37signals · Strategy · Entry · 45 to 60 minutes

How should 37signals price a new chat tool?

37signals is a small software company that makes web tools for businesses. Answer this product management case and get it graded line by line against a weighted rubric.

pricing_strategy
product_strategy
customer_empathy
structured_thinking
experimentation

The situation

The founders at 37signals ask you for a recommendation on pricing a new web based group chat tool for businesses. The idea is promising, but still early. The team believes there is a real need for simple online chat that lets coworkers and clients talk in one place, yet they have not settled on the clearest customer promise or on what exactly customers would feel comfortable paying for. They can build a first version quickly, but they are entering an unfamiliar category with very little hard data. A pricing mistake could either scare away early users or push the team toward the wrong product shape. They want a simple first offer that feels credible to small businesses and is easy to explain. Your job is not only to suggest how to charge, but also to explain how pricing should inform the product definition before launch. You do not have a full survey dataset or a research report. You need to make a practical call now, using lightweight judgment and a clear learning plan.

What to produce

A 1 to 2 page strategy memo.

Your answer must

Name the most likely initial customer for this chat tool and the main problem it should solve for them.
Recommend an initial pricing model, including what the customer is paying for and a starting price point or narrow range.
Explain whether the current product concept should stay as is or be adjusted based on likely willingness to pay signals.
Propose a simple way to test the pricing and concept before launch or immediately after launch, with clear success or failure signals.
List the two biggest risks in your recommendation and how the team should respond if those risks appear.

Constraints

Assume any price points or market sizes you use are illustrative.
You cannot rely on detailed market research or historical sales data.
Keep the launch offer simple, with no more than two charging options.
Recommend something the team could test within one release cycle.

Format

Use short headings such as customer, pricing model, product implication, test plan, and risks.

How 37signals actually played it

37signals explains how it set Basecamp's first plans in 2004 using plain questions like what they would pay and which numbers feel right. It also tells how asking whether they would pay five dollars per chat led to Campfire becoming a persistent chat room with monthly fees rather than a temporary event chat. A short example of price reshaping a product concept.

Ask what you yourself would pay as the starting test.
Let a pricing test change the product concept, as with Campfire.
Pick a low entry price and a credible top price for an unknown market.
Respect the emotional side of price points.

Built from Ask 37signals: How did you come up with pricing for your products? by 37signals.