The Power of Experimentation in Pricing

Naomi Ionita is a Partner at the venture capital firm, Menlo Ventures. She started her career in engineering in 2002, shifted to product in 2006, and built product growth and monetization teams starting over a decade ago as one of the first PLG leaders in B2B. She was an early mentor at Reforge and her expertise is in building full-stack growth teams and cultures, launching new products, and helping existing products monetize and retain their users. Consider today’s episode a master class on monetization and pricing. We talk about common mistakes made by founders, specific experiments for how to determine pricing, and why initial growth sometimes comes at the expense of revenue. Naomi also introduces the concept of the Modern Growth Stack, how AI will play a role in growth, and what she’s most excited about for the future.

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Find the full transcript here: https://www.lennyspodcast.com/how-to-price-your-product-naomi-ionita-menlo-ventures/#transcript

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Where to find Naomi:

• Twitter: https://twitter.com/npilosof

• LinkedIn: https://www.linkedin.com/in/naomipilosofionita/

• Website: https://www.menlovc.com/naomi-pilosof-ionita

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Referenced:

Disclaimer: Lenny is an angel investor in a few startups mentioned in this episode: Eppo, Endgame, Pocus

• Evernote: https://evernote.com/

• Figma: https://www.figma.com/

• The Van Westendorp pricing model: https://www.forbes.com/sites/rebeccasadwick/2020/06/22/how-to-price-products/?sh=7e6077f855c7

• OpenView: https://openviewpartners.com/

• SaaS business model at Profitwell: https://www.profitwell.com/recur/all/saas-business-model

• Envoy: https://envoy.com/

• Invoice2go: https://invoice.2go.com/

• Gas: https://apps.apple.com/us/app/gas/id1641791746

• Endgame: https://www.endgame.io/

• Pocus: https://www.pocus.com/

• Optimizely: https://www.optimizely.com/

• Eppo: https://www.geteppo.com/

• Amplitude: https://amplitude.com/

• Chargebee: https://www.chargebee.com/

• Zuora: https://www.zuora.com/

• Metronome: https://metronome.com/

• Orb: https://www.withorb.com/

• Monetizing Innovation: How Smart Companies Design the Product Around the Price: https://www.amazon.com/Monetizing-Innovation-Companies-Design-Product/dp/1119240867

• Ask the Storybots on Netflix: https://www.netflix.com/title/80108159

• Madhavan Ramanujam on Lenny’s Podcast: https://www.lennyspodcast.com/videos/the-art-and-science-of-pricing-madhavan-ramanujam-monetizing-innovation-simon-kucher/

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In this episode, we cover:

(00:00) Naomi’s background

(06:21) Why Evernote wasn’t able to leverage the kind of growth that Notion did

(08:06) What founders get wrong when it comes to monetization

(12:34) Which features to include in a freemium product

(13:22) Day one vs. day one-hundred premium features

(15:35) Matching price to value for optimal segmentation

(18:50) When pricing should be revisited

(19:38) How to determine price, and why it’s a good idea to have a cross-functional pricing team

(23:06) How to restructure pricing holistically 

(25:58) How Envoy learned that they were undercharging

(28:39) The importance of experimentation 

(32:19) How to balance growth with revenue

(35:12) What is the modern data stack?

(36:45) The modern growth stack

(42:22) The importance of experimentation in the growth stack

(42:59) Platforms for billing and monetization

(46:13) Why a hybrid model of pricing tends to be most used in SaaS companies

(49:01) Leveraging AI 

(49:52) Lightning round

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