I don't agree with this–or maybe I do. It's hard to tell without knowing what he means by "testing your price with customers".
I think asking customers "what would you expect to pay for this?" should be part of your initial usability or beta test with potential customers. 2 Reasons for this: (a) your target market has certain price expectations for products and (b) you might "tell them" what to pay and still be too low.
I just did this with a new product we launched. My lowest plan was priced at $9/month. We did a usability test with our target market and ask them (at the end) what they expected to pay for a product like this. Only 1 person said a number lower than $20/month–and they went as high as $100/month.
"I just did this with a new product we launched. My lowest plan was priced at $9/month. We did a usability test with our target market and ask them (at the end) what they expected to pay for a product like this. Only 1 person said a number lower than $20/month–and they went as high as $100/month."
However, that doesn't imply that they WOULD pay that for a product. The conclusion they might draw (validly or otherwise) could be "I'd expect to pay a lot more for this product, so I won't even consider it an option - it's out of my range."
I might expect to pay $1,000 for a table for 4 at one of Gordon Ramsay's restaurants. I might be pleasantly surprised to find the average bill around $600. That doesn't mean I'll pay $600 for that, though.
In the next post, I'll cover my approach to not only how to test price with customers, but how to get them to want to pay.
Yes, pricing is a conversation but you need to lead the conversation because if you pause and think about it, there is no rational justification for your customer to offer you a fair price.
They are either clueless on value and don't know
OR
they'll low-ball you because they want a good deal.
"The fair price for your product is usually higher than what both you and the customer think".
I think asking customers "what would you expect to pay for this?" should be part of your initial usability or beta test with potential customers. 2 Reasons for this: (a) your target market has certain price expectations for products and (b) you might "tell them" what to pay and still be too low.
I just did this with a new product we launched. My lowest plan was priced at $9/month. We did a usability test with our target market and ask them (at the end) what they expected to pay for a product like this. Only 1 person said a number lower than $20/month–and they went as high as $100/month.