[seanwilson]

> But if the service is significantly lower ($1, $2.50 in your case) it's a no brainer.

I think this rational is okay for selling things like a coffee or a mobile game but not for a service. If you're thinking of pricing this low, you really have to start targeting users that value what you're selling more or expand the product to solve more valuable pain points. If you've got a niche product, you're unlikely to sell a big enough volume to earn a living selling it cheap as well.

You'll lose the "no-brainer because it's so cheap" market by increasing prices but those customers aren't necessarily the customers you want.

[vineyardmike]

Why aren’t those the customers you want?

Each additional customer costs 0 more (since its software), and it’s a side project, so maximizing revenue isn’t necessarily the OP’s chief objective. He made a cool thing, and people like it!

[seanwilson]

More customers means more support requests (especially if it's a cloud service) and customers that only get the product because it's cheap tend to be the noisiest and most unreasonable. The post mentions paying the rent with the earnings so I'm assuming more revenue is wanted too.

[rutthenut]

>>> Why aren’t those the customers you want?

Agree with this - they may be the long tail.

So long as overheads/support costs are low, having a cheap entry point has to be a good idea, if there's volume to be had. Especially if you have higher-cost options too for up-selling.

[natch]

I agree with everything you said here. Except I'd emphasize the trick is to keep it still being a "no-brainer because it's so cheap" decision even at higher prices, by adding more value to the service as he goes (as you also said). Not necessarily with the same users, to be sure.