| This is strictly an opinion, but I think your pricing is way off. The Pro account should be $9 or $10. You should move to dedicated server hosting, or to perhaps Linode, and drastically reduce your cost basis and dramatically improve your value proposition. 250mb of storage is nothing for $19 / month. The numbers just seem out of whack. Shouldn't customers easily be able to store a huge number of podcasts, given how cheap storage is? Store and forget. You want their content on your servers, all of it. For $99 / month I better get a terabyte of storage these days. Slash your costs to the ground. Boost your value proposition to the sky. Dramatically increase how many podcasts customers can store on your service. You want them to stream your brains out, and you want it all to happen with bandwidth rates around $0.01 or $0.02 / gb. With scale, and lots of usage, expand what services you offer to customers. Storage & streaming are commodities, so treat them accordingly, and instead focus on building a customer base with modest margins on the core, with an eye on what you can do with all those customers over time. By going with the easy AWS solution, you're pinning yourself into a very tight corner on costs. Again, all just an opinion. |
Also, while I 100% agree on lowering costs, I think the idea of lowering pricing is foolish. I don't think cutting price in half is going to more than double sales. In fact, with as small as his sales likely are, it's very likely that he could stand to double the lower end plans. Something more like $25/$50/$100 might be more appropriate.
Podcast hosting is a very small niche. It's not wordpress hosting where there are millions of potential sites. You're talking about potentially thousands of customers total in the marketplace. Now, even at 10% of 1,000 potential customers you're talking about 100 potential customers. At $9 a month that's $900 a month, which is not a lot frankly. At $25 a month you're at $2,500 a month which still isn't great but it's somewhat interesting and something you can at least reinvest in customer acquisition.
At even the top end plan $100/month is going to need 100 customers to get to $10,000 which is probably salary replacement level after taxes for one developer, depending on where they live. Realistically, if the average customer pays $20, that means you need 500 customers to get to the same outcome.
If the company gets 10 sales a month and has 0 churn it is going to take approximately 4+ years to get to 500 customers. Figuring on a reasonable churn rate, it's more like 5 or more years at $20/month to get to $10,000 a month.
Now, if you are starting a podcast hosting company on the side, do you want it to take you 5 years to get to income replacement? I wouldn't.
As a comparison, it took the fairly successful time tracking app freckle 5 years to get to approximately $38,000 MRR with much better pricing. I estimate they have around 500 customers based on their $79/mo. plan. http://unicornfree.com/2013/5-years-of-saas-growth-every-mon...
So, unless this guy becomes a lot better at running his app than other SAAS operators have historically been, it could take 5 years to get to 500 customers paying $20/month. And the outcome would be about 1/4 of the revenue of freckle.
The math behind lowering your price rarely works out in terms of getting you enough extra customers to cover the revenue/profit difference.