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title: 2. Getting Ready
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Now that you know where in the marketplace your product lives and have identified our idea customer to come up with a proper pricing plan, we need to understand the following information about your customers and product.

**What is the purpose of your product?**

- To help customers save money
- Increase efficiency
- Grow sales
- Staff happiness

Staff happiness and increasing efficiency is typical hard to quantify and prospects can balk at buying a product that doesn’t offer a clear ROI in the next quarter. If this is your value proposition, the pricing needs to have either low upfront investment or an easy way to get out (no long term contracts) to make people comfortable trying the product.

With a proposition of growing sales or cutting costs, that is very easy to keep track of and people are more willing spend money when they can quickly figure out if the results are there.  You can try with a slightly higher price point since you’ll know exactly how much value you’re providing to the customer.



### Switching costs and barriers
- Is your product something that’s extremely sticky and hard to migrate from once people start using it? 
- Is there a lot of up front work to get going that requires an implementation process? 
- How is easy is it to migrate from a competitor?
- How easy is it to migrate away?

If your product is extremely sticky, meaning once people get on boarded and start using it it’s hard for them to move then the pricing needs to encourage low cost or even a free trial. This is especially true if the signup and launch process is completely automated and there is no customer configuration or onboarding process required.  Consider a pricing structure that has a very inexpensive base plan and add-ons as people start using more of the functionality. 

If the product requires lots of upfront configuration, integration into other systems, etc than you’re heading down the enterprise road. If so, consider having an implementation fee. This is something that larger businesses are used to because they require lots of handholding during the launch process to make sure it goes smoothly and doesn’t distrupt process and you don’t want to lose money when launching clients..

As we begin the journey to come up with the pricing plan and ideas start to bubble up, here are the signs that you’re on the right path:

1.	Predictable recurring revenues
2.	Increasing revenues as users increase engagement  
3.	Less discounts to keep existing customers
4.	Lower cost of revenue acquisition over time

<commit_msg>Updated 2_Preparation.md<commit_after>---
layout: page
title: 2. Getting Ready
published: true
---


> **Key Points**

> 1. You need to know the value propostion of your product

> 2. Switching costs and barriers are key part of determining correct pricing

> 3. Signs that your pricing is making sense

Once you know where your product is positioned in the market, and have identified our ideal customer, you need to understand the following information about your customers and your product.

**What is the purpose of your product?**

- Save money
- Grow sales
- Increase efficiency
- Staff happiness

If your product promises to grow sales or cut costs, that is very easy for the customer to keep track of and people are more willing spend money when they can quickly figure out if the results are there.  You can experiment with a slightly higher price point since you’ll know exactly how much value you’re providing to the customer. As long as your price is less then the value to the customer, in theory, they would be willing to pay that.

Staff happiness and increasing efficiency is typically hard to quantify, and prospects balk at buying a product that doesn’t offer a clear ROI they can put a number on. Imagine going to your boss for approval to purchase something and the boss asks "Great, if we spend this $500 a year, can we track the results?"  If this is your value proposition, consider for your pricing to have low upfront cost or an easy way to get out (no long term contracts) to make people comfortable trying the product.

### Switching costs and barriers
- Is your product something that’s extremely sticky and hard to migrate from once people start using it? 
- Is there a lot of up front work that requires an implementation process? 
- How is easy is it to migrate from a competitor to your product?

If your product is extremely sticky, meaning once people start using it, it’s hard for them to move then the pricing needs to encourage people to get started. Consider a free trial, help onboarding, or anything else that encourage people to get started. This is especially true if the signup and launch process is completely automated and there is no customer configuration or onboarding process required.  

If the product requires lots of upfront configuration, integration into other systems, etc consider having an implementation fee. This is something that large businesses are used to because they require lots of handholding during the launch process to make sure it goes smoothly and doesn’t disrupt process and you don’t want to lose money when launching clients. The implementation fee should cover your cost but should not be prohibitive. If you're going to spend time and resources to get a customer to launch, you want them to have skin in the game by committing some cash upfront. 

As you begin the journey to come up with the pricing plan and ideas start to bubble up, here are the signs that you’re on the right path:

1. Predictable, recurring revenue
2. Revenue increases as users increase engagement  
3. Your cost of serving customers go down
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