product owner, you need to be thinking about your business and pricing model. Early pricing wrong out of the gate can have long-term repercussions and even lead to a completely unsustainable business that fails completely.

Are you debating pricing changes for a new or existing product? You're in the right place. Stay tuned to learn how to choose a business and pricing model for your WordPress product.

[00:00:57] Matt Cromwell: This is WP Product Talk [00:01:00] Place where every week we bring you insights, product marketing, business management, and growth, customer experience, product development.

And more. It's your go-to podcast for WordPress product owners by WordPress product owners. And now enjoy the show.

[00:01:24] Amber Hinds: Hi, I'm Amber Heinz, CEO of Equalize Digital. And

[00:01:28] Zack Katz: I'm Zach Katz, CEO of GravityKit. And uh, today we are talking about an important topic that affects everyone who's planning to build a WordPress product. Uh, how to price it. What are you gonna charge? Uh,

[00:01:41] Amber Hinds: the, yeah, this is the fourth episode in our new season of WP Product Talk.

As I mentioned before, we're walking through the entire process, and maybe it's not the fourth episode, it might actually be a little further along there. But we are following the journey of going [00:02:00] from beginning to being awesome and amazing at your business. And we are talking about models. Business models, pricing, all of the really important things today.

[00:02:12] Zack Katz: Yeah. And that's why we've inve invited Ramesh Supermanium to, uh, from Retain full today. Uh, Ramesh, uh, welcome. Please introduce yourself and, uh, what you do. And yeah. Hello. Thanks for joining us.

[00:02:28] Ramesh Subramaniam: Hello everyone. Thank you for, you know, having me in the show. I'm Rames Broman, founder of Ful and email marketing platform for WooCommerce and Shopify.

And, uh, we have, um, we are a 16,000 plus customers strong in the 99%, you know, in the entire product. I'm the. And, uh, a bit about myself. I'm a journalist and entrepreneur. I love spending much of my time building products and, you know, um, [00:03:00] when I have more time and I actually spend with the family, my wife, and I'm blessed with two kids.

Both of them buy and they're really awesome. So I'm here. Thank you for having me again. Yeah, we are. So thank again for coming on.

[00:03:13] Amber Hinds: Yeah, we are so happy to have you here. For everyone who is watching, we are also happy to have you here. So please use the chat on YouTube if you are able, um, and put any questions in, and we will definitely address them as we can.

[00:03:32] Zack Katz: Should we? Yeah. So why is this topic, uh, the most important topic? Ramesh? What, why, what, what do we need to, why is this important for product owners to get right.

[00:03:45] Ramesh Subramaniam: Yeah,

[00:03:45] Zack Katz: pricing

[00:03:46] Ramesh Subramaniam: is basically everything. Okay. So when you are building a product, right, when you are building a product, whether you, most of us, you know, whether you offer one time fee, an annual subscription, or a monthly plan, [00:04:00] your pricing model basically affects your cashflow and your ability to invest back into the development and support.

Basically you need to have a stable, recurring revenue in order to help you to plan your entire roadmap and also, you know, invest back into the development and grow steady. That means that we need to get the pricing right. It is quite complex. It's very hard to get it at the very beginning itself, but it your success, right?

Even if you are. You might have even the best plug, you, you probably invested hundreds of cars in developing into it. Hundred. You know, you must, we might have invested, you know, hired a very good team and have the entire support team back in, uh, even a better marketing team, right? But if you price your product poorly and if your revenue model does not support your, you know, ongoing development and support.

It's not going to help you a lot down the line. Right? So there's a huge [00:05:00] amount of effort, you know, you need, you, you put in, uh, for building the product and taking into the market and making it successful. But if you get the pricing wrong, then it might, you know, affect in a very, very large way. Right? So that is why pricing is much more important these days.

Right? So that is one more thing, you know, everybody should actually. Every product owner, owner should actually understand, right? So a lot of people, a lot of product owners like us, you know, make a mistake in pricing when it comes to, because it is very complex and it is not, you know, we, we cannot get the right pricing at the, you know, uh, at the very instant and at the very beginning itself.

It's more like trial and error matter. We try something and then see if it is working. And if it is, uh, not working, we try another model. And then, you know, it's like we, we get, we try to get the right pricing, you know, uh, on a trial and error basis. But, you know, the most common mistakes, you know, a lot of people actually make [00:06:00] is that, you know, we just look at the competition.

A they're pricing at, uh, okay, so they're selling at $16 million per year. Let's put it at $29 per year. So that, you know, we get a lot of market. We, we, we get a lot, we, we can attract a lot of customers and then because we are pricing it lower than the market, right? But unfortunately, that is of the wrong or wrong approach because, you know, let's say, um, for instance, let me, let me give you an example.

Let's say a business that is making a hundred K in monthly revenue, right? They would not hesitate to pay you even a hundred dollars a month provided your product gives them a clear ROI for them. Right. If you are able to deliver a a, right, and the, if you're able to deliver the right value to the, your target audience, then they would actually would be willing to pay you the right amount of price, provided you get your pricing.

Okay, so that is why pricing is actually much more important [00:07:00] these days. But you know, whatever you do, um, whatever the pricing that you make it, if you are able to price it rightly right, then your customers will appreciate you and even they will support you. They will be willing to invest in you because most of the time they are not buying the product itself.

Just because of, just because of the price. They're not buying the product. They're investing in the product because they wanted to get value from That is why actually they're buying the product. That is why they're making the buying decision. So that is why pricing is more important.

[00:07:34] Amber Hinds: Mm-hmm. Yeah. No, I, I, I think you're right.

If you don't get it right, obviously you. Won't last very long if you even can really get started. Um, that's right. Uh, I, I'm curious about this question, you know, of mistakes people make you, you mentioned referring to and just only looking at [00:08:00] competitors, and maybe we can go into that a little bit more, but before we do that, I'm curious, are there other mistakes that we could just list out that people make when they're pricing?

And maybe why, like, are, are we afraid to go too high? So we undervalue ourselves? I mean, I know I've certainly been there where I've been like, oh man, I don't, I don't know. Is this product that good? You know, that kind of thing. Like what do you think are like common pricing mistakes? I.

[00:08:28] Ramesh Subramaniam: Amber. Um, I, I will, let me tell you a simple example, okay? Uh, let's say you are making a product. You're building a product for the, uh, uh, your target audience is actually in us. Okay? Let's say you are pricing your product at $29 per year. Okay? Imagine, you know, in us. If you wanted to have a proper lunch, it costs way [00:09:00] more than 29.

[00:09:01] Amber Hinds: Mm-hmm.

[00:09:03] Ramesh Subramaniam: Okay. So you need, so the, in order to get the pricing right, you need to understand your target audience, your ICP, your ideal customer persona. That is the secret behind, you know, and understanding, you know, getting the pricing right. If your customers get the value, like I mentioned before. If, if you're able to deliver a clear R oi to them, then they would be willing to understand it no matter what kind of a pricing that you're making it.

Okay? It doesn't, it doesn't matter if your competitor is selling at a very lower price or at a very higher price. You need to price your product according to the value that you not based on what?

The customer perceives them them. Right. So based on that, you need to, you know, what kind of value that if you deliver, is actually [00:10:00] most important. Then what are your other competitors doing? What is doing which value? Solving it?

[00:10:07] Zack Katz: No, it doesn't matter. So let's talk about value-based pricing. 'cause Ramesh, I have some questions about this.

Yeah. How do you decide what your value is to customers? So, uh, one of our co-hosts, Katie, Keith, she runs barn two, uh, plugins, which has, you know, she integrates with WooCommerce, uh, as you do Ramesh, with, uh, retain full, right? Like. If you integrate with a shopping cart, it's a pretty clear thing where you can say, install this, and you get to increase your sales.

You get to make, uh, more sales to your customers. So buy this a hundred dollars a month or a year plugin and you make more money. That's not every single product. So when you're looking at products that don't directly contribute to the bottom line, when they add functionality that might be useful to an agency and that agency can, then I improve [00:11:00] their, uh, their flow and their toolkit so that in the future the agency can make websites cheaper, but it's not a direct one-to-one.

How do you talk about value-based pricing? Not just how do you talk about value-based pricing when you aren't exactly sure about the value?

[00:11:17] Ramesh Subramaniam: Yes. Let me give you the example. It's not about when, when you, when I tell you about value, I'm not actually referring to just the revenue that actually is directly the product is contributing to the business.

It, the value can be of anything. It can be of, you know, how much time, you know, it saves you, for instance. So let's say you are spending, uh, a week of your time to building a page right in, in, in your, for example, let's say an agency builds tons of websites. And every single day they build pages. And every single day when they wanted to build a page, they invest their [00:12:00] time, their human resources into it.

Right? And if you are able to save, uh, uh, at least a 50%, let's say 30% of their time, right? Let's, so, um, imagine, you know, hiring a WordPress developer, uh, in it costs, you know, 70. Right. Imagine if you're able to save 30% of their time a person's time, right? Then it's a clear value. It's, it, it's something that actually gives you direct value there, right?

It, it's, it's in, it's not a win. It's not in terms of money, but in terms of the time that you segment and how productively you're actually working. So productivity can be one of the value. Similarly, there are a number of other values that, you know, are there. Actually, for example, in terms of performance.

[00:12:54] Amber Hinds: Mm-hmm.

[00:12:55] Ramesh Subramaniam: In terms of how optimized your website is, and there are a number of [00:13:00] similar such values that a product can deliver. All you have to, all you have to make the, your customer understand is that they understand that ROI clearly.

[00:13:11] Amber Hinds: Yeah,

[00:13:11] Ramesh Subramaniam: you pitch them. What is the auto idea getting?

[00:13:14] Amber Hinds: I, I, well, I was gonna say, I think a lot of it really, it does go down to money, right?

I was in a Facebook group earlier this week and I saw someone be like, does anyone know how I can I. Promote or how I can import all this data in. I don't wanna buy wpa all import, and I wanna do like an SQL. And literally my comment was, you're gonna spend so much time trying to figure out how to write an SQL query to import this in.

Like time is money, right? It's

[00:13:43] Zack Katz: going to break and you're gonna end up buying it anyway. And then you're gonna hate yourself for not having done it. Earlier I was like, just,

[00:13:49] Amber Hinds: just buy WVL import. Yeah. It's so worth it. But like, so I think there's the time argument, but again, it comes to money. Um, the performance that can vary easily if you sell a [00:14:00] product that optimizes website speed.

Well, there are tons of studies out there that say. You know, optimized time on site means more or better load times means more people stay on site, which for an e-commerce results in more sales for, you know, an ad driven site results in more ad revenue, right? I do think the value is a lot of times can be drawn back to revenue like our tool.

Is a tool. Our accessibility checker plugin is a tool that applies to agencies, and it doesn't always directly result in the same way that a WooCommerce addon might in increased revenue. Right. I mean, we do sometimes connect it to, well, obviously if your website can be used by people with screen readers, then they can buy your products and you'll make money in a way that you wouldn't.

Right. Um, but, but we've also been able to connect it for. Agencies who are making money, they make money selling [00:15:00] websites, and they can make more money selling websites if they can deliver a better website product. And our tool helps 'em deliver a better website product, or it could help with recurring revenue.

So I think there's a lot of ways to have different things that come back. To value that hits bottom line, even though on the surface you might not think it hits bottom line.

[00:15:22] Ramesh Subramaniam: Okay. So here is actually, and one more thing that you know, uh, another mistake that most of the, you are asking, Jack was asking what are the other mistakes that people actually do?

So most of the product developers don't even define their.

When I say ICP, ideal customer persona. So when you are making a product, it, uh, not everyone is basically is your customer.

[00:15:45] Amber Hinds: Mm-hmm.

[00:15:46] Ramesh Subramaniam: Right? As a product. You know, this is what I'm trying see, some of the, my ideas are actually quite the opposite of the, you know, popular. Uh, it, it's not okay. So [00:16:00] I probably, because I'm coming from a journalist background, so that probably is the reason journalists are always right.

So, so one of the, uh, one of the single most mistakes that, you know, people make when building their product is they're not identifying their customers. They think thateveryone. Not everyone is a customer. Um, for instance, uh, in the case, an accessibility agencies are the most.

[00:16:32] Amber Hinds: Mm-hmm.

[00:16:32] Ramesh Subramaniam: And when it comes to a return for like, uh, ours, like, you know, it's an email marketing tool. Uh, it's an, we are not a general email marketing tool. We are actually specifically focuses on an e-commerce store, especially eCommerce and Shopify store rooms. And our customers are, uh, you know, are a store owner.

[00:16:51] Amber Hinds: Mm-hmm.

[00:16:52] Ramesh Subramaniam: A store, its email is basically must have.

But again, [00:17:00] uh, we have a even further sub categorized than into our ICPs divided into multiple categories. So who.

And, uh, these are all the people we need to target initially to get the initial traction. Once you get there, then your I CCP actually changes. And then, you know, once you get that stage and your I CCP changes, so your I CCP needs to be defined at every single stage. And then you need to reach your value.

You need to, you know, give value.

And value

[00:17:35] Zack Katz: actually sells you

[00:17:36] Ramesh Subramaniam: more.

[00:17:37] Zack Katz: So how do you mm-hmm. With WordPress products and, you know, across my different product lines, I have, I have a bunch of different, uh, price points. And so, GravityKit, let's take GravityKit as an example. Uh, GravityKit is a very, it's a technical tool in the sense that you need to be like a site builder or somebody who is familiar with the WordPress site to, [00:18:00] to, you know, to take advantage of it.

But that might not be the end user. But like in Word, in the WordPress space, there are so many different roles that do the research into plugins that refer, oh, I saw this as a solution, and then refer it to the agency that's actually building the site. And the agency, the person that might be forwarded to is the developer, and the developer says to the product, project lead, Hey, I need this software.

And the project lead reads the same website that everybody else has been reading, uh, and the price, the value. To the developer might be different than the value to the end user might be different than the value of the product. How do you do that in a way that makes sense to everybody who's gonna be looking into this product?

Because unlike maybe retain full, um, it's not often, it's, it's not a single person who's making this decision and who's identifying the need for it.

[00:18:53] Ramesh Subramaniam: You are correct Jack, this, it's a very good question and your observation is actually is absolutely perfect. [00:19:00] Defining ICP is one of the most difficult tasks actually.

It's not just every single product that can, you know, fit into a particular box and then, you know, we just go straight into it and then, you know, market that, a specific audience that that's not, it's getting in defining icp. I.

In a product like, uh, that actually what you said, for example, what the need, the requirements of a developer and the requirements of Aster, you know, the person is who owns the site, are the person who actually runs an agency, is actually completely different. And that is some of the products, like you have mentioned that

again, you can do.

Here, the messaging has to be perfected into, uh, multiple, uh, segments, right? So your se their target audience does not have to be, you know, uh, one single [00:20:00] segment of customer, one single box. It can be of multiple different segments. Each segment has to have a different messaging. Uh, I'll give a simple example.

In terms of email marketing, uh, different industries actually require different types of marketing. Email marketing. You cannot have the same messaging delivered to a person in their apparel category, uh, to a hardware category.

That's not possible. Similar though though, email marketing as itself is a, uh, is a, we can define our, you know, uh, ICP in a bigger box. But again, that actually can be segmented into multiple ones. And then, you know, you can deliver the messaging according, it can pitch the value accordingly. So that is how you know it, it's very relevant to, in determining pricing.

Um, [00:21:00] uh, one more, uh, example is, uh, before we comment to that, you know, we were talking about Apple, right? Apple is a biggest example in terms of talking about in a software model. Apple is, uh, apple is actually, is very clear about their customers, who they wanted as wanted as a customer. Not everybody is actually goes and buys an Apple and if you, once you buy an apple and you.

[00:21:29] Zack Katz: Because it's expensive because you're a Mac

[00:21:33] Amber Hinds: and not a pc.

[00:21:38] Zack Katz: Oh. Why do you choose a Mac? Yeah, because I, I'm definitely a Mac, even though I'm kind of probably a pc.

[00:21:46] Amber Hinds: Yeah, I, I think these, you know, like developing the use cases, understanding who your customer is really important, and I think those. The use case or the, you know, who we serve kind of pages on a website [00:22:00] can be very helpful for.

Justifying pricing to your customers or allowing your customers to see themself in your product and in your pricing. But I kind of wanna transition us a little bit back, maybe a step for some of the people who are watching who might not I. Be as aware of even what different type of pricing models they could take.

And I feel like it would be useful to talk about these high level and how you would choose different ones. So things like, for example, we used to see a lot more lifetime pricing in, um. WordPress, it kind of went away from, but there are still some people who do that occasionally. Maybe only on Black Friday or maybe all the time.

And then we saw the folks from Basecamp recently come out with a, a pay once model, which is literally kind of like a lifetime pricing. Yeah. Um, and then there's lifetime yearly subscriptions, which is most common in WordPress. We have some monthly. Options, which you don't see a lot in WordPress, but it's very common [00:23:00] in a SaaS.

So I feel it could be useful for us to go in and talk about these different models and what they mean for a business's revenue stream and how you would choose which model to even use.

[00:23:13] Zack Katz: And how it best aligns with the value that you're providing to, to users. Like, uh, in some, some instances, uh, for example, in email marketing, the more emails you send, the more money you're likely going to generate from that.

And so you might wanna charge per tier of emails being sent. But then in things like, uh, help Scout, for example, and customer support models, you might wanna have a per seat pricing structure, depending on, you know, how many support users you have. And then WordPress space, uh, we often do the yearly and not the usage based or the metered billing or the tiered pricing models because it's kind of easier technically to just say, here's the software pay once per year.

And, and if it's active, it's active for as many people as you want. But I feel like that's [00:24:00] a changing currently in the WordPress space as things get more connected to, uh, the usage of a product and, and less, less free and open source and more paid in open source. Yeah,

[00:24:14] Ramesh Subramaniam: sure. Uh, so, um, we can categorize these things into five, five or six, uh, pricing models.

Let me go one by one. So one of the most popular model is actually is the premium model, uh, which we use in most, uh, the. So you create a free product, uh, with less number of features, limited number of features, and then you create a premium, uh, version of it with a lot of features, and then you sell it. Uh uh.

Early on a monthly basis on a subscription model recording pricing model. So, uh, and also there is one more, uh, sub classification towards that. You know, uh, you sell based on the number of license, I mean number of sites that you [00:25:00] wanted to use. You start with the single site. You start with the three sites.

You start with the, uh, 25 sites model. It's all on a recurring basis. So this is an annual recurring basis, premium free plus premium model. This is the most common model that most of these WordPress products, most of WordPress product success.

The recording model, uh, helps the businesses to sustain their revenue they need, they thought of a prediction and their how much revenue that they will get on a each year basis. Um, so that, you know, they can plan to their investment, they can continue their development, they can, uh, invest in their support and other, uh, infrastructure that is actually

success success.

For themselves. Right. And this is one of the most important model and there are people who are actually combine the occurring plus the lifetime [00:26:00] model as well. So they actually sell a lifetime deal as well. And uh, which, uh, is limited to per site or unlimited sites. That is one more model. Personally, I'm not a big fan of lifetime model.

In the earlier episode, Kevin Gary was talking an interesting.

Uh, uh, an interesting use case I hear from, uh, some of my friends were using, uh, for lifetime model is that they, uh, they in, when they launched their product, they actually introduced the lifetime model to customers, right? Initial customers, early adopters, kind of early adopters, and then they used the lifetime model to, you know, like gather the vital feedback about the product itself.

Initially when you launch your product, it's not everything you, you don't know anything. Basically, everything is your assumption. It's a guesswork. It's not a product. That's what I call it. It's basically a guesswork that this is actually something that is we're gonna to deliver to customers and they will [00:27:00] actually love about it.

But in fact, in the, you know, when, you know, when we launched product, it's most of the time, you know, the feedback that we get it, Hey, this is not something that I wanted, this is something that's something else I wanted. We might imagine that there is one feature.

That is the worst feature that we would've included, and that is another small feature which we thought seemed significant, would become something, you know, much bigger because people would to, would allowed it and used. So this is like a kind of a vital feedback that they use. Uh, lifetime customers you limited period.

They run for a limited number of licenses. This is one of the important use case for, you know, using a lifetime. But if you are offering a lifetime, uh, model for all the time, right? Every time may not be really recording model might be very sustained. And there are, when it comes to, um, fast pricing, [00:28:00] like you mentioned, we have cleared pricing and usage based pricing.

So there is a seat based number of seats you have, and usage based is basically how much usage you. Based on, you know, for example, in threefold, it's, um, everything is based on the contact side. Uh, it's contact I use basically usage. So the more you usage, the more you pay. So you, your pricing grows as your business grows.

Does the pay, pay as you grow, that's a, a simple way of model. Then that is another model, which is becoming popular these days. Um, it's a, a revenue share model. It's not like a revenue share model. It's like, uh, you take a small percentage of it. It doesn't work for every, uh, product, but it works for some sort of, right.

So, uh, for example, in affiliate marketing. They, they, they take a percentage of your affiliate marketing into, they, they don't charge anything for you upfront. You don't have to pay anything. You, you can [00:29:00] pay just, uh, 1% of your affiliate, say in SA fee for using the software, maybe plus, uh, a monthly fee. That is another model that is actually these days getting popular.

And because, you know, since there is no upfront fee that, uh, the, you know, merchants don't have to pay, I mean, the customers don't have to pay. Most of the customers, especially those who are starting their businesses and they're launching their businesses, growing their businesses, they adopt this model p as in grow model as well,

[00:29:29] Zack Katz: which can often result in being very expensive if you get popular.

[00:29:35] Ramesh Subramaniam: Yeah. Yeah, it's true. So when you get popular, you move into the tire where you know you don't have to pay, you know? Right. That just, so these are the models that you use premium with, uh, uh, free plus, uh, recurring model, and you have a lifetime one, and you have, uh, usage based, uh, tier based pricing model.

And then you have a commission based model. [00:30:00] Uh, most of the WordPress in area, I think the reckoning model will be, uh, may. A pre a premium with, uh, reckoning model might be much better because it gives you, uh, a revenue support. It, it actually helps you to build a sustainable product business.

[00:30:22] Zack Katz: So when it comes to lifetime pricing, uh, one of the things we do at GravityKit is we have lifetime pricing price as a multiple of the number of years that are, uh, are, um, our annual plan costs.

And we have calculated, for example, that, uh, our, uh, average, and I'm just gonna make up some numbers, but our, let's say our average customer, uh, lasts 3.4 years. And we, looking at this, we, we determined that we should price the lifetime pricing plan at four x our annual lifetime, our, our annual plan, [00:31:00] so that we on average, make more money per customer, uh, than we would otherwise.

One of the downsides with lifetime pricing as I understand it, is that if you are looking to sell your business, a potential acquirer might look at your lifetime plans and say, well, this is. Lost future revenue, which I disagree with if they're not using your product anyway. Like if the average lifetime of a customer is shorter than on average, that's not the case.

Uh, but they also don't want to have a permanent support load. So one of the things that, uh, we've done at GravityKit, uh, years ago and like, uh, other people have also done in the WordPress space recently is to say, lifetime plan with a three year support license built into this. You get software updates for life, which is zero marginal cost, and you have a few, a fixed amount of support.

What's wrong with that pricing model? Like, uh, how, how can you, um, why is that not the best option? I.

[00:31:58] Ramesh Subramaniam: Right. Uh, [00:32:00] Jack, uh, before even I went, gonna answer that, uh, it's a very good question. Uh, when it comes to pricing, there is nothing wrong or right about, uh, the pricing, right?

[00:32:11] Zack Katz: Yeah.

[00:32:12] Ramesh Subramaniam: That's a good thing for, for our listeners

[00:32:13] Zack Katz: to understand is like there's no right answer.

I, I was just trying to become, there's no,

[00:32:20] Ramesh Subramaniam: when it comes to pricing, there is no right answer. It's all in the, on a trial and error basis. It depends on the product that you're building. It depends on the kind of, uh, uh, you know, target audience you have. It depends on the, even, it depends on the geography that you live in.

And it's even the, depends on the kind of technology, the kind of investment, the kind of work that you are actually, uh, um, uh, the recording costs are development is.

Like you mentioned, the one, the one, uh, the downside of uh, having a lifetime deal is [00:33:00] actually, is when you try to exit your business As a product owner. As a product owner, at some point of time it's. Lifestyle business where, you know, you travel with the product for a longer time. So once you are able to grow a particular point of time, you try to and you try to exit.

And then you know, when the potential, uh, you know, investor or the buyer will actually have a, a red flag into it because, you know, you have a, a set of customers for which you know you are bound to provide. Uh. Free support or free updates, and I mean, lifetime of updates. And you need to continuously listen to it.

And there is no further revenue, future revenue to that, uh, type of customers. So they'll actually tend to ignore that and then they, you know, and then value rest of your business that actually brings a future revenue.

That is, even though some investors don't mind [00:34:00] it, most of the investors that I actually, most of the buyers would actually take this into account. Another downside to it is that, and the customers that, uh, uh, it's, you know, um, more than building a product, right? You know, supporting it is actually has a recurring cost for.

We need to invest in a good support. We need to have people who actually talk to customers, solve their problems, take their feedback and relay the feedback to your development team, continuously contribute to the product development, and then the only then you product mature and your product actually continuously grow.

And then you can, uh, not just one product. And you can continuously invest on this even if you just have. One, one, only one product. You can continuously invest on that product and then grow your, um, revenue and in, in a very sustain, so that actually costs a lot money. [00:35:00] If you need to hire, you need to invest in good.

It's not like, you know, uh, so for, for instance, you know. If you, there are tools, there are free tools, right? You can, you, you, even if you go for a, a basic plan for a ticketing system, you would end up paying at least, uh, even if you have a three support reps, you would end up paying even $200 a month. It's about works, about $3,600 a year.

If you wanted to invest in a three support agent team with a good ticketing tool. Just for example. Yeah,

[00:35:39] Amber Hinds: I think there's a lot of math that has to be done around what you think your operating costs are going to be when you're deciding on your pricing. So, you know, you had mentioned early on Ramesh, that it doesn't make sense to only look at what your competitors are doing and being like, okay, I'll just charge $10 less than them.

Right. Um, because of your [00:36:00] operating costs. Don't match their operating costs, it doesn't matter. Like you may not do that. So I think there's a lot that goes into this. Um, you know, what other revenue do you have coming in while you're waiting for this new product? Whether you have other products that are already bringing in revenue, whether you are an agency doing service work or a freelancer, or you have a full-time job somewhere and your product is your, you know, your.

Side hustle that you're working on growing? Uh, I think you have to figure out what is the timeline at which you want to be break even on this product, knowing how much you're gonna put into it, how much you expect it to maintain. And then, um, I. And what are all those costs? And then from there there's kind of a point where you can sort of figure out what will the market bear from a pricing standpoint.

'cause obviously you don't really wanna be an outlier either direction. Being too cheap sometimes makes people think, well, this product can't possibly meet my needs being too expensive then. Or like, eh, there's be, there's other [00:37:00] alternatives or maybe better ones because they're more mature, so they have more features that cost less money.

So why would I buy this? Right. Um,

[00:37:07] Zack Katz: and, and, but I think, and being too creative is also a huge problem when you come up with your own pricing structure that nobody else is doing. That's a huge turnoff,

[00:37:16] Amber Hinds: I'll say. So with, um, with Accessibility Checker, we have. Uh, pricing that we have heard from some people.

It's expensive for a WordPress product in that we don't have an unlimited site license. So you can buy up to 25 sites off our website, which is if you do, we have yearly and monthly for that. If you do yearly, it's $1,800, which $1,800 for 25 sites is pretty expensive for a WordPress plugin, but not very expensive if you compare it to some of our SaaS competitors at all.

Right? Um, and then if you want more [00:38:00] than 25 sites, you contact us and we give you pricing, but it is never unlimited sites. And that's unusual for WordPress and we have gotten complaints about that, but it's, you know, you have to balance that out because we haven't gotten enough complaints. That for us, we're like, yeah, but we also need to have a sustainable business model.

[00:38:18] Ramesh Subramaniam: So that will always be, sorry to interrupt, and there will always be people who will actually complain about it. It's uh, it's like I said, you, you never get the pricing right, tell you lifetime, uh, you know, mark my breaths. You know, it, it's not that, you know, whatever the price, you know, even if you put the $10 per year, per year, people will still compliant.

There will be people who are actually still compliant about, you know, $10. It's actually expensive it business, but you know, when you product, like I mentioned, if delivering the value and then people are finding the value, then they will be you willing to pay for it There. There is no second question about that.

And people

[00:38:57] Zack Katz: mm-hmm. You can keep on raising the prices. So this [00:39:00] is, this is the way that we did it, and this is, I think the natural way of the world is you start lower than you should be, and then you keep on increasing your price until you meet resistance and you, your sales go down and then you say, oh, okay.

That seems to be like the, the, the price where the, the sweet spot. Where I, uh, people are okay paying up to here. Now, it might be that your messaging isn't right and you could be charging a lot more, but it could be that this is the sweet spot for your product and stop raising prices. It's gonna be a lot harder to lower your prices, and people will complain a lot more if they've renewing at a higher price than your current price is, uh, than it is to keep on raising prices.

And year over year people think they get a good deal if they're locking in their subscription, uh, at a lower price.

[00:39:47] Amber Hinds: This is a thing that we, when you talk first released excessively, when you talk about, oh, hold on one sec. I, so I, I. People get anchored to pricing, right? And [00:40:00] so one of the things that we did with Accessibility Checker was I knew we were gonna release what was an MVP.

It was not gonna have a lot of features. It was not going to have what I thought it needed. Um, I mean, I don't know if we ever have what we think it needs, 'cause our ideas about that change, but, but I was like, I don't want people to get anchored to this really low price. So when we first launched the product.

We had what I thought the price should be, and we had a 50% discount for those people. But it was not a, it renews at the full price. It was a, you buy now, you will have this lifetime 50% discount because that's your early adopter. Thank you. Mm-hmm. Um, and here's some feedback about where it's going, but I didn't want people to get anchored to this 50% price that I thought was all it was valued at.

At the time of launch, because then when we go to like increase the pricing to what I think it's valued at now, right? Like then that's a huge jump. [00:41:00] So, so we did that so people could see and get in their heads at some point in time it's going to cost this amount of money. And then in fact when we got ready to get rid of the 50%, you know, this is your price that you pay subscription.

We literally emailed the list and we're like. Next week, the prices are gonna go up and we're getting rid of our early adopter discount. If you want that early adopter discount forever. You should go buy now. Right? And, and that was helpful. But I think you know that there are ways to approach pricing a new product where you can do that without having to like start really low and have people anchor to this low idea.

Like they can anchor and be like, oh, I'm getting a really good deal now, but I do want to. I wanna, and I think it's kind of relevant. We had a question that came into the chat from Harshi, which is, how about renewal pricing, same double or what, because this is something we see from people, which is, I think Zach, where you thought I was going when I said it was 50% off, where they sell the initial [00:42:00] purchase for 50% off and then it renews at full price, which is double what.

So I'm curious, um, maybe Ramesh, you have thoughts on it first, and then Zach can follow up. What are your thoughts on this, this approach to the discount on your.

[00:42:16] Ramesh Subramaniam: So when you do a discount on the first purchase and the renewal price is actually double averted, is, you know, people will actually do a lot of crazy stuff, creative ways of getting a, we know that discount.

So what they would do is that they would just cancel the, the subscription and then they will actually buy it again if you have a discount. But there's also a reason why, you know, during Black Friday and the Cyber Monday, you know, you get a crazy, you know, amount of uh, you know, uh, deals and discount pricing, which happens, and when people actually cancel their subscription and then, you know, then come back and then buy.

So that's another side to this approach. Usually what most people do is that, you know, when they, [00:43:00] when you provide a discount and the initial purchase, and like you mentioned for early adopters, you lock the price forever. It just another create not just creative approach, but it is another press strategy.

That you can get people to buy your product. That's actually is one thing that you can do. Otherwise, you know, like, uh, there is another creative approach to it. So when people revenue automatically, you know, I think, you know, it was just that was actually doing this. If you revenue on time, you get 10 or 20% discount automatically.

And you keep, keep the discount. And if you renew every year and year, year on year, you get another 10% percent or many percent discount on top of the renewal. So on renewal, you, you know, because you know people, the renewal rate and worthless space is actually, is, uh, is quite tricky because the renew at a year and after a year, it's [00:44:00] not monthly.

Right? And you renew at a year. People, a lot of people forget about it. A lot of time there is a card issues. A lot of time the payment related issues crop up. So your renewal rate is actually depends on, you know, how you know the customer. They mean that the customer is actually engaged with the product.

They remember about it, they remember the subscription. They actually keep their card active and the number of factors to it. So if you're able to give them a annual discount. Discount on their renewable, it'll actually help, you know, increase the number of renewals, keep the, you know, churn very low, and have your subscription for a longer time.

I mean, your, there is a concept called lifetime value, LTV. So the customer lifetime value is continuously, you know, goes up.

[00:44:51] Zack Katz: That's the idea. And this is, um, but it, one, one of the things that I've found is it's so hard not just with, uh, annual plans, but [00:45:00] even Sure. With a monthly plan, uh, doing the numbers and finding out, okay, what works better, what converts better in the first place is the, and let's say I make a sale and I, I start off with a, a fixed 50% off discount for the first year, and it renews at full price the next year.

Is that customer, the customer I want is the val. Is the lifetime of that customer longer than the customer who buys at full price at a higher price? There are so many different variables that I find it infuriating and also a little exciting, but like to not have any idea the the perfect mixture, and this is maybe my takeaway from all of of our conversation today.

Is that it really depends on your business. It depends on your target, your, your ICP, your ideal customer profile. And it also, there's no right answer. So I, uh, yes. Yeah, [00:46:00]

[00:46:01] Ramesh Subramaniam: there is one, uh, 1, 1, 1 thing that I found which works, uh, great, is that you can be very transparent out about your pricing. The, the simpler and transparent you keep your pricing for any of any product, uh, whether it's a SaaS or a WordPress product or any product for that matter, the right kind of customer usually appreciates it.

And that customer is actually, is your going to be your loyal customer. And that customer is actually is you need, your business actually needs it because that customer will be like, you know, we call like angel customers. So this customer is actually, adds a lot of value to your business itself because now they understand why they're investing, paying for that new product in the first place itself.

Right. So we, we actually learned this in the hardware. We, and we initially started, we started as applauding, just providing the. [00:47:00] And then we un understood, okay, hey, the product needs to different direction. It has to grow into an email marketing solution, and the plugin way is not going to be helpful. So we actually transitioned from a plugin to our, so when we transitioned into a staffs product, you know, we thought, you know, we try, let's try different bots, different pricing models.

So we had a preplan and two, three paid plans, and each of the paid plan had different trials. Okay. Trial period. So you can try the features and the free plan is actually with limited features and each plan had feature. Okay. So this actually led to huge confusions, not just huge confusions. Most of the support records we need to go and then explain the pricing for the customer.

Imagine, you know, you need to explain the pricing to your customers when you want. When you explain the pricing to your, the moment you are trying to explain your, the pricing to your customers, it means that you're [00:48:00] doing it wrong. That's, that's a simple answer too. Yeah. Right. You need to

[00:48:05] Amber Hinds: fix your pricing table or something.

Right. If they can't understand exactly what it means exactly and why

[00:48:09] Ramesh Subramaniam: they're not able to undid, you need to fix it. So what we did is that we took a different approach. We simplified everything. You get all the features in all the plans. No limitations, just only one limitation. Number of emails. You can send it in our free plan.

You explore all the features, not just one feature. All the features. You can try all the features. You can use the features. It can have unlimited automation, unlimited campaigns, unlimited sign of firms, unlimited, well, almost everything. Unlimited contacts and everything, right? You can do that. So, and one limitation we had, it's one single limitation is the number of emails that you can.

That's only limitation. You have it in the free plan, then you upgrade to the paid plan. You get all the features and unlimited emails, unlimited. The number of emails is limited to the based on your contact size. [00:49:00] 10 x of your contact size is the number of emails you can send it per month, and that you can, that is only, uh, limitation.

That is the one thing that the customer have to understand, that we made it clear in the pricing table itself. Once we made that, then all the questions stopped. No questions.

[00:49:18] Amber Hinds: Yeah, I think I, I agree. It's super important to have a, a pricing table that makes sense for people. I think, you know, a lot of times in WordPress it seems challenging to figure out ways.

So what those feature lines are, it's, it's easy to say, okay, well if I'm gonna make this, this feature a separate add-on plugin, then I can only make that add-on plugin available to people at certain pricing tiers. Um, but of course that adds development overhead. 'cause now you're maintaining multiple plugins and sometimes when you wanna release an update, you actually have to update due in order to just add something to one of them.

Um. And of course, you know, like, it, it can be hard to think about, well, how can I do seat based pricing when in WordPress anyone can [00:50:00] add as many users? So there's a lot more complexities there. Um, but I do think from a, a business longevity standpoint, having, you know, putting a lot of thought into what's gonna provide the most sustainable.

Pricing for your organization and your company is really important and, and we are about at time. So I'm sort of wondering if we wanna close out and transition over to best advice and this is Ramesh, our sort of like elevator pitch. If you had to give a new product owner, you know, three sentences about what your best advice is, uh, for.

Setting pricing for their product. That's, that's what this is. And, uh, I don't know which one of you wants to go first, Zach. All right, Zach. Zach, what's your best advice, your new, my

[00:50:54] Zack Katz: advice is don't ask people if they think the price is fair. It never [00:51:00] works. Uh, if you have a new product and you say, Hey, I'm thinking of charging this, would you pay that?

Oh yeah, I'd pay that. They never actually buy your thing. Don't go off of, don't ask people. Just try it out. And that's, uh, that's my best advice.

[00:51:15] Amber Hinds: What's yours, Ramesh?

[00:51:16] Zack Katz: My,

[00:51:18] Ramesh Subramaniam: that's, uh, simplicity. The more simpler, easier for your pricing to understand for the customer. It's the best one that you can go for. So keep it simple and keep it like a a premium model where you have a pre version and have a paid version and have it clearly mentioned what you are offering, what the value that you're actually getting from each of your plan.

If you have multiple, clearly mention simple, transparent, clarity. This actually wins when it comes to price. Whatever model you offer, whatever pricing model, subscription model, any model that you think, [00:52:00] anything that is simpler, anything that is transformed, anything that has a clarity wins. All day.

[00:52:07] Amber Hinds: So my advice is something you don't see very often in uh, WordPress products, but I think that you should offer monthly pricing.

We have had a ton of luck with this on our higher tiers, not our very lowest. We got rid of monthly on that because it had $15 a month, resulted in huge amounts of churn. But our larger tiers have monthly pricing and we have a lot of people. Upgrade because of that. And it gives us con consistent monthly revenue, which is really nice and super helpful.

So I would advise people to consider adding monthly if you don't have monthly.

[00:52:47] Zack Katz: And with the monthly plan, the issue is that you have to turn off the functionality if it, if they stop paying. Is that correct, Amber?

[00:52:55] Amber Hinds: Uh, yeah. I mean, you need to have some way to enforce it. Otherwise [00:53:00] they'll just buy your plugin for monthly.

Month, the monthly costs, and then stop paying you. Uh, we do restore functionality in our plugin if the license isn't being paid. And there are lots of WordPress plugins that are doing that now. And I would say honestly, moving towards operating more like a SaaS is going to better position your plugin.

From a longevity standpoint for keeping people renewing, but also in the long term. Also, if you do want to sell or bring on investors and sell part of your ownership stake in that plugin, um, you probably do wanna think about having some features that get turned off.

[00:53:47] Ramesh Subramaniam: Yeah, people probably hate me right

[00:53:49] Amber Hinds: now and I don't even wanna know what some WordPress leadership figures have to say about that, but literal truth.

[00:53:57] Ramesh Subramaniam: Hey, that's the true actually [00:54:00] you, you have to sustainable, right? So you need to keep the product in your shipped every single month. You know, you need to keep sustainable. You need to have a sustainable business. If you are super happy, then your product will be very, you know, have a very good quality and the users will also be very happy about it.

So it's a win-win monthly pricing works. And product also, like you said, you know, can go for a monthly or yearly. Yeah, it depends on the choices that I support your argument.

[00:54:33] Zack Katz: Well, that's a wrap. Uh, Ramesh, thank you so much for joining us. Where can people find you online? I.

[00:54:41] Ramesh Subramaniam: Uh, I'm very active in LinkedIn, so you can find me Ramesh Broman and, uh, having, uh, uh, and uh, just search for Ramesh Broman from Ful or search for ful and find me so you can find it in the rig. I'm very active in LinkedIn.

You can find me there and not [00:55:00] much of a.

[00:55:11] Amber Hinds: So thanks next week.

[00:55:13] Ramesh Subramaniam: Thank you. Yeah.

[00:55:14] Amber Hinds: We are so glad to have had you here, Ramesh. Thank you. Um, next week for all of our viewers, you can tune in. I will be back with our co-host, Katie, Keith, and, uh, mark, we Broad will be joining us and we'll be talking about how to create a go to market strategy that drives sales from day one.

[00:55:34] Zack Katz: And special thanks to post status for being our green room where we coordinate these shows. Uh, if you're enjoying WP Product Talk, do us a favor, hit like, subscribe, share it with your friends, reference your show in your newsletters. Uh, reference this show in your newsletters. Uh, and don't forget to tune in next week.

Bye.

[00:55:52] Amber Hinds: Bye Bye.

[00:55:53] Zack Katz: Thank you. Thank you.