How to Price Your App – Learning from Basecamp

BTW, it looks like you switched the two images that introduce the forum and the FAQ.

Great post!

Good collection... some of these I hadn't seen before.

For the latest design they actually trialled it on Highrise's signup page first, and even wrote a post on Signal vs. Noise about how the design came into being:

http://www.37signals.com/svn/posts/1496-design-...

Pretty interesting to get the "inside scoop" on the thought process behind this.

That's a great catch Al.

One thing I noticed is that the release on February 7, 2005 was when they switched from the standard left-to-right increase in pricing to go from right-to-left instead, which they've kept until today. It's a smart and unconventional strategy that places their most expensive plan first.

You are the man Robert . . . thanks for sharing.

FYI: KISSmetrics tweeted a link to a Flickr shot, that linked this page.

Thanks for letting me know how you arrived Chris, and thanks for the king words. I hope it helped.

What I found interesting here is that there is a clear progression of pricing strategy in terms of maturity and market adoption. While I'm not sure exactly what was going through 37signals collective minds at each stage, I think some reasonable assumptions can be made.

April 2004 - Provide a simple pricing scheme that gives an on-ramp for customers. Make it as simple as possible. Price such that the middle tier is probably the best value/money (likely based on the usage of their current beta customer list).

December 2004 - Probably had some level of adoption, but needed a way to create future customers. In a SaaS model, I've found that trying is believing. In other words, if you can get your potential customer to try the product, even for free, it means a much higher conversion rate to a paying customer in the long (or even short) term. Thus the introduction of the Free and Personal pricing levels.

Feb 2005 - A price increase. My guess is they started realizing that people would pay more for their service and saw it as another way to increase revenue (more leads, higher price). But note that at the bottom of the matrix, they put price comparisons with similar products to show they were still the low cost leader, in effect justifying the raised price.

December 2005 - That same "justification" of the higher price is gone. The market has accepted the new "standard" price point. No need to justify anymore.

June 2006 - after 18 months from the first chart, an "enterprise" or "max" version comes out with a higher price point. This is to capture full value from customers who have the money to "have it all" and perhaps are "having it all" at the premium price level.

June 2006-Sept 2008 - As their product matures, they keep filling in the matrix with additional features, focusing on enhancing the value of the upper tiers while keeping fresh the value in the lower tiers.

Sept 2008 - Price adjustment. Maybe based on the cost of supporting the personal and free customers...or perhaps the personal and free customers seem to be purchasing Basic...or most likely, the cost of supporting a personal or free customer vs. the conversion rate isn't lucrative enough...they eliminate those product categories and hike the price of Basic. They'll have fewer customers, but more revenue per customer, and lower overall expenses/cost at the low end.

I loved the comments here about heading back to a simple model. So true. Note too the addition of a 30 day trial to allow adoption. The product is mature enough that they likely feel within 30 days they can show enough value to get people to pay.

Feb 2009 - Last, they add back in the Premium offering at $99, probably to smooth out the price point gap between $149 (Max) and $49 (plus) to maximize revenue per customer.

Anyway, apologies for the length of this comment, but Robert, you've hit on a very cool way of looking at pricing.

From what I see their price evolution mainly included:
* Moving up the minimum plan
* Moving up the unlimited plan
* Increasing the disk space significantly - no wonder, since they use S3 and Amazon invested in them

The biggest impact is on the low level plans, where each dollar in price change transforms in big $$$ (since that's where most of the users are). As the plans go up - the impact is less and the clients care less.

I think the lowest level plans are the ones to watch for.

@Danail: that's up to you. The purpose of the post is to show an example of how 37signals is pricing Basecamp. Ultimately, pricing is determined by a number of factors, including competition, operating costs, desired profit margins, the market you're going into, and more.

Great comparison, it is thought provoking to see that as they built more they also were expanding the packages-contrary to the keep it simple mantra. But in the end went back to a Good, Better, Best strategy.

This post from last year shows how they were thinking of selling just a flat annual plan but couldn't get their merchant bank to approve it and that gave way to the subscription model: http://tinyurl.com/28a6s7

Reminds me of the original salesforce.com pricing model: $50/user - No Options. http://tinyurl.com/d77pp,
then they quickly figured out that different users wanted different options, service levels and plans.

I recall the founders of Writely said the one thing they wished they had done more of was experiment with pricing levels and strategies. They felt that there are too many ways to meet customers desires.

So, how I should price my online app?

That was neat to see, thanks for posting this.

The first and last screens look almost identical. Things went from simple to complex back to simple.