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What’s your price point, and what’s your pricing methodology, and why did you settle on both of these? – Take them through your thought process.
Here’s what they mean…
You have probably talked about how much money you make and some of your KPIs and now investors are questioning if you are making as much money as you could be with questions like; “What’s your price point, and what’s your pricing methodology, and why did you settle on both of these?”
- What is your pricing point?
- How many different pricing packages do you offer?
- How do you think about effective segmentation?
- Do you have a means for expansion revenue?
- Do you offer an enterprise package?
- Do you offer professional services?
- What is the way upon which you’ve settled on the prices, and how did you come to that decision?
- Are your prices too low or too high?
- Are you executing any smart pricing strategies?
- Do you have thoughts about promotional pricing?
- If you are doing a free trial, for how long?
One way or the other you are charging something for your product, so why are you charging those priced? I presume you know, so tell them.
Of course, maybe you’re like Pinterest and don’t make any money… in which case what you have to do is say “We haven’t turned on the pipe… yet… But imagine if we did!” Yeah, apparently VCs buy that BS if you grow fast enough.
If you are really early stage it’s fine to not know how to price effectively. Just be honest with the investor. Tell them this is something you are figuring out, but you are more concerned about identifying product market fit than optimising pricing. It’s fine to say you don’t know if you are not ignorant and that there is a reason you don’t know. You know you don’t know.
What you need to say
“We recently increased our prices, we had a thesis that we were leaving money on the table by only charging $50.
We decided to change the prices a month ago, but we have seen no drop off rate in our conversion and in our revenue growth. Customers seem to be relatively price-sensitive since we are offering them so much compelling value.
We estimate that they are getting 20x RoI. That means we can still double and offer 10x value. We are still testing, but the results are quite compelling. We want to start expanding the pricing packages we offer and see if we can more effectively price discriminate.”
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