Pricing 0s and 1s

Pricing 0s and 1s

Christopher Murphy · 4 August, 2020

These are notes for one of our founders on pricing digital tools. In this instance, the founder was selling complex Google Docs in a medical context, where the tools would potentially save users thousands of hours and as a result many more thousands of dollars.

The founder had proposed selling each Google Doc for $5, with a bundle of all the Docs (~20) for $30. This hugely undervalued the offering. Here are some of the notes:

If you can demonstrate the actual value of each of the Google Docs, showing how the documents translate to real world savings, then you can scale the price up accordingly to a price that more accurately reflects their value.

There’s a tendency to limit yourself when pricing digital downloadables, because they're created from 0s and 1s. Your internal voice says:

This is just a Google Doc, there’s no way anyone would pay $50 for a Google Doc. It's just data.

That's a mistake. You have to let go of this limiting belief and think:

What is this file actually worth in business process terms? Then price accordingly.

Put in these terms, there’s absolutely nothing stopping you from pricing a single Google Doc for, say, $495. If that Doc saves its user(s) thousands and thousands of hours it might be priced even higher. Perhaps $4,950?

Price based on value, regardless of delivery mechanism (atoms or bits).