Pros and Cons of “Act Now” offers

I imaging people will be reluctant to sign up to a low price if they don't know how long it is going to be low for. They will be suspicious that you just put the price up whenever you want. I think for this to be a viable option, you would need to grandfather the users that sign up at the low price (ie. they stay on the low price for life, only new people pay the higher price). This would make it compelling to start on the lower price.

I don't see a problem with the strategy, just be careful on how you market it... obviously "we will put the price up when we have more value" isn't the message you would use. Something along the lines of "Opening Special - We're excited to have launched XXXX, and for a limited time all prices are XX% off!".

Lets restate the problem. How do you price appropriately when the value of the product has changed significantly, without receiving client backlash?

Presumably in the later stages of the product lifecycle value is not increasing dramatically. In fact, relative to competitors, the value of your offering can often times be decreasing as you rely on your existing success while young upstart competitors innovate. But sometimes, usually in the early stages, your value maybe be increasing dramatically in a shortened time period. The value of your product at the time of your initial release can end up being 1/2 or 1/4 the actual value of the product a year down the road. So how do you sell this early product while still being able to price appropriately when you are delivering much more value down the road.

If people signup for something, thinking that the price they're paying is the final price, then large positive price perturbations will cause people to be... perturbed. As I've been putting it: "how do you keep from getting 'Netflixed'?" Netflix introduced a product that did well based on its value vs. the competition (Blockbuster, et al.). Then they added value to the product over time, while keeping the price roughly the same throughout that period. Once they had 2 legitimate products being offered for the price of 1 they decided to split them and effectively, nearly, double the price of their existing product offering. Even though they were still deliver much higher value than competitors, and relatively the same amount of value relative to their product offerings from 3 years ago, they got nailed for the huge price increase.

So I submit that the early adopter special is a good way to price your initial offering because it enables you to price low enough to get customers when you're delivering little value while still leaving room for price increases when your value has increased significantly. As JF points out ANY change in price will have some negative affect on some portion of the customers, but similar to how a company like Comcast advertises $19.99 broadband and then charges $49.99 6 months later, if that initial price is understood to be a promotional offer... the human psyche does a better job of not having a visceral reaction. I suspect this is related to the fact that the price change was expected. They don't feel duped, they feel like they got a deal at first and are now paying the actual price.