Photo by Images_of_Money
I recently received the following question from a reader:
[When we spoke at a recent conference] I had been thinking of a $1/month price point [for my product aimed at teachers] to make it a “no-brainer,” and you strongly advised against it, suggesting $5-7 at a minimum. Are you concerned at all about the fact that teachers could continue using the existing work-around solution? I wonder if I provide enough value to rationalize $5-7. Maybe it would be better for me to find more ways to add value rather than lower my price point?
Trying to make money selling an app for $1/month is crazy unless your market is gigantic and you have the expertise or the funds to reach them (and even then, support will kill you).
Let’s look at some numbers:
- If your goal is a meager $2k per month you need 2k customers.
- To begin, that’s a lot of non-technical customers to support for that little money. You’ll still be working a full-time job at that point so it’ll be nights and weekends. Not cool.
- To get 2k customers with a 1% conversion rate you’ll need 200k unique visitors (total, not monthly). If you crank really hard on promotion and word of mouth I can imagine you’ll ramp up to 1k-2k uniques per month. Even at 4k per month you’ll be waiting a long time to hit that 200k mark.
- These days I’ve been advising people to go up-market and try for $30/month and $50/month price points. What can you build that people would value that much?
In your case you have a hard pricing constraint because teachers don’t have a lot of extra cash lying around to spend on software. But I don’t see any way a niche product can work with a price point of $1/month. Even at $5-7/month it’s going to be extremely difficult to build revenue beyond a few thousand dollars.