Value Over Price: The Key to Successful Price Optimization

1min Snip

00:00

Play full episode

Summary

Transcript

Episode notes

Early adopters prioritize benefits over price when evaluating products. To optimize pricing, focus on the value your product provides and avoid undercharging. Organize your approach to price optimization by testing different price points, considering sales volume, conversion rates, and revenue. Your pricing strategy will influence your acquisition strategy, so ensure the balance between sales cycle expenses and pricing is optimal. Use the 'ten, five, 20 roll' method to set prices at a tenth of the value and increase by 5% until losing 20% of deals, balancing value and affordability.

We've cut down the seventh week of lectures to be even shorter and combined them into one podcast.

Kevin Hale gave both lectures this week. Kevin’s a partner at YC and cofounded Wufoo. His first lecture is on how to improve conversion rates and his second lecture is on pricing for startups.

Y Combinator invests a small amount of money ($150k) in a large number of startups (recently 200), twice a year.

Learn more about YC and apply for funding here: https://www.ycombinator.com/apply/

***

Topics

00:00 - Intro

00:27 - Kevin Hale - How to Improve Conversion Rates

1:02 - Why we care about conversion rates

2:02 - Shareware conversion rate is .5%

2:22 - Casual download games is 2%

2:32 - Freemium SaaS range from 1.5 to 5%

3:57 - Knowledge spectrum

5:52 - The one button interface

6:37 - What is the call to action? And the magic moment.

8:02 - What is it?

8:38 - Is it right for me?

9:02 - Is it legit?

9:22 - Who else is using it?

9:52 - How much? What's the catch?

10:39 - Where can I get help?

11:30 - Kevin Hale - Startup Pricing 101

13:15 - Monetization gives you the biggest bang for your buck

14:35 - Price thermometer

16:35 - Mistake 1 - Prices are too low

16:55 - Mistake 2 - Underestimate costs

17:08 - Mistake 3 - Don't understand your value

17:27 - Mistake 4 - Focus on wrong customers

18:05 - Sales and profit over a product's life

19:20 - Why is pricing innovation hard?

21:27 - How to optimize prices

22:32 - $1B formula

24:05 - Price and complexity

26:55 - 10 - 5 - 20 rule

28:20 - Summary