Pricing 101 (YC)


Pricing gives most bang for the buck:

  • 1% increase in acquisition yields 3.32% more revenue
  • 1% increase in retention yields 6.71% more revenue
  • 1% increase in monetization yields 12.7% more revenue

How to determine price?

  • "cost +": cost + margin
  • value-based pricing: (preferred) you can charge more.

Go after early adopters first (the first easy 2-5% of the market), don't go after non-believers. Early adopters are not price sensitive. If you don't price enough it looks like there is a catch / you don't have reputation.

plot price to sales:



lower prices are lost opportunities


SMB (small and midsize businesses) = treat their money like consumers but look like they're enterprise. Danger zone.

price determines acquisition strategy:


self-serve: no sales team doing outreach, no support (sales cycle: a day)

transactional: can generate leads, customer support (SLAs?) (sales cycle: 1-3 month)

enterprise: branding, marketing, high-touch support, people dedicated to the client (sales cycle: 6-12 months)

if in danger zone: your focus should be to increase perceived value of your product

Rules of thumbs:

  • value should = 10xprice (value should be easily be understood by customer to be 10x the price)
  • raise prices 5% until you lose 20% of your customers (pushback)