How do we determine the initial price for our product without scaring off customers or leaving money on the table?

Below is a concise answer based on the principles outlined in our SaaS pricing book, Price to Scale.

Direct Answer

You can determine your initial price by combining a deep analysis of your product-market fit with strategic market feedback and scenario testing. This means assessing your ideal customer profile (ICP) using both internal data and firmographic insights, and then testing multiple pricing scenarios with potential customers to identify a price range that balances volume with margin.

Key Concepts from Price to Scale

Assessing Product-Market Fit:
As discussed in our book (see Figure 25 on page 81), begin with a clear self-assessment of how your product fits into the market. By combining this with firmographic data, you can determine which customer segments—whether large innovative enterprises or smaller companies—are most likely to value your product. This helps to refine your ICP and ensures you’re targeting the customers most receptive to your price point.
Using Market Feedback and Scenario Testing:
Rather than directly asking, “How much would you pay?” our approach (outlined on pages 63 and 221) emphasizes asking a series of probing questions or presenting fixed trade-off screens. By walking potential customers through a couple of pricing scenarios (straw-man concepts), you gain nuanced insights into price sensitivities. This method helps avoid bias that might come from a singular number and instead provides a range where customers feel the price is fair without compromising perceived product quality.
Balancing Market Share and Margin:
The book highlights that the pricing decision can depend on your overall strategy—whether your goal is to maximize revenue through higher margins (often suitable for a niche enterprise product) or to capture greater market share by pricing at the lower end of what customers are willing to pay (suitable for mass-market SaaS products). This strategic balance is crucial to avoid both scaring off customers and leaving money on the table.

Practical Steps

Conduct a Product-Market Fit Analysis:
Use the strategic assessment tools provided to understand where your product stands relative to market needs and competitor offerings.
Refine Your ICP:
Based on your assessment, ensure you’re targeting customers where the fit—and therefore willingness to pay—is strongest.
Gather Market Feedback:
Design surveys or structured interviews that provide context before asking pricing questions. Present different scenarios (using fixed trade-off screens or anchored questions) to uncover a realistic price range.
Test Multiple Scenarios:
Instead of selecting a single price point, experiment with a range, and analyze how each scenario impacts both perceived value and customer uptake.
Analyze and Iterate:
Balance the feedback to determine an initial price that doesn’t undervalue your product while also keeping it attractive enough to win over customers.

Summary

By combining a rigorous product-market fit assessment with targeted customer research and scenario testing, you can pinpoint an initial price that avoids scaring off customers while ensuring you capture maximum value. This balanced, strategic approach is at the core of Price to Scale’s methodology, helping you deploy a pricing strategy that aligns with your market dynamics and long-term revenue goals.