Free Assessment: How does your sales & marketing measure up?

Get Started

Free Assessment:

How does your sales & 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
John Bonini

By John Bonini

Oct 3, 2014


Marketing Strategy
Marketing Strategy

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

John Bonini

By John Bonini

Oct 3, 2014

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

Related Articles

What Should a 2024 Content Marketing Strategy Include?

September 21, 2023
Mandy York Mandy York

HubSpot Pricing: Your Guide to Everything HubSpot Costs

August 24, 2023
Will Smith Will Smith

Why Trust Is the True Currency for All Business

August 9, 2023
Marcus Sheridan Marcus Sheridan

10 Marketing KPIs You Should Be Tracking

August 3, 2023
Carolyn Edgecomb Carolyn Edgecomb

How To Become a Better Business Coach

July 31, 2023
Allison Riggs Allison Riggs

Do You Need a New Website? Maybe Not

July 19, 2023
Vin Gaeta Vin Gaeta

How to Create a Content Map To Solve Your Marketing Guesswork

July 6, 2023
Brian Casey Brian Casey

Inbound Marketing vs. Content Marketing: What's the Difference? 

July 3, 2023
Brian Casey Brian Casey

How To Do a Competitive Analysis In 5-and-a-half Easy Steps

June 29, 2023
John Becker John Becker

Why Hiring a Coach is the Surest Way to Spur Business Growth

June 28, 2023
Bob Ruffolo Bob Ruffolo

Marketing Coach vs Agency: Why You Need a Coach for Real Success

June 26, 2023
John Becker John Becker

LinkedIn Could Become Your Most Powerful Distribution Channel

June 22, 2023
John Becker John Becker

Content Copycat: What To Do When Your Website Gets Copied

June 15, 2023
Christine Austin Christine Austin

My Best Sales Reps Haven’t Hit Their Quotas All Year: What Do I Do?

June 7, 2023
Marcus Sheridan Marcus Sheridan

7 Must-have Word-of-Mouth Marketing Strategies [Infographic]

May 8, 2023
Ramona Sukhraj Ramona Sukhraj

What Small Business Leaders Need To Know to Thrive During a Recession

April 19, 2023
Marcus Sheridan Marcus Sheridan

5 Keys to Marketing Your Business During a Recession

April 17, 2023
Ramona Sukhraj Ramona Sukhraj

Should Your Demand Gen Strategy Change in a Slumping Economy?

April 12, 2023
Nick Bennett Nick Bennett

Demand Generation vs. Lead Generation: What’s the Difference?

April 10, 2023
Kristen Harold Kristen Harold

How a Lack of Sales and Leadership Buy-in Is Killing Marketing Morale Worldwide

March 6, 2023
Marcus Sheridan Marcus Sheridan

Website Conversions in 2023 — STOP, START, KEEP

January 25, 2023
Vin Gaeta Vin Gaeta

Sales vs Marketing in 2023: What’s The Difference?

January 5, 2023
Marcus Sheridan Marcus Sheridan

How To Set Content Marketing Goals for Growth

December 29, 2022
Brian Casey Brian Casey

Should You Hire An Agency to Create Your Content?

December 12, 2022
Marcus Sheridan Marcus Sheridan

24 Essential Questions for Understanding Your Ideal Customer (+ Infographic)

December 1, 2022
Dia Vavruska Dia Vavruska