Fun with pricing

Yesterday, while our team was working on a pricing model for a new product we’re developing, I found myself dreaming of split payments again. If you have ever read this blog, you’re probably aware I am a big proponent of split payments, and think PayPal would benefit a great deal by providing this functionality.

When you’re selling a product or service to a small business owner, one thing you always have to think about is how many bills that business owner pays each month. When we’re conducting user research with SMB’s and the subject of pricing bubbles up, small business owners often tell us the same story about their monthly bills and how they relate to their decision to buy new services.

“Well, ten dollars a month for this new service is reasonable, but the problem is, I have ten other business expenses to cover each month. By the time I pay for my office space, my cell phone, and my DSL, I don’t have much cash left for myself. “

The bottom line here, is that every time a business owner shells out some cash for a new tool or service to help them run their business a little better, it gets incrementally more difficult for you to sell that business owner your product or service. Creative pricing models are key to helping you sell a product to a business owner who thinks he should be pinching his pennies.

Ok, so now we’re getting back to my pipe dream of PayPal offering split payments. The other day, we were sitting around the office talking about a pricing model for one of our new products. We’ve chosen a fairly common pricing strategy. Our product will offer a way for lots of people to use it free-of-charge, but to get all the bells and whistles and use our product to accept online payments, we’re going to charge a little something each month.This is when we got to thinking about split payments again, and how they could be used to build creative pricing models that could really help us sell our product.

Imagine if instead of telling a business owner that your new web application will cost them $19 a month, you told them “There’s no monthly fees, we’ll just skim fifty cents off the top of very fifth payment”.

“Every fifth payment?” Sound strange? Well, that’s the point. It’s supposed to sound a little strange and it’s supposed to get their attention. By charging fees that fluctuate based on business volume and are imposed less than twenty five percent of the time, you’ve created an interesting pricing story that’s fun to tell and will get peoples’ attention. With split payments functionality courtesy of PayPal, it would have been possible for us to experiment with this pricing model. Too bad. Do you have any examples of creative pricing models? If so, send us an email.

Leave a Reply