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)