0:00

So this is in line with that

0:02

thinking that really you can't, even if

0:04

you're a horizontal product, you still have

0:07

to make some difficult decisions about

0:09

who your someone's are going to be. Who

0:11

are you going to have everything for? Because

0:13

even if you have a horizontal product, there

0:16

are going to be different use cases and

0:18

you are going to have to make hard

0:20

decisions with incomplete information as the founder or

0:22

as the product leader about what to build

0:24

and what to say no to. So

0:42

listening to start up to the rest of

0:44

us. I'm your host Rob Walling and today

0:46

I'm going to be covering some solo topics.

0:49

There's a listener question or two

0:51

thrown in here, but they are

0:54

questions that I think apply to

0:56

a Rob Solo adventure. First topic

0:58

I'd like to cover today is

1:01

about testing pricing for your product.

1:04

And this came about when I

1:06

asked Twitter for questions when

1:08

Derek Rimer was going to be on the show and we

1:10

got more questions than we had time to cover. So

1:13

this question was an overflow that

1:15

I saved in a questions Trello

1:17

board. It's from cat at build

1:19

the keyword.com and she asks how

1:21

do you test different prices for

1:23

your product? The answer is there

1:26

are several different ways to do this. Testing

1:28

pricing is hard, but the thing to think

1:30

about is there's

1:32

testing pricing for brand new customers who

1:34

are coming to your website or doing

1:37

a demo or sales call and then

1:39

there is changing pricing on existing customers.

1:41

Notifying them you're currently paying $50 it's

1:43

going up to $100 or $75 separate

1:45

those two things in your mind

1:49

because what you don't want to do is change

1:51

and test prices on existing

1:54

customers without being really confident

1:57

that those price changes are in order. And so

1:59

you Usually, you test it on

2:01

new folks coming in. I

2:05

have only known of one SaaS company that

2:07

ever tested prices. Everyone

2:10

else just does not have the

2:12

volume, and

2:15

frankly, it is so much work to do this well. I

2:20

mean, it's truly just split testing, having

2:23

people click and the price appear differently, like

2:27

the standard split test definition that we talk about. One of the

2:29

things that you have a low touch funnel is

2:32

you go to your pricing page and you just change the pricing on it. You

2:36

see how it impacts your conversion rate over the next week

2:38

or month, and

2:41

I've called this a poor person's split test before,

2:44

which is it's not ideal, it's not

2:46

scientific, but

2:48

if you have a real pulse on your business

2:51

and you have a decent flow of

2:53

traffic and prospects over

2:56

your pricing page, frankly, then you

2:58

can see patterns. When I

3:00

used to test pricing,

3:04

it was only when I had a lot of folks

3:06

hitting that pricing page, because if it's a trickle, you

3:08

can't see the difference. There's

3:12

too much noise. Usually,

3:15

most people don't look at changing their pricing

3:17

as a test. They often

3:20

say, I'm going to haul in and I'm

3:22

just going to change my pricing. I think I'm priced

3:24

too low or I think the value metric is off,

3:27

and they go to the pricing page and just drive

3:29

call and they just change it. I'll

3:31

say hope for the best, but really, it's

3:33

a calculated risk. It's a calculated gamble of

3:36

odds are pretty good, I'm underpriced, I feel

3:38

like I'm underpriced. I'm going

3:40

to solve that by raising all of my tiers or by,

3:42

let's say, dropping my lowest tier, something people frequently

3:44

do. I've seen several tiny seed founders do that.

3:48

Then trying to make it work. There

3:50

were times when I've raised prices where I was just like, I'm

3:53

making this price point work. It's

3:55

called aspirational pricing. I

3:57

aspire for my product to be worth

3:59

this much. This is the business I want to build.

4:05

I'm going to keep building features to where this

4:07

price is

4:13

a no-brainer. I

4:19

want my price points to be $1,000. That's

4:24

the minimum. It's

4:27

a high-touch sales environment.

4:32

You can just unpublish your pricing from your website. You

4:37

can either say, starts at $4.99 a month, starts at $1,000 a month, whatever

4:39

it is. Or

4:42

you can list some pricing and call us. Or

4:47

you can just not list pricing at all. You

4:52

can actually structure the product and how this works. Then

4:57

you split-test it a bit and you start

4:59

quoting prices that are higher than what you're

5:01

currently charging. Basically,

5:04

you see the reaction. You

5:09

see if folks choke or you see if folks see it. Usually

5:14

what you'll do is you'll double your price and someone

5:16

will say, oh yeah, great. I

5:19

notice I haven't said testing price drops. That

5:24

does happen. It's

5:29

just very, very infrequent. Usually

5:34

if you're testing, you are trying to test the price

5:36

elasticity of your space and of the folks who visit

5:38

your website. Or the folks who are

5:40

raising their hands and becoming leads for you. It

5:44

is an inexact science. Can

5:48

you attribute 60 or 70%? Yeah,

5:53

probably. Is that good enough? Is that the

5:55

best you can do? It probably is. It's

5:57

the same with any hard decision where you

5:59

have incomplete information. and part of it is some

6:01

founder gut. You

6:05

collect what data you can and you make observations

6:10

and then you make a bit of a gut decision about,

6:15

should I continue with this price increase? Or

6:20

is it not working? I

6:25

want to keep the pricing the same but

6:30

I just want to change the structure. I

6:33

want to change the value metric. So

6:36

my tiers are still 50, 100, 200, but

6:39

maybe I don't price based on storage, now

6:42

it's priced on emails sent or whatever. There's

6:45

a bunch of different things you can do here.

6:48

Before I did these, I would always have a conversation with

6:51

myself but be with a couple other trusted folks that

6:53

I had. I knew how to get, I would factor

6:55

that in with my own gut feeling and

6:59

then I would test. For

7:02

me most of the time I was dealing with low medium touch funnels so

7:07

I could test on the website and we also had

7:09

a lot of traffic. So it

7:11

allowed me to quickly, I wasn't split testing, keep

7:15

in mind, but I knew historically in any given week how

7:18

many new trials we got and in any given week

7:21

how many new conversions we had. I

7:23

didn't get a gauge for it early, it wasn't definitive, but

7:26

it made me feel more comfortable with it. Testing

7:29

pricing is hard, it really is. But

7:32

I would actually say you have an advantage if you're doing high touch, if

7:35

you're doing demos and that allows you to have conversations with people

7:39

and also allows you, you double the price, you quote it to them and they

7:41

say, wow, that's out of our budget. And

7:43

you say, oh, what is the budget? What is your budget? Or

7:45

we can work with you, like for example, if you want to pay annually, 20%

7:49

off of that. And I'm not saying sell

7:52

from your heels, I'm not saying

7:54

you just back off and sell, but when you

7:56

are increasing prices, there are ways to back off

7:58

that increase in real time.