Welcome to another episode of the Product Thinking podcast. This week, host Melissa Perri is joined by Patrick Campbell, CEO of Profitwell. They discuss all things pricing, diving deep into the psychology behind pricing models and how to choose a pricing strategy. Patrick talks about the biggest mistakes businesses make when pricing, when and how often you should be raising your prices, how to align your price changes with your value metrics and communicate those changes to customers, and more.
You’ll hear Melissa and Patrick talk about:
Patrick's team developed a financial analytics product and decided to give it away for free in order to get more data and improve their algorithms. 37,000 companies have used it in the past seven years.
Patrick's company was acquired by Paddle for $200 million in May 2022, with a mission to grow subscription companies automatically.
Pricing is a core competency for a business and should not be treated as a quick task to be done and moved on from. It is the very essence of a business as it represents the value of a product or service and how it is perceived by customers.
Businesses should experiment with monetization once per quarter and raise prices once per year.
Raising prices too often can lead to customer churn. However, this eventually normalizes as ‘fence-sitting’ customers leave.
Make sure your price increase is justified by the value you provide to the customer. Align your pricing with a value metric, such as revenue.
Packaging and pricing go hand in hand and can be thought of in terms of charging different prices for different pieces of value of the product.
Sustaining a social media platform like Twitter is difficult, and it can be hard to monetize.
Adobe's move from selling Photoshop for $1,000 to a subscription model of $32 a month was an "eye-opening" change that allowed for more investment in the product.
It's important to get the finance team aligned with the move to a subscription model, as costs will initially go up and revenue will initially go down.
Pricing is a whole company problem, not just a product problem.
Resources
Patrick Campbell Website | Email | LinkedIn
ProfitWell
