This document provides guidance on pricing strategies for startups. It discusses that pricing is important for retention, monetization, and acquisition of customers. Pricing is difficult for startups because it requires changing user behaviors and early adopters value potential benefits most. The document recommends understanding costs and customer value when setting price. It also suggests optimizing prices through testing conversion rates and revenues at different price points. Finally, it proposes a 10/5/20 rule for raising price 5% at a time until reaching a 20% level of customer pushback to maximize value compared to price.
5. Prices are too low
Focus on wrong customers
Underestimate costs
Don’t understand your value
6.
7. Empirical studies indicate
that demand does not begin
to accelerate until the first 2%
to 5% of potential buyers
adopt the product.
8. Why is pricing
innovation hard?
• Innovation requires users
to change patterns
• Avg user lacks knowledge and trust to
make that change
• Early adopters place highest value on
potential benefits
15. 10 · 5 · 20 RULE
Value = 10X Price
Raise price 5%
Until 20% Push Back
16. In Summary!
• Pricing gives most bang for effort
• Understand the variables (cost, price, value)
• Go after early adopters. Benefits > Price
• Get organized when optimizing pricing
• Price determines acquisition strategy
• Use the 10 / 5 / 20 Rule
