Pricing without Data
I know, it sounds like a sin. But, the reality is for those of us in emerging markets that are not yet defined and do not have a set of competitors to baseline against, it makes driving decisions based on Analyst information and market data very difficult. Especially pricing.
I approach pricing very consciously. It’s one of those things that I want to make sure I limit the amount of mistakes i make. Luckily, we don’t yet have a ton of market exposure and clients paying attention to our every move, so I’m afforded the flex space to make some judgement calls and see how things go.
Much of the time, I only have common sense data like chosen market segments, some competitive details, what prospects are telling us, and estimates based on metrics like # of new customers and # of lost customers across any given time frame.
When some choices are cloudy, I will generally approach a price using a skimming strategy. I know that the price I put to market will generally be higher than what the market(s) we are targeting will bear. As such, I’m prepared to lower them, and in our state of trying to increase market penetration with all of our technology and products, Sales will discount to get a deal done.
This is all fine.
When you are so undefined in a market space, it makes it very difficult to act as though you are an authority. But, this doesn’t mean that everyone can run around and give out any price they feel like it. While there is lots of flexibility (as I mentioned above), the deal has to make sense at the end of the day. If a Sales manage can work within the framework of our product objectives, standardized product and targets, than price can be discounted to help close a deal and get in another customer.
Because, really, will 20% off a setup fee really matter at the end of the day? No. Now, that’s not to say there aren’t elements of a product price I’d prefer Sales to discount. For example, if you are gearing everything on subscription-based pricing, do you really care about the setup? You probably shouldn’t. If Sales can close a deal with 80% off the discount, but the client signs-on for 3-years of recurring revenue, that’s pretty sweet - only if the 3-years of revenue equals out to something greater than the setup. If not, it’s then things start getting loopy.
All in all, take specific care with your pricing. You must go through this process. Why? Well, isn’t it WAY better to have a deal close for the pricing you set than for nothing at all?
Businesses will generally want to pay for things. It’s the course of doing business. If you say, “everything is free, or at $5 per month” or something nutty, people will start to ask questions. Why would they want to work with a company that doesn’t value their product? If they are requesting you pay them nothing (or close to nothing) what kind of relationship will the client expect to have moving forward? What about support? Yes, you can charge for support, but if the perceived value of the product you are supporting is nothing, how can a client be expected to get answers to their questions even if they pay for it?
Pricing is just one part of a product’s equation. But, keep in mind, in start-ups that are within markets that are not very well defined, sometimes you have to go on instinct. Put yourself in a targeted client, in the market you are targeting. If you are targeting small to mid-size businesses it probably doesn’t make logical sense to price to an Enterprise. Vice versa. But, if you are working at a level of all three, figure out where the “sweet spot” is and price from there accordingly.
No, you are not going to get it right everytime. But, in start-ups, mistakes are what it’s all about. I’ve made plenty, and you shouldn’t go around being afraid of getting fired or management choosing to bring in people that “really know what they are doing.” Trust yourself, and your market instincts and sensing capabilities and tweak as you go.
It won’t be right out of the gate, nor will it be right every time, all the time. But, pricing is like building a successful product. You have to listen to the market to make sure the price is for your customers. After all, you aren’t building a product for yourself or your competitors. Nor should you price a product for yourself or your competitors.
Meeting with Prospects
There’s something so cool about meeting with prospects — especially the ones that are truly excited about the market you are in and their products.
I just got home from dinner out with some prospects we have in LA from Europe. Super nice people, super interested in what we are doing and really professional. It was a fantastic meeting.
I dunno, maybe I’m really geeky, but I get SO excited and worked about when I talk about our technology and all the extremely cool things that consumers and businesses alike can do with it. I sometimes have to ask myself while I’m talking if I’m getting carried away and need to shutup!
But, there’s nothing better for me than a receptive audience that is really into what we’re going and the products that we have. Coupled with some great food and rapport building, it makes for my kinda night.
I know it’s not everyone’s cup of tea. Maybe it’s because I grew up around Sales - my Dad has been in Sales ever since I was born and is truly great. I learned a lot from listening to him take calls from my room doing homework while in school, or when I was working from home running my Web dev company, etc… I love how he approaches a sale and puts effort into the person he talks to.
I couldn’t have asked for a better person to learn about Sales from. It’s such a critical aspect of where I want to go in my career, being able to remember how I would hear him talk and build rapport with whoever he was on the phone with helps me everyday in my career. Now it’s just a matter of putting some that into practice and playing the experience building game.
