Valuable Blog post from Visual Website Optimizer:

We are in the process of finalizing pricing for my startup Visual Website Optimizer, which is an A/B and Multivariate testing tool. As you can imagine, fixing price is one of the toughest decisions that a startup has to (inevitably) take. Once fixed, it could be extremely difficult to change it without annoying a lot of customers. We want to be extra sure that we don’t end up under- or over-pricing Visual Website Optimizer. So, how do we decide what to charge?

Asking beta users can be one of the strategies and we actually used that for VWO. However, it turned out to be not the best of our ideas because users actually correlate price with quality. Further, if a product is innovative (like VWO is), users aren’t able to rationally determine its price as they would do in established markets (read this research paper [PDF]). Hence, asking users what a new product should cost yields half-baked information as they have little or no reference points to determine the ideal price.

Another way to determine price is, of course, to look at what competitors charge. In the world of A/B testing, there is a lot of variation. While Google’s basic testing tool is free, Omniture and Webtrends solutions easily run into thousands of dollars per month. To be sure, VWO is not competing head-to-head with a free tool – it is a sure shot way to death for any startup. We are actually competing with pricey tools, at least in terms of functionality. In fact, our users’ feedback confirms our hypothesis that VWO is much better than any other A/B testing tool in the world. Does that mean, like enterprise tools, we should also charge thousands of dollars per month?

So, here we are: still undecided about the pricing. We don’t want to charge too high, neither we want to charge too less. To get better insights into pricing, I decided to research if there had been a successful startup in a complementary industry which was in a similar position. I was lucky enough to find Clicktale, a company which provides heatmaps and usability testing tools. Thanks to Archive.org, a great way to trace their progress over years is to look at their website and pricing evolution over time. (Note: I don’t have any insider information about their company nor I am affiliated to Clicktale in any manner. All material that I have used for research is publically available on the Internet).

Read the whole article here: http://visualwebsiteoptimizer.com/split-testing-blog/how-pricing-plans-evolved-over-time-for-a-saas-startup/