3:58
but, so, so one of the things I think we, we talked about doing an episode was on pricing.
4:07
SASS pricing and the, the classic advice of ra pricing.
4:12
I think there’s many people sass founders quote for this.
4:17
and it’s like beaten over their heads for for people.
4:21
So, yeah, I have heard that advice.
4:23
I have heard that advice so many times.
4:25
I’m really glad we’re gonna talk about it because I have so many questions.
4:28
Ok.
4:30
So we’ll start with first in general.
4:34
I hate blanket device, right?
4:35
Like I understand it, I understand why it has to exist.
4:39
I understand a lot of people have defaults and sort of like it helps like nope, it’s not a, it’s not a yes, it’s, it’s not a maybe it’s, you should consider, it’s a very direct like raise prices, don’t ask questions, just do it like type of thing.
4:54
And I get that where sometimes you’re trying to get someone off a rock that they just have no perspective on and they’re like fighting it and they’re like just do it, do it, just do it shut up and come.
5:05
Yeah, I think it’s hard though cause it’s like, you know, you’re, you’re trying to tell a lot of people to move in one direction but you almost have to tell people like, how do you know when you’re at the right level of pricing, right?
5:13
Like that’s, that’s what I feel like the useful advice would be, right?
5:16
It’s like move until you’re in this sort of situation then, you know, you’ve probably gone far enough.
5:21
But, yeah, I, I, I agree.
5:23
I agree.
5:23
And there’s, we don’t have to, we’re not gonna go into a ton of, like, how to price today because that’s just way beyond me.
5:30
And also just, there’s so many variants, so many different directions you can go.
5:34
But I just, I, you know, I cringe at that advice.
5:38
Maybe it’s because I’m in a different stage now.
5:41
I don’t know.
5:43
there were definitely times that raising prices did help us and it was, but, but I didn’t hear it from someone else.
5:48
I, I actually heard it from a customer more or less.
5:51
Well, I think a lot of people are scared to raise prices though.
5:54
Right.
5:54
So, I think like the, if someone just kind of subtly said to you, oh, maybe you should raise your prices then, like, everyone’s just like, yeah, hard pass.
6:03
I’m freaked out of that.
6:04
, so maybe that’s why we got such strong, you know, like you, you should raise prices, that kind of messaging going around.
6:12
No, I agree.
6:13
I agree.
6:13
It’s, it’s, it’s, it’s, you’re comfortable with and it’s, it’s what got me here and your fears like you lose customers or all of a sudden what was quote unquote working is now not working anymore.
6:25
Right?
6:25
So, yeah, like if I ain’t broke broke, don’t fix it.
6:28
But then there’s also like the, like, you know, am I gonna,, yeah.
6:32
Am I gonna alienate people?
6:33
Am I gonna go back on my word al almost or like, kind of like feelings of greed almost.
6:38
Maybe with, changing that.
6:41
Yeah, I think there’s a lot of emotions wrapped up.
6:44
Right.
6:44
So today I do want to talk about like, what can happen when you raise prices as well.
6:49
Like there’s just other, I think, factors that, that people don’t, I think, think about sort of like, what are the, and maybe this is the, what are the like, tradeoffs or what are the bad things about raising prices?
7:04
Because everyone talks about the good and you started with the fear, which I think is a, a natural thing that I think by default, most people aren’t gonna raise prices.
7:13
So they’re gonna sit there in that camp and be like, cool, didn’t do it.
7:16
Happy to follow Nate’s advice.
7:18
Awesome.
7:19
Wasn’t advice.
7:20
I was just vocalizing tears, but that’s, that’s the reality, right?
7:24
Like, that’s that emotion.
7:26
That’s that like steady state of if it ain’t broke, don’t fix it.
7:30
Like, why am I gonna mess with that?
7:32
But on the flip side, right?
7:34
Pricing is one of your highest leverage pieces that in, in the business that, you know, people talk about, would you rather have 1000 customers paying $10 a month or, you know, 10 customers paying, you know, $1000 a month, right?
7:53
And, and I’d by far rather well see, and that’s where it, it kind of gets a little gray because I, I, like, I have two feelings on that exact statement, which is 1000 paying $10 a month.
8:03
Like, I think there’s gonna be a lot of very painful support requests because there’s a lot of people paying very little, which at the same time, if it’s a, depending on the complexity of the service, you know, can be up for that.
8:17
But that’s like for me, you know, could be, you know, potentially challenging.
8:24
But on the flip side, you need the people paying $1000 a month, have a higher level of expectation of service as well for paying that much, I think.
8:32
Right.
8:32
And if you have churn like that really hurts.
8:34
Right.
8:34
You lose 1/10 of your business.
8:36
That’s a big deal.
8:37
Whereas if you have a few people churn when you have 1000 customers, it’s not quite so bad.
8:41
Right.
8:42
Right.
8:43
True.
8:44
So, so, so other disadvantages.
8:47
So let’s just maybe this is, yeah, just talking more about disadvantages of the counterpoint to it.
8:53
So, I think in general, everyone, everyone should consider this because it’s a huge lever.
8:59
More than likely you’re not and you’re probably underpriced and you don’t know it if you never raised prices.
9:06
So it’s almost like if you’ve never raised prices, at least, like if you’ve never raised prices then raise prices maybe it is the common thing.
9:15
But like, after you’ve done a little bit of it, like, oh, now, let me see, you know, a little bit into what are the potential challenges I’m going to have if I trade offs for them.
9:27
Right.
9:27
And it’s even maybe just a, like on a regular basis, like, reevaluate why you are priced the way you are and like, is it worth moving or not?
9:36
Just to at least, you know, go through the thought experiment I think is probably important.
9:40
Right.
9:41
Yes.
9:42
So, and like, we know from, from your standpoint with status list, it probably doesn’t necessarily make sense to raise prices because you’re in a, we’ve talked about before you’re in more or less a commodity type of business.
9:56
So we like, you know, people are like that, it’s I would say it’s probably a more price sensitive thing, like someone’s not gonna pay five times more for the same thing where really there’s not much more value, so to speak than, than someone that is 1/10 the cost, right?
10:15
So maybe the point there is just like the there has to be a differentiation to be able to prove why you should be priced differently than somebody else.
10:23
Right.
10:25
And maybe also just like, don’t be so crazily different than the rest of the market.
10:30
Yeah.
10:31
So one a statement I heard.
10:32
So I, I was listening to a podcast and it was on the How To Win Podcast.
10:38
I don’t know if you’ve ever heard that one with, it’s with pep.
10:44
Oh yeah.
10:44
Ok.
10:45
I forgot his, like, I don’t know how to spell.
10:46
I know it.
10:47
Pep is how you say his first name.
10:48
Something with the L, I forgot off.
10:51
I’ll put a link to it in the show notes.
10:53
Ok.
10:53
So he was interviewing someone that I think it was the founder of Salsify and they make this big enterprise product.
11:00
And, and in there, it was funny enough, they, they brought up a, a quote from Mark Andreesen that said, I wish I had a skywriter that could write up on the clouds like that said, like raise prices or whatever.
11:12
But, but he had a good point, not, not Mark Andreason, the founder of Salsify.
11:18
He said, yeah, I think everyone should raise prices when, when they have, when they’re meaningfully differentiated and high value like to the customer, like the value proposition is very high to the customer.
11:31
And that made a lot of sense to me because that helps us rule out things like commodity types of things because of the differentiation.
11:38
Yeah, for sure.
11:39
That makes a lot of sense.
11:41
But there is probably some room in there, right?
11:43
Like if there’s if you’re not, if you’re in like the middle of the market, then you probably do have some room to go up even in a commodity type business, but there’s probably more factors at play there than just, you know, blanket statement raise prices.
11:55
True, true.
11:56
And, and which brings me to another point which is in the middle of the market.
12:00
So this is a little backstory on refer rock, like when we first started, you know, we started at that lower like $50 type of month price.
12:10
And then we went into, I eventually started charging around $200 a month for mostly because I think I mentioned like, customer, a customer asked so to speak, like, in a way, not directly.
12:24
But when I talk to them, they’re like, oh, is that really your pricing?
12:29
And then when I changed the pricing and later on added a feature that they were looking for, which was like automated gift cards.
12:36
They were like, and they on the second call, they mentioned that, oh, it looks like you raise your prices and it was like, they sounded excited like they actually sound like it was validating the worth to pay for this that it won’t go away, which was fascinating.
12:51
But yeah, yeah.
12:53
Well, I think everyone’s like, everyone’s fear is that you’re gonna raise prices and people are gonna think that you’re, you know, like they’re not gonna want you anymore.
13:00
But in reality, I think it’s almost the opposite happens where it’s like, because you’ve raised your prices, you’re more of a, you are perceived as a higher end, company, even if you haven’t really changed anything necessarily.
13:13
And as long as you have some sort of value proposition to back that idea up then, like, that’s gonna be good for you.
13:23
Yeah.
13:23
But I, I think you’re right and you said it near the top, which is like, but there is some certain consideration to a point.
13:29
So what’s interesting is we raised prices and we got ourselves out of this like self service, like expectation at a $50 a month type of thing.
13:39
What is interesting was there was a competitor at that time that was priced just above us.
13:48
So I knew our product wasn’t like on par with theirs.
13:53
So I didn’t venture too far into that and I knew we were at least in enough conversations that customers were shopping them as well.
14:00
And so I didn’t get into that.
14:03
And what was interesting was a couple, like within a year or so.
14:07
Well, myself kind of moving up towards the bottom tier of theirs.
14:12
They moved up further.
14:13
I don’t know if it was necessarily result of me.
14:15
Probably not at that point.
14:16
I was probably just an annoyance but they, I think they raised money.
14:20
They did all these other things and they really went for like a they thought they were differentiated and high value and I think they, like I said, they raised money.
14:28
So I think they needed to back into their valuation.
14:30
So they added additional pressure to themselves.
14:33
All of a sudden, their lowest price was like $800, which left more room for me to move in, which was interesting, but I still didn’t want to be in that area.
14:43
Now speeding forward, they ended up like getting sold to a private equity company and I think the founders did reasonably well, but the company is now just kind of floating around.
14:54
but what was interesting was I, I do believe and that they left, they basically left a breathing room for us in the mid market.
15:05
And before that, we were otherwise like, because we were behind from a product standpoint, we were like fighting for scraps in this other area.
15:12
So part of our value proposition had to be a lower price.
15:15
So I do think knowing a position in the market, you know, is important, it was, but it was fortuitous for us that they moved up and actually gave us more breathing room into that space, which actually accelerate our growth because then we could charge more for the thing, fill this gap and, and add more fuel to our own fire.
15:36
So, yeah.
15:36
No, totally.
15:37
I think that makes sense too.
15:39
I think like over time, companies as they grow, tend to move upward in the market, right?
15:44
A lot of people start out at, at the, the, the low end with the self serving some of that sort of thing.
15:49
And then slowly move up to mid market and then often into enterprise.
15:54
So maybe part of that raise prices is like to say, hey, you, you, you have some levers to pull in that direction and everyone does after some point.
16:03
So maybe, you know, take a look at that.
16:07
Yeah.
16:07
No, I definitely think that’s a, that’s a factor.
16:12
What’s, what’s also interesting is like knowing that I’ve also been cognizant of not giving too much breathing room for below me either try to be everything to everyone, not by being everything to everyone, but just not getting too far from like knowing where there’s crossover points of where you’re leaving too much breathing room for a market and maybe you, you didn’t have enough oxygen as you moved up, right?
16:38
So that’s the other thing you have to be like cognizant of.
16:41
It’s like the, the the power of yes, maybe I’m sense like here’s that back to our other example of 1000 1000 customers paying $10 right?
16:54
It’s kind of interesting.
16:54
It’s like 1000, if I had 1000 customers paying $10 and they were also like it was easy to service and they were very happy with the product.
17:06
Think about that like word of mouth lever over there in terms of now, there are 1000 fans, 1000 big fans of your product that are out there telling other people versus the 10 that are paying 1000 even if only 10 are they, they’re not, let’s say they are also happy.
17:23
That’s only 10 people out there like talking to other people.
17:26
So from a brand perspective, word of mouth having more, like you share something on social and people are following say like there’s just, there’s just a like volume aspect to it to that lower price point or just having more people that are sort of sort of point in that area as well.
17:44
Yeah, and just like just the network effect is better, right?
17:47
Like that’s kind of like what you’re saying.
17:49
Yeah, totally.
17:51
But that’s something I, I, I think about often in terms of maybe someday doing a, a free version or something like that just to get like a, not necessarily as a acquisition model, but more or not necessarily as a revenue opportunity, but more as like a acquisition channel and getting more people kind of talking about it and could we stripped down and have something more simplistic that doesn’t cost us a normal leg on the server side.
18:18
But yeah, it’s, it is a word of mouth channel, right?
18:24
And that’s a lot of like how slack works, right?
18:25
Like they, they free, free, free offering is really, at least in my mind is an acquisition channel.
18:31
It’s right.
18:32
It’s like getting people using it for communities and stuff and then, you know, when they go to work, then they’re used to it already and kind of have expectations around that.
18:41
Right.
18:41
Right.
18:42
I, I think an ideal mechanism is actually having probably a little of both.
18:46
Right.
18:47
Like having that, having that, that part.
18:49
But also I wouldn’t say being, I would say being like mid priced to start with and again, this is just not assuming if, if there’s an enterprise clients that are just getting so much value out of your software, like you’re selling to, you know, companies that have millions, if not billions of dollars in revenue.
19:08
And you’re just like a, like a annoying speck on the wall.
19:12
It’s almost more annoying because they have to fill out a P O for you.
19:18
There’s yeah, that would be like, you know, and you know, you’re, you’re making a substantial difference to their business based off of like the service you provide then.
19:27
Yeah, there’s, there’s definitely some upward movement to, to move up and make sure you kind of thinking about value based pricing.
19:34
Yeah, and I don’t think that you’re talking about that the enterprise is a bad way to move, but I think it’s more just making sure that there’s room in the middle there that you don’t get caught trying to move from mid market to enterprise and get caught in the middle because you didn’t think to look at like what size of fish were sitting up there in enterprise competing with you.
19:53
Yeah.
19:54
Yeah.
19:54
No, that was a good point.
19:55
Like, yeah, the, the, the how much air is up there, I think is a good, is a good question.
20:00
Another one is also just like, how will I have to change my organization based off of that?
20:06
And I think that’s a, that’s an interesting one that I’ve seen as we’ve moved in and, you know, we need service people.
20:12
Like it changes the business model, it went from maybe just having the, the classic thing that the developer wants, which is like, hey, there’s development and there’s support, that’s it.
20:23
There’s no one else, there’s no sales team, there’s no like customer success and onboarding and services teams.
20:30
Like you add those teams, that’s a level of complexity that you also need to.
20:36
It may be easy at first because if you’re doing that job, it’s one thing and you’re having a great generalist that has joined your company that can do it as well.
20:44
But at scale, you, you need to jump over.
20:50
I guess you need to get enough, enough hurdles in, in revenue where that is gonna make sense because these people are potentially paid more.
20:57
Now you also have, now you’ve built in points of failure in your system like you’re now dependent on this one person that is doing the sales.
21:06
What happens when that person gets sick?
21:08
What happens with that person threatens to leave and asks for a raise or whatever else?
21:11
It’s like, so you have to have built in a level of redundancy and then you also have to build in a pipeline of training new people to come in and you’re now all of a sudden having to go.
21:21
Am I a five person company or am I a 20% company or am I a 50% company?
21:26
And that just totally changes the dynamics of the business you may or may not want to run?
21:31
Right.
21:31
And I, I think that really has to do with like drastic price changes, right?
21:35
Like if you’re moving from $50 to $500 or you’re moving from $500 to like 1000 plus, I think that’s where you’re getting these types of problems, right?
21:43
Where it’s like my business is actually going to fundamentally change if I make this price increase.
21:49
Well, I wouldn’t say it’s necessarily on those certain price markers.
21:53
It’s also just more on like, how does that customer, what does that customer need to be successful?
21:59
What does it need to get them over the line?
22:01
Because there are $200 products that might need a sales person just for of the, of the type of customer you’re working with.
22:07
Right.
22:07
But I guess my point is just that there are, those are bigger price jumps.
22:11
Like if you’re gonna experiment with increasing your prices by 20%, you’re probably not gonna see those types of changes in your business.
22:19
Yeah, I wouldn’t say percentage is probably a good marker, but you’re probably right.
22:23
Like, there’s, there’s definitely, like, I think of it as in bands and maybe it’s like, once you get to a certain band you’re gonna get, there’s gonna be different expectations no matter what.
22:32
So, I think for us, as we’ve seen once people are at the 500 up, you know, 500 1000 at least they’re, you’re probably thinking there’s definitely a little bit more, there’s more service, there’s more people service.
22:49
And also yeah, a at the other, the other thought process too is like the actual sale itself, like are people gonna need contracts?
22:57
Like at that point, people start to think about those things is a standardized contract.
23:01
Is it your contract?
23:02
Is it our contract?
23:05
And the other point too is like, do you like, I think it brought before?
23:09
Can they put it on a credit card?
23:11
Do they need approval for it?
23:12
So I think if you’re in that 500 to 1000 mark, like you can get away with a lot of that stuff without it.
23:18
security checks all of that.
23:20
But once you start going higher and it’s probably, then it’s like, ok, now we’re gonna need to bring in procurement and now we’re gonna bring in all these things and there’s probably a meddling area between that like 1000 to 4 or 5000 that just is like almost in no man’s land because by the time they’re getting out their checkbook, you might as well charge them much, much more.
23:43
yeah, totally.
23:44
Ok.
23:45
I’ve got a question for you.
23:46
So often people will say, to increase your pricing and just keep increasing it until a certain percentage of your customers churns because of the price increase.
23:58
What do you think of that?
23:59
, first, I am a strong believer in, in grandfather pricing.
24:08
So I think of these in cohorts.
24:10
So also from a safety protection and just doing right by your customers, they joined you when you were, maybe you’ve added more value, which is great and everyone loves more added value and maybe you’ve added significant, more value and it’s significantly more server costs and you need to raise prices.
24:25
That’s a different story to come back to those conversations.
24:30
But by default, I usually settle on yes, grandfather pricing.
24:34
So everyone keeps the pricing they’re on indefinitely or not indefinitely.
24:40
And like I said, raising their prices is a different conversation for me than versus it may happen at the same time.
24:47
But I want, I think of those as two different conversations and two separate things.
24:54
Mostly because again, if I’m testing out a new pricing, right?
24:58
I don’t want to have to go back and roll back again, keeping all this disruption, another change.
25:02
So if a new, if I change pricing on the page and roll a new plan and now I can see early on without as much business risk like has my conversion rate dropped?
25:14
Ok?
25:15
Because that’s it starts there.
25:16
I don’t think they’re gonna churn because of the price because they came in brand new with that price in mind that anchoring in their head and that expectation.
25:26
So I think that’s where you test it is like the new people coming in.
25:30
So if you want to do some aggressive testing, like that’s the, that’s the area to do it in with new people where you can almost see like, hey, I expect to get 10 new customers a month all of a sudden we’re getting five.
25:42
Ok.
25:43
Now I have to do the math.
25:44
Like, was that worth it?
25:45
Maybe I more than doubled my price and that’s still ok.
25:48
Right.
25:48
But so you, you, you figure those things out and I don’t think that the churn is gonna, you know, shin check churn is gonna be a lagging indicator.
25:57
So if you got them in the door, you should be able to keep them.
26:00
Right.
26:01
So that’s interesting.
26:04
Ok.
26:05
What else you got?
26:09
I don’t know, I just, that, that one kind of kind of came to mind because like, people often talk about like, well, you should just keep increasing until like there’s drop off and maybe you could do it, you could measure it on the sign ups, right?
26:22
but like, I wonder if that’s like, is that the right way to go like that?
26:25
You’re just basically testing the market until people stop converting at the rate that you would like.
26:31
It seems like kind of, I don’t know, blunt or I, I think there’s situations for that type of mentality where you really just don’t know the value, but I feel like blind testing, it just feels sort of, yeah, like you said, blunt, like if you talk to customers and that’s where I would probably start.
26:51
I know it’s like talk to people but you, and that’s where that led to my first price raise, which was like, I got it from the sense of the conversations and, and I think that’s really important and because one of the big things they mentioned in there, it was when I realized it was for a water filtration company that was making $10,000 per referral, like paying two or $300 for my stuff.
27:16
Like was a no brainer, right?
27:18
Like you, once you hit that in the perspective from their eyes, you’re like, oh, that’s the value right now.
27:24
If, if referral rock to them was, you know, $1000 a month, maybe not like it starts to get into that.
27:31
Is this worth it?
27:32
Because they still have to figure out if it’s gonna work for them and is that worth the risk?
27:36
Right?
27:37
And I think you get too close to the value for them like, and no one, even a two X value for people is not enough.
27:46
I mostly hear people say like a good rule of thumb is 10 X or at least aspiring to be a 10 X value for something.
27:54
Then no one’s even questioning it.
27:56
You’re just like, hey, I just made a 10 X on X on this.
27:59
And so that’s a no-brainer.
28:01
Yeah.
28:02
Yeah.
28:02
What about people like starting out trying to figure out pricing?
28:05
Should you just like pick your closest competitor and kind of anchor off of them be like, I’m better and so I’ll charge a little bit more or like, I’ll charge kind of similar and just kind of see where it lands.
28:17
I don’t know.
28:17
How do you think about that?
28:21
That one’s tough.
28:22
I mean, I, I would say that’s all that’s always a good place to start is in those areas, but then you also have to know why you’re different, right?
28:30
Like why am I, am I, am I a prettier?
28:33
Why is it easier?
28:34
Am I saving more time?
28:35
Am I like?
28:36
So either way since you may not know and, and that you can put yourself in those areas, but also beware for the lowest person like you can go, you can hover above some of those things.
28:48
And I think again, like, I like to think about it in band.
28:51
So if everyone is at $25.35 or $50 isn’t that much difference.
28:56
So you could probably be there and look like the premium player.
28:58
So that’s ok.
29:01
but hopefully your site doesn’t look Janki than theirs.
29:04
So that’s the first impression.
29:07
Right.
29:08
So, yeah.
29:08
Yeah, I know.
29:09
That makes a lot of sense.
29:10
I thought, I thought it was kind of neat how you were talking earlier about separating the discussion between, like, existing customers versus new customers and, like, kind of testing out your pricing on new customers.
29:19
I feel like that’s like a really, I, I think that’s, that’s a really important thing because you’re talking about like that, it’s a different type of conversation.
29:29
So like what does the the customer, existing customer conversation kind of look like for you?
29:37
Well, it’s more of a conversation in my head.
29:39
So it’s not necessarily like literally the conversation with them.
29:44
But I have to think about like, you know, if, if I’m already providing value, right?
29:50
And what at what, at what level?
29:52
So the challenge is for with some of our customers is it means different things to different people, right?
29:58
So some people, there’s a high value in just having a referral program in general.
30:03
They, they enjoy having it, they have it on their site, they feel like it promotes some loyalty, some give back mechanisms to their customers and all those, right?
30:13
And there’s other ones that are think about it, more of like the affiliate types of things and are really looking at it like a performance channel and a performance model.
30:22
So it’s, it’s more of a what have you done for me lately?
30:26
How many referrals is it making?
30:27
Even though it is dependent on their affiliates and who are the people that are sharing.
30:32
So some of these conversations end up being challenging because if I look back over the years, like people came in at different times with different product features.
30:42
And so we look at usage.
30:44
So it’s, it may be like we’re looking at people that are high usage and seemingly getting more value, right?
30:51
And it might be approaching them differently for our for price increases.
30:57
Like again, we’ll still base it on the plans we have, but it becomes secondary.
31:03
So in my brain, we go, ok, we’re decided to change the pricing.
31:07
We want to change it to x.
31:10
Now, how will that affect existing customers?
31:12
How will they feel about it the in these types of bands?
31:15
Ok.
31:15
For this type of customer that isn’t getting, isn’t logging in a lot, they’re getting some value.
31:21
I’m not gonna touch them like they’re, they’re probably fine where I’m giving enough fringe value that they’re ok where they are.
31:28
But for the person that is in it all the time and do these other things like here’s the reality is it doesn’t, you don’t have to give everyone the same deal.
31:37
I could go back to this high usage person and saying, hey, this is great.
31:41
We just raised prices.
31:43
but you can, you’re gonna stay on your, your version for the next six months.
31:49
But after that, you’re gonna move into new pricing and they’re like, ok, cool, like set the expectation.
31:54
I still feel like I got a deal because I got, I, I was forewarned about it before it happened.
32:00
And now they’re like segued into the new pricing and the new model and you could take that high usage customer and put them in the, into that band, right?
32:08
Ok.
32:08
So you’re, you’re kind of segmenting two ways.
32:11
One is the, the people who aren’t using much.
32:13
You’re, you’re trying to not just alienate them because you know that they’re not, they’re not gonna accept the price increase on some level like they aren’t receiving the level of value.
32:22
And so you just leave them and that makes a lot of sense like, you know, if it ain’t broke, don’t fix it for those people.
32:27
And especially because you’re probably not incurring much cost on those people either.
32:31
Right?
32:31
They, they’re already on boarded, they’re already running, they’re already happy enough, right?
32:35
So, so why rock the boat there?
32:38
Yeah.
32:38
And then for the people that you do want to increase, you’re kind of, you’re, you’re, you’re kind of anchoring it as a deal, like the fact that they get forewarned, the fact that they get a certain number of months at the old pricing tier, the fact that everybody else has to go up already, it makes them feel like they’re special.
32:55
You cared about them and thought, you know, reach out.
32:58
Right.
32:59
Right.
32:59
And you leave room for them to be like, oh, really?
33:02
Can, is there a way, can it like this challenge?
33:04
It, and it can have a conversation and you can figure out something?
33:07
Right.
33:07
That’s what might spur that conversation of really understanding their value and, and what you’re providing.
33:14
And so how, how tough are you on that?
33:16
Like, I know some, some places they’re like, this is across the board.
33:20
No exceptions, you know, just get them to accept it or else and other people are like, well, we can finagle just about anything.
33:27
I mean, at that point, I, I, I say anything but handle it sort of like in bandon groups, it’s not everyone’s an individual, but there’s ones that you’re like, it’s fine, like they’re already paying again with our service.
33:40
Most of the stuff, the work is already done if they’re up and running.
33:42
So it’s not really much extra skin off our back necessarily.
33:48
Unless there was like, sometimes the reason you’re doing the pricing is because, hey, maybe your cost change like, hey, I’m also using a external service with a A I API that just their prices went up.
34:00
So my cost went up like, ok, that’s, that’s a different story and a different reason to talk about it in a different way to like, sort of manage those users that might be costing you more money.
34:13
Right.
34:13
So, would you always kind of relate your price increase to some sort of cost on your end?
34:19
Is that like, kind of how you think about it?
34:21
Because it, it’s what it kind of sounds like.
34:23
I, I don’t because our service, for the most part, there’s not like our server costs aren’t a, we’re not a massive server cost type of business.
34:32
So there’s not really like a cost, a large cost of goods sold with ours.
34:35
Other maybe, right?
34:37
There’s other ones that have to pay other API S and other services and things like that.
34:41
But it’s, it’s, it’s very small differences for us, right?
34:46
So if you had a customer who was, you know, pretend they managed to do like exactly the same referrals every month and the exact same amount of logins every month at the old pricing tier.
34:56
And you came to them and said, ok, we’re gonna increase your pricing by, you know, 10% or something like that.
35:02
You would just say like, hey, you know, we’re gonna treat you right because you’re, you’ve been a customer and all that, but like it’s not, there’s not really a reason given it’s just this is what’s gonna happen kind of thing.
35:12
Well, mostly because, hey, the price just changed.
35:15
So again, like it started with, we want to do a price change and the pricing change happened mostly because I’m thinking future modeling, how is this, how is new customers gonna come in the door?
35:26
How does, how do I want this to be rigged and set up correctly so that they’re getting value?
35:32
And I get to necessarily like make a good, make, make the most within the value structures that they have if that makes sense, just like optimizing area under the curve, if you want to think about it that way.
35:45
And it changes, right, the curves change based off of features and usage and time and, and new things you discover about how people use your product.
35:54
So it starts with that, like it starts with a new price for that and that’s why I said it’s a separate conversation then.
36:01
OK.
36:02
Now how do I deal with the legacy people?
36:04
And then it’s, it’s, it’s separated out so it’s always priced that way.
36:09
And it’s sort of like I might say, well, this person is gonna cost me more and actually that was one of the spurring reasons we did the new pricing as well to like fix a cost overrun internally.
36:21
So then those are the ones I’m probably also facing off with.
36:24
So.
36:24
Right.
36:25
Yeah, I know that makes a lot of sense and it sounds like you’re, you’re thinking about a lot of things when you’re thinking about like increasing the price, like you’re thinking about how the customers feeling about this, like, how much value they’re getting, how to treat existing customers well, and that sort of thing.
36:39
And, like, I think there’s a lot to it that, that you’re thinking about that.
36:45
I don’t know that conventional wisdom doesn’t really talk about, like, even just, like how to go about those conversations and that sort of thing.
36:52
I think there’s a lot of nuance there that really can, you know, make things work or like, or if you missed out on, like, thinking about how you’re gonna deal with existing customers, it could just blow up in your face.
37:02
Right.
37:03
Yeah.
37:03
Yeah.
37:04
And it’s, and those things are irreversible, right?
37:06
Like with those, that’s why I like taking caution in band.
37:09
So, so, yes, the directional, this is a great point to kind of wrap up with, but the, the, the directional advice of raise prices.
37:18
Yes.
37:18
But, you know, and, and it’s so, it sort of like, make the decision to raise prices if you’ve never raised prices before.
37:28
Now here’s how to consider like your fears and here’s how to make sure it’s, it’s, you’re not gonna shoot yourself in the foot.
37:35
Here’s some things you should look for if you fly too close to the sun, like here’s all these things, but sure make the decision that you’re at least going to exercise in those areas.
37:43
And that’s what I would if I was to blast anyone, any advice it’d be, like, as loudly and as forceful as you can consider raising prices, at least.
37:53
Maybe that’s, but that sounds lame.
37:56
Yeah.
37:56
Not nearly as a hot take.
37:58
I, no, no.
37:59
So, we’re just a bunch of moderates on this thing.
38:03
We just have to find new and all that.
38:06
I, and I think that’s where, yeah, that’s, that’s, I don’t know, I, I find more fun in that and that, maybe that’s just me.
38:12
Like, I never like just bow in China shop advice trying to just do that.
38:16
But I understand like other people need that to get them off the rock.
38:21
And I think by default you and me are in this, we’re sort of meddling and overthinking.
38:25
But, I think we also have enough get up to get moving as well.
38:29
It’s not like we’re gonna have the analysis paralysis of it all.
38:33
Oh, no, definitely not analysis paralysis.
38:35
We just jump.
38:36
I just jump in with 2 ft.
38:38
So we’re good.
38:40
Cool.
38:41
All right.
38:41
All right.
38:42
Thanks Nate.
38:43
I talk to you later.
38:44
See you.
