Why my first prices were too low

I underpriced my first product by a factor of four.

The price felt aggressive. I was nervous. I shipped it anyway.

Customers signed up. I was relieved.

Then I noticed what was happening: I was attracting customers who couldn't afford the right thing for their problem, and they were treating my product as their backup plan. When they had a real problem, they used the more expensive tool. They used mine when they wanted to avoid spending.

The price had selected for the wrong customer.

Two years in, I raised the price. Three things happened:

The volume of new signups dropped. As expected.

The quality of new signups went up dramatically. The new customers were people who had real problems, real budgets, and real intent.

The support burden per customer went down. People who paid more complained less.

The total revenue went up. The number of customers went down. The lifetime value per customer went up much more than the volume dropped.

I should have started at the higher price.

The reason I didn't is simple: I was selling to me. I imagined what I would have paid in their position. That's the wrong reference point. They're not me. They have their own constraints and their own willingness to pay for the right thing.

Three things I'd tell my earlier self:

Price for the customer you want, not the customer you're afraid of losing.

The customer who balks at the higher price was probably never going to be a great customer. Let them go.

Underpricing is not a discount. It's a positioning statement that you didn't mean to make.

Charge more than feels comfortable. Then watch what changes.