Lenny's Podcast: Product | Career | Growth

chevron_right

Pricing your AI product: Lessons from 400+ companies and 50 unicorns | Madhavan Ramanujam

whatshot 886 snips

Jul 27, 2025

Guest

Madhavan Ramanujam

Madhavan Ramanujam, a pricing and monetization expert, shares his insights from advising over 250 companies, including unicorns. He discusses why AI companies can capture much higher value than traditional SaaS models. Madhavan introduces a 2x2 framework for optimal pricing and highlights negotiation strategies that maximized a founder's deal size. He also emphasizes reframing Proof of Concepts to create business cases and stresses that monetization must be prioritized from the start. His insights reveal crucial strategies for sustainable growth in AI.

01:11:43

forum

Ask episode

web_stories

AI Snips

view_agenda

Chapters

menu_book

Books

auto_awesome

Transcript

info_circle

Episode notes

00:00 / 00:00

Master Market and Wallet Share

Founders must master both market share and wallet share to build enduring businesses.
Dominating one without the other limits profitable growth possibilities.

00:00 / 00:00

Use Simple, Value-Based Pricing

Keep early pricing simple to reduce friction and ensure customers understand it.
Tell a clear value story that contextualizes your price with the benefits customers gain.

00:00 / 00:00

Master Negotiations To Increase Value

Master negotiation by using gives and gets, value selling, and smart negotiation strategies.
Show pricing options and anchor high to extract maximum value from deals.

Get the Snipd Podcast app to discover more snips from this episode

Navigating Growth: Strategies for Sustainable Business Development

05:00 • 25min

chevron_right

Reframing the Purpose of POCs in Business Strategy

30:22 • 3min

chevron_right

Strategic Pricing for AI Products

33:49 • 16min

chevron_right

Navigating AI Product Pricing and Packaging Strategies

49:42 • 2min

chevron_right

Dynamic Pricing Strategies for AI Companies

51:42 • 14min

chevron_right

Shifting Focus: From Consulting to Early-Stage AI Investment

01:05:51 • 2min

chevron_right

Exclusive Book Bundles and Community Engagement

How Smart Companies Architect Profitable Growth

Madhavan Ramanujam

Madhavan Ramanujam's "Scaling Innovation" is a comprehensive guide on how to build enduring businesses by effectively scaling innovation for long-term profitable growth. The book provides strategies for mastering both market share and wallet share, emphasizing the importance of acquisition, monetization, and retention. It highlights common traps that prevent teams from building sustainable businesses and offers actionable insights for profitable growth. Ramanujam introduces frameworks and tools for companies to architect their business models and pricing strategies, especially in the context of AI. Through real-world examples and CEO questions, the book equips founders with the knowledge to navigate challenges and achieve lasting success.

#13324

• Mentioned in 2 episodes

Business model canvas

Penerapan di Indonesia

Penerbit PPM

This book provides a detailed explanation of the Business Model Canvas and its application in Indonesian businesses. It covers the nine key elements of the Business Model Canvas, including customer segments, value proposition, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. The book is designed to help entrepreneurs and business managers understand and implement the Business Model Canvas effectively in their organizations.

#1456

• Mentioned in 16 episodes

Contagious

Why Things Catch On

Jonah Berger

In 'Contagious: Why Things Catch On,' Jonah Berger explains that the popularity of products, ideas, and behaviors is driven by six key principles: social currency, triggers, emotion, public visibility, practical value, and stories. Berger argues that word of mouth, rather than traditional advertising, is the primary force behind making things popular. He provides case studies, real-world examples, and research findings to support these principles, which can be applied to various fields including marketing, social causes, and political campaigns. The book emphasizes that contagious content can spread through everyday conversations rather than relying on socially influential individuals.

• Mentioned in 325 episodes

Thinking, Fast and Slow

Daniel Kahneman

In this book, Daniel Kahneman takes readers on a tour of the mind, explaining how the two systems of thought shape our judgments and decisions. System 1 is fast, automatic, and emotional, while System 2 is slower, effortful, and logical. Kahneman discusses the impact of cognitive biases, the difficulties of predicting future happiness, and the effects of overconfidence on corporate strategies. He offers practical insights into how to guard against mental glitches and how to benefit from slow thinking in both personal and business life. The book also explores the distinction between the 'experiencing self' and the 'remembering self' and their roles in our perception of happiness.

#2359

• Mentioned in 11 episodes

Monetizing Innovation

Simon-Kucher & Partners

Madhavan Ramanujam is the world’s foremost expert on pricing and monetization strategy. As managing partner at Simon-Kucher, he helped over 250 companies, including 30 unicorns, architect their pricing strategies. He’s the author of the definitive book on pricing, Monetizing Innovation. Now he’s back with a sequel, Scaling Innovation, which reveals how to build enduring businesses by dominating both market share and wallet share. He recently left Simon-Kucher to launch his own fund, 49 Palms, focused on helping early-stage AI companies.

In this conversation, we discuss:

1. The 2x2 framework that identifies your optimal pricing model

2. Why AI companies can capture 25% to 50% of value created, vs. 10% to 20% for traditional SaaS products

3. Why popular AI coding tools may have already doomed themselves with underpricing

4. The “give-and-get” framework top negotiators use to extract maximum value from every deal

5. The negotiation strategy that helped one founder 4x their deal size overnight

6. How to frame POCs as “business case creation” instead of technical demos (and why this changes everything)

7. Why AI companies must get monetization right from day one—not “figure it out later”

8. How companies like Intercom’s Fin and Sierra pioneered outcome-based pricing (charging $0.99 per AI resolution)

9. The single question that reveals if your pricing is too complex

—

Brought to you by:

Enterpret—Transform customer feedback into product growth: https://enterpret.com/lenny

DX—A platform for measuring and improving developer productivity: https://getdx.com/lenny

Persona—A global leader in digital identity verification: https://withpersona.com/lenny

—

Transcript: https://www.lennysnewsletter.com/p/pricing-and-scaling-your-ai-product-madhavan-ramanujam

—

My biggest takeaways (for paid newsletter subscribers): https://www.lennysnewsletter.com/i/168109183/my-biggest-takeaways-from-this-conversation

—

Where to find Madhavan Ramanujam:

• X: https://x.com/madhavansf

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

• Promo email for Scaling Innovation: promo@49palmsvc.com — If you’re purchasing more than five copies, send a screenshot of your receipt to enter Madhavan’s exclusive bundle raffle.

—

Where to find Lenny:

• Newsletter: https://www.lennysnewsletter.com

• X: https://twitter.com/lennysan

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

—

In this episode, we cover:

(00:00) Introduction to Madhavan and his work

(04:30) The core thesis of Scaling Innovation

(09:20) Common traps founders fall into

(12:06) Beautifully simple pricing

(15:00) Mastering negotiations

(26:51) Other strategies for effective pricing and monetization

(27:35) How AI pricing is different

(31:33) Handling POCs

(36:25) The importance of mastering monetization

(38:58) Choosing the right AI pricing model

(43:13) Current trends in AI pricing

(44:48) Strategizing for outcome-based models

(50:23) Packaging strategies for scaling

(51:37) Adapting pricing strategies over time

(53:40) Key axioms for pricing success

(58:00) Takeaways for founders

(01:01:33) Lightning round and final thoughts

—

Referenced:

• The art and science of pricing | Madhavan Ramanujam (Monetizing Innovation, Simon-Kucher): https://www.lennysnewsletter.com/p/the-art-and-science-of-pricing-madhavan

• Cursor: https://www.cursor.com/

• The rise of Cursor: The $300M ARR AI tool that engineers can’t stop using | Michael Truell (co-founder and CEO): https://www.lennysnewsletter.com/p/the-rise-of-cursor-michael-truell

• Sierra Finn: http://www.sierrafinn.com/

• Chargeflow: https://www.chargeflow.io/

• GitHub: https://github.com/

• Intercom: https://www.intercom.com/

• Warren Buffett’s quote: https://www.goodreads.com/quotes/11478913-if-you-ve-got-the-power-to-raise-prices-without-losing

• Sierra: https://sierra.ai/

• Clay Bavor on LinkedIn: https://www.linkedin.com/in/claybavor/

• Mission: Impossible—The Final Reckoning: https://www.imdb.com/title/tt9603208/

• Delphi: https://www.delphi.ai/

• Dara Ladjevardian on LinkedIn: https://www.linkedin.com/in/dara-ladjevardian/

• Sam Spelsberg on LinkedIn: https://www.linkedin.com/in/samuel-spelsberg/

• Lennybot: https://www.lennybot.com/

• Granola: https://www.granola.ai/

• Simon-Kucher: https://www.simon-kucher.com/

• Josh Bloom on LinkedIn: https://www.linkedin.com/in/joshuabloompricingconsulting/

—

Recommended books:

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

• Scaling Innovation: How Smart Companies Architect Profitable Growth: https://www.amazon.com/dp/1119633060

• Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers: https://www.amazon.com/Business-Model-Generation-Visionaries-Challengers/dp/0470876417

• Thinking Fast and Slow: https://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555/

• Contagious: Why Things Catch On: https://www.amazon.com/Contagious-Things-Catch-Jonah-Berger/dp/1451686587/

—

Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com.

Lenny may be an investor in the companies discussed.

To hear more, visit www.lennysnewsletter.com

Home Top podcasts Popular guests Top books