Free Assessment: How does your inbound marketing measure up?

Get Started

Free Assessment:

How does your inbound marketing measure up?
Take this free, 5-minute assessment and learn what you can start doing today to boost traffic, leads, and sales.
Get Started

Free Assessment:

Don’t Roll the Dice: 4 Rules for Pricing Your Software Product

By John Bonini

Don’t Roll the Dice: 4 Rules for Pricing Your Software Product

pricing-your-software-productI had a pretty candid phone conversation last week with the CEO of a newly-launched software startup who told me, “we spent so much time thinking about engineering the product that we completely neglected the marketing and sales aspect of the launch.” 

But hey, when you’re in the trenches developing a product, many things tend to take a backseat to the engineering process. 

Sleep. Food. Overall hygiene. It happens. 

Sometimes this works, sometimes it gets you into trouble in a hurry. 

Most startups aren’t afforded much time when it comes to proving profitability. That’s why things like pricing need to be clearly ironed out before launching your minimal viable product (MVP).

The operative word here is clearly, as this is no "roll of the dice" as Neil Davidson puts it in his guide on software pricing. 

Control your pricing by being different

Positioning isn’t so much a marketing tactic as it is an engineering one. At its core, how is your product or service unique from the rest?

If it isn’t, you have bigger problems than pricing your product.  

Differentiation in your offering allows you to control your own pricing, as if you’re too similar to the competition, the market will control it for you. Now, your product bias probably has you thinking, “We’re completely unique. We’re not similar to anyone out there.”

If this is true, kudos. But let’s be real, there’s enough risk in starting a company in the first place, creating a new product category or market is even scarier. Chances are you'll be elbowing for marketshare at some point, so it's all about finding fertile soil that's going unnoticed. Identify your niche and position your product and marketing differently and you’ll have much more control over pricing.

Perceived Value vs. Objective Value

You’ve engineered a great product. Great. 

No one knows how great it is until they’re using it. And typically people aren’t using products they don’t perceive as valuable in some way. 

People first need to perceive the value of your product before they can experience it. 

“Hopefully their perceived value is, to some degree, a function of the objective value. If not, you’re screwing something up,” says Dharmesh Shah, founder and CTO of HubSpot. (Source:

For marketing and sales, this means focusing more on the benefits of your product rather than its features. What is it solving? What pains are you addressing? 

Before launching a product, or even in the early stages of doing so, only the engineers understand the true objective value of a product. It’s up to marketing and sales to convey this value in a way that empathizes with your audience. This directly impacts perceived value.

Customers are buying the entire experience, not just the end product. How is the user experience on your website? How are they treated during product demos? How high is the barrier of entry for people to try your product?

This is all part of perceived value. People pay more when the experience justifies it. 

Avoid Price Wars With Competitors

Engaging in a pricing war with a competitor is dangerous for two reasons:

  1. If price is your only differentiator, what happens when a bigger, well-funded company comes along and decides to squash everyone on price?
  2. As Seth Godin says, when you compete on price, you’re simply in a "race to the bottom.” Who can be the cheapest? Everyone loses.

As we talked about earlier, your main differentiator should be your product offering, not your pricing. As tempting as it might be, it’s better not to even go down this road, as the market response is always going to dictate the price. So if you're fully engaged in a pricing battle, the only winner (or loser?) is the one who is cheapest. 

Pricing Tiers Have Complexity 

A logical step for many early stage software companies is to (at some point) introduce segmentation into the pricing model. 

This can be great, but as Shah warns:

“Remember that this segmentation has a price — it’s not free revenue.  For example, when HubSpot went from a single price ($250/month) to two prices (still pretty simple), life got a lot harder.  All of a sudden, our marketing, sales and even our operational efforts got more complicated. The reality is that when you add a new dimension to your pricing structure, you’re adding a new dimension of complexity.”

Consider the trickle down effect, from product to marketing to sales, before making any changes to your pricing. Not because you shouldn’t do it, but because the level of complexity can be better managed when everyone is prepared. Once the process and infrastructure is in place, future adjustments are easier to manage.

Don’t wait on pricing your software product

Launching a new product can sometimes feel like a roll of the dice, but your pricing model should never be a gamble. Even in the early stages. Heck, especially in the early stages.

So focus on engineering. That’s great. It’s much easier to market a remarkable product than it is a good one, anyways. 

Just don’t neglect your pricing model, because sleep, food, and overall hygiene can (arguably) wait. 

Profitability cannot. 

Free Assessment:

How does your inbound marketing measure up?
Take this free, 5-minute assessment and learn what you can start doing today to boost traffic, leads, and sales.


Marketing Strategy
Published on October 3, 2014

Recent Articles

How a Lack of Sales and Leadership Buy-in Is Killing Marketing Morale Worldwide
March 6, 2023 • 5 min read
Website Conversions in 2023 — STOP, START, KEEP
January 25, 2023 • 5 min read
Sales vs Marketing in 2023: What’s The Difference?
January 5, 2023 • 7 min read
How To Set Content Marketing Goals for Growth
December 29, 2022 • 6 min read
Should You Hire An Agency to Create Your Content?
December 12, 2022 • 4 min read
24 Essential Questions for Understanding Your Ideal Customer (+ Infographic)
December 1, 2022 • 5 min read
HubSpot Pricing: Your Guide to Everything HubSpot Costs for 2023
November 20, 2022 • 13 min read
Take It From an Expert: You Probably Don’t Need a New Website
November 16, 2022 • 4 min read
Inbound Marketing Benefits Explained (Updated for 2023)
November 15, 2022 • 6 min read
Want to Win More and Improve Company Culture? Do More Role-playing
November 9, 2022 • 4 min read
4 Ways To Recession-proof Your Website In 2023
November 1, 2022 • 5 min read
Why Trust Is the True Currency for All Business
September 5, 2022 • 7 min read
The Big 5: Best Business Blog Topics to Drive Traffic, Leads, and Sales
August 29, 2022 • 10 min read
What is a Content Strategy? (Definition + Templates)
August 25, 2022 • 12 min read
10 Marketing Objective Examples To Guide and Focus Your Strategy
August 18, 2022 • 6 min read
What Marketers Need To Know About Switching to GA4 [Google Analytics 4]
July 30, 2022 • 5 min read
How To Inspire Your Marketing Team To Try New Ideas
July 25, 2022 • 5 min read
Do I Need To Invest in Marketing When My Business is Thriving? (+ Video)
July 21, 2022 • 7 min read
How Much Does It Cost To Become a World-class They Ask, You Answer Case Study?
July 16, 2022 • 12 min read
Demand Generation vs. Lead Generation: What’s the Difference?
June 6, 2022 • 5 min read
What Small Business Leaders Need To Know to Thrive During a Recession
May 23, 2022 • 7 min read
Blog Editorial Calendar for 2022: Templates, Examples, and Tips
May 21, 2022 • 6 min read
Green Energy Inbound Marketing Strategy: The DIY Approach to Getting More Customers
May 7, 2022 • 9 min read
33 Most Important IMPACT+ Resources To Train Your Marketing Team in 2022
April 26, 2022 • 13 min read
SaaS Inbound Marketing: How to Get Started With Your Strategy (+ Examples)
April 16, 2022 • 9 min read