Don't sell the build effort.
There's a trend I have noticed when folks try sell software, their perception of how hard it was to build the software influences their comfort in setting a price. More difficult to build, more expensive. Easy to build, we can't charge a premium for that!
This is tangentially related to cost vs value based pricing but the 'cost' here is the one time build cost rather than the ongoing running cost. In recent conversations I've seen this phenomenon affect people in both sales and technology.
Lets think about a scenario here that might illustrate the point. Imagine a startup that's been building a product for two years and is now hiring their first sales person. They have some initial users but it's now time to price and sell the product outside of any 'early adopter' discounts.
First, imagine you're the technology lead. You've proven people want the thing you're building and now you need to recoup the time and effort you've put into the product. You know every feature inside and out and saw the five versions of that feature that came before. All of that time and attention has been tough, the reward needs to reflect that.
Sadly, the world doesn't work that way. Your new customers never saw versions one through four and nor should they. They want version five and they want it to solve their problem. That's it.
Now lets flip things and think about the perspective of a sales person who has only the context of the here and now. From their perspective the work is done. The thing is built and we all know the running costs are near zero. We don't need to earn back our R&D costs, those were the price to get here but are an artifact of the past. Let's pick a price point here that maximizes commissions and minimizes effort.
That is somewhat embellished I'll admit but I have seen similar arguments, especially when it comes to releasing new features. The new feature makes sales easier, if the price goes up then it'll be harder to sell. The work to make the feature becomes irrelevant, lets keep the price the same and sell them even more for the same price.
Both of these approaches are common. Neither of them means you wont get any sales but they're both disconnected from the optimal price point, one set through value based pricing.
As a brief aside, I see this 'effort high, price high' pattern a lot in university spin outs. These are by far some of the most extreme example of this, added here to paint the expensive end of the spectrum. In those cases the cost to develop the underlying technology can be astronomical and may be tied up in decades of research and effort. Oftentimes the businesses spun out from these research projects fail to find product market fit due to a strong bias of wanting to recover the research costs.
Value based pricing is old enough and well documented enough that I will cover only the high level here. You should discover how much value your product delivers to the customer, in terms they care about, and charge a mutually agreeable fraction of that value as your price. If you save a customer a million dollars you could charge half of that and both come out winners.
The reason I've been thinking about this lately is two fold. First, I have had some discussions recently about where pricing should live in the org-structure. Second, if the promise of AI based coding tools plays out then the effort to do things is going to decrease, potentially leading to a push for a lower price.
On the first point, where pricing should live, this is going to be very company dependent. My main comment here is that if pricing is determined by sales or engineering/product there is a high chance those biases above will come into effect.
As with most things relating to org-design you want individual incentives to align well with company incentives. This is going to be harder to achieve in a smaller team but having a dedicated 'pricing' person/team lets you set an independent success metric around finding a price as close to 'optimal' as resources allow.
If you're a founder or small team, how you handle this is going to depend a lot on how you're running your business. If you've raised money from venture capital you've banked on these costs and have raised to afford the luxury to recoup them over a longer time period. If you're bootstrapped or light on funding you've got to be even more aware of how setting the price plays into your long term cash flow.
On the second point, how AI will play a part here, I think there will be a reinforcement of the bias towards 'easy to make, should be cheap'.
To some extent that position is correct. If you have a competitive market you'll eventually find someone willing to charge less to capture more market share. This drives down the price of things in a way that's typically better for the end consumer.
This is fine in the theoretical market sense but for anyone building a startup or operating in a niche the dynamics don't play out the same way. You still have price pressure from competitors but you're ideally competing on maximum values rather than minimum price.
If you are competing on value the pressure to lower costs because 'AI makes it cheap to make this now' is something to be keenly aware of.
Generally, if you're getting this advice from people well outside your niche you should probably just ignore it. The zeitgeist of 'AI will kill SaaS' is likely very over exaggerated in the same way that we once heard stories of how everyone would have a 3D printer at home to print all their physical goods.
So what do you do?
You can't write these costs to zero and pretend they didn't exist. You spent the money on R&D and need to earn it back. You need to make sure your price point gives you an ROI on that spend in a reasonable time but it shouldn't be your primary driver. The specifics of estimating your value based price are a topic for another day.
Better yet you should be thinking about these things prior to the R&D effort. While R&D spend is hard to predict, if you can ball park your target price point you can put a budgeted cap on how much you're willing to spend getting there given the cash you have.
This has become a much longer post than I originally intended so to end with somewhat of a summary: When deciding your prices, the effort to get from zero to where you are should not be a deciding factor.