💎 Revenue that most companies ignore

Remember the days when you’d ask your parents for money so you could buy candy? Well, it’s a fond memory for me and likely the birth of my current sugar cravings (read addiction). You’d go up and ask the cashier for a small plastic bag and for 5 cents a candy, you’d fill that f*cker up. Insane how you could bag a sugar rainbow for just 2 dollars from your parents. But as things do, prices rise over time. 5 cents turns into 25 cents. Yet you still only had 2 dollars.

Soon I was mowing lawns and landscaping for the geriatrics in the neighborhood to keep my sugar addiction alive. Which also ignited my entrepreneurial spirit. A win-win.

All to say, things change, you change. And price changes. Yet most companies rarely get it right on their first try. The number of companies that iterate? Even fewer. But doing so can be a massive win. Spotify learned this. They decided to finally raise their prices after more than a decade. And what happened? Shares soared by 11%. That’s billions.

Makes you think, “What else was left on the table”? Let’s dive in.

Set it, and forget it

Most companies fight hard to get their first customers. This is the window most companies iterate on their price before stopping. They think that this specific formula of price + product + sales process is how you attract customers forever more. And as you bring more customers, it’s the product that changes, while pricing stays fixed. Naturally, with features being delivered, you become more valuable over time.

I was working with a startup that hadn’t changed its pricing in over 7 years. When they did, an immediate 7-figure profit was produced overnight. Because it had been so long since the increase, churn was practically 0. And for those that did leave, we learned they were likely going to leave soon anyway.

So ask yourself first, “When’s the last time you raised prices?” If it’s been more than a year, you have an opportunity.

Being cheap isn’t an advantage

Now there’s a group of companies that believe pricing is a competitive advantage. Price is how you’re positioned in the market. Some are expensive, some are affordable, and some are cheap. Driving your price down to be competitive is a bad strategy.

It also means you have a different problem. Your product isn’t competitive enough so you resort to lowering your price. That’s a drive to the bottom. So if you see pricing become a strategy, ask yourself, “What product enhancements are we missing?”

It doesn’t mean swinging from being cheap to expensive. Instead, it’s about saving your customers time or money that you can charge for a fraction of which. Find ways to help customers reduce time spent on a task or help them make more money. Then charge more.

Other pricing insights

Just like your roadmap, pricing is iterative. So if you don’t see experiments baked into your roadmap, make the time. That’s why pricing strategy should live within your product org. They are already driving product value so the same should happen with pricing.

Another area in your organization is Sales. Duh. Sales are incentivized to close the deal. And customers will share their thoughts on pricing. They’ll say things like, “I thought this was more expensive” or “I was ready to pay more”.

One entrepreneur told me that her salespeople constantly heard this, so they raised prices by 250% and dramatically increased revenues, overnight.

Batches on batches

For those that are sketched out about making more money. I get it. That was sarcasm—money is nice. But there’s a trick if you are worried: batch your rollout.

Instead of changing your pricing all at once, release it slowly. Take a handful of customers and get their reaction. If they don’t flinch, roll it out to more. This way you can treat any churn with white-glove treatment. You may learn faster than you think that your new pricing kicks ass.

Don’t be caught in a world where you’re pinching the marketing budget or that new hire because you weren’t being smart about pricing. Experiment often. Encourage sales. Find valuable features. Batch your rollout.

These are the ways companies manage their pricing. And make more revenue. If you want help, I’m here. Just hit me up!

Onwards,