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How to price a product, sell it to customers, and build a sales team

265 points by petethomas 8y ago

paulie_a 8y ago
I love this article. Never give your service away for free. The user has no skin in the game so won't use it. You are not selling if you do all the talking. 90 percent of the conversation on your end should be questions. I am not a sales guy buy I've seen it done right and the wrong way. The wrong way is someone doing all the talking. The right way simply asks open ended questions and listens.
- Rainymood 8y ago
  >Charge more Agreed. There is this weird psychological trick where if you charge people more they start to value your service more or at least delude themselves into thinking so exactly because they are spending more money, it's a beautiful thing. If it fails, you can always reduce your price again! >Never give your service away for free.* * Except if your business model depends on capturing a large enough audience to feed them ads and generate revenue from that (Facebook, Google, Reddit).
  - paulie_a 8y ago
    Granted b2c is an exception when based on advertising. But I've seen plenty of cases where raising prices resulted in more customers. And quite frankly better customers overall. The ones that get the service for free or an extremely low cost are the ones that bitch the most in my experience. The people paying a decent price tend to be friendly and while might encounter issues, they work with the CSR to solve the problem.
  - codetrotter 8y ago
    You quote them as saying “charge more”, but I don’t see them say that. Did they edit their comment while/after you responded?
    - ryanbertrand 8y ago
      It is in the 'Do you have any advice for founders trying to price their product?' section as a hyperlink.
      - codetrotter 8y ago
        Ah, so that part of the comment is in reply to the original post. Confusing but I see.
- overcast 8y ago
  Exactly, if people aren't willing to pay for it, what exactly is the point of it? To waste your time? I understand if something is a hobby project, but dumping tons of your own resources just to provide a "free" service is dumb. People are getting more reluctant to upload their lives in exchange for their private information being sold off. I said it before, the next big web is going to be actually good paid services.
- cabaalis 8y ago
  > The user has no skin in the game so won't use it. I agree 100% with this statement. The first startup I was involved with decided to give the product away for free to build an audience, and then attempt to monetize the audience. The "business" felt more like a "hobby" and our users were not helpful because they had no investment whatsoever in the product.
- Drdrdrq 8y ago
  And at the end - don't think you don't have experience in selling, you already do that when you communicate. Genius.
  - ddebernardy 8y ago
    You also learn how to sell in early childhood... - No. - Why? - It's candy, and we're not here to buy candy. [...] - Why? - [Sigh] Because mum said so, and I promised her not to buy you any. - But mum doesn't need to know, does she?
- novaleaf 8y ago
  While I agree that charging more is generally a good strategy, not having a free tier discourages product experimentation. A real life example: I am in search for an api doc solution for my SaaS. A certain "docs" SaaS costs about $1200/year for their basic service, which includes an ad for their service at the bottom of your doc pages. To not have their branding ("white label") costs $4800/yr. That SaaS is certainly taking the "charge more" advice to heart and because of it I will never try their service, and instead am trying open source solutions like docusaurus.
  - ddebernardy 8y ago
    But you're probably not their target audience. If you're charging $1200/year for basic service, the last thing you want is would-be users who try the service unassisted on a self-service basis, fail to use it properly, and decide that no, it's actually not their thing. As a sales manager, what you want instead is to get these users to interact with an account manager and make damn sure they succeed when they decide to try.
philipodonnell 8y ago
> ... You want paid pilots. When it comes to enterprise, you want to uncover real buying intent as fast as possible. ... In the enterprise world, if you’re not putting a price tag on your product, it’s not going to be valued. I disagree with the idea that you should never offer free pilots to enterprise customers. Some pilots do not demonstrate buying intent: they are qualifiers. Often times pilots are necessary to get enough information to justify the purchasing decision. Salespeople always claim a product will solve 100% of my needs. The reality is that it is actually somewhere between 20% and 80%. Where it is on the spectrum will determine whether I should be a customer. I need the pilot to know where that level is. Just because you are not asking for money does not mean the pilot is "free". I have to justify the time I'm spending on this pilot, I have to set aside other priorities potentially disappointing stakeholders. I have to request resources and people. I carry the reputation risk since I am the one driving it internally. If you are asking me to pay an even higher price than that, by forcing my reputation risk to also include a budgetary impact, or force me to slog through procurement, I am going to skip your company, even in favor of a higher ticket-price competitor. There should be greatly asymmetrical costs incurred by you compared to me to justify that.
- ddebernardy 8y ago
  I think you misunderstood. When you're in sales, it's an open secret that large companies give managers a discretionary spending limit under which procurement doesn't get involved. At all. The exact amount depends on the business, but the figure isn't hard to come by - you basically just need to ask an insider. If you don't have such a discretionary spending limit yourself, but still interact heavily with outside sales, it's because the sales you're dealing with view you as an inside asset - credit to you, you're what's called an influencer - that allows them to get to your boss who does. (Alternatively, you might actually be working for a small or medium business. Which is cool but keep in mind that these can be very different in this respect, in that many managers in them have little to no discretionary spending limit.)
  - philipodonnell 8y ago
    Even if the money is available via discretionary spending, the article is arguing that the lack of an explicit price of $X>$0 means that the client has no skin in the game, as if the cost to the client goes from $0->$X. The implication is that charging a price makes it more likely I will buy once the pilot is over because I now have "skin in the game". My point was that this is not true. The cost is not zero just because there is no price. I already have skin in the game. I am willing to incur those costs on a pilot to decide whether to use your company but the decision will be based on how much benefit your company demonstrates during the pilot. Adding a price to those costs just makes it less likely I'll do a pilot, that's it.
lostmsu 8y ago
Any particular suggestions on how much exactly a typical software engineer would underestimate its enterprise product?

265 points by petethomas 8y ago

I love this article. Never give your service away for free. The user has no skin in the game so won't use it. You are not selling if you do all the talking. 90 percent of the conversation on your end should be questions. I am not a sales guy buy I've seen it done right and the wrong way. The wrong way is someone doing all the talking. The right way simply asks open ended questions and listens.

Rainymood 8y ago
>Charge more Agreed. There is this weird psychological trick where if you charge people more they start to value your service more or at least delude themselves into thinking so exactly because they are spending more money, it's a beautiful thing. If it fails, you can always reduce your price again! >Never give your service away for free.* * Except if your business model depends on capturing a large enough audience to feed them ads and generate revenue from that (Facebook, Google, Reddit).
- paulie_a 8y ago
  Granted b2c is an exception when based on advertising. But I've seen plenty of cases where raising prices resulted in more customers. And quite frankly better customers overall. The ones that get the service for free or an extremely low cost are the ones that bitch the most in my experience. The people paying a decent price tend to be friendly and while might encounter issues, they work with the CSR to solve the problem.
- codetrotter 8y ago
  You quote them as saying “charge more”, but I don’t see them say that. Did they edit their comment while/after you responded?
  - ryanbertrand 8y ago
    It is in the 'Do you have any advice for founders trying to price their product?' section as a hyperlink.
    - codetrotter 8y ago
      Ah, so that part of the comment is in reply to the original post. Confusing but I see.
overcast 8y ago
Exactly, if people aren't willing to pay for it, what exactly is the point of it? To waste your time? I understand if something is a hobby project, but dumping tons of your own resources just to provide a "free" service is dumb. People are getting more reluctant to upload their lives in exchange for their private information being sold off. I said it before, the next big web is going to be actually good paid services.
cabaalis 8y ago
> The user has no skin in the game so won't use it. I agree 100% with this statement. The first startup I was involved with decided to give the product away for free to build an audience, and then attempt to monetize the audience. The "business" felt more like a "hobby" and our users were not helpful because they had no investment whatsoever in the product.
Drdrdrq 8y ago
And at the end - don't think you don't have experience in selling, you already do that when you communicate. Genius.
- ddebernardy 8y ago
  You also learn how to sell in early childhood... - No. - Why? - It's candy, and we're not here to buy candy. [...] - Why? - [Sigh] Because mum said so, and I promised her not to buy you any. - But mum doesn't need to know, does she?
novaleaf 8y ago
While I agree that charging more is generally a good strategy, not having a free tier discourages product experimentation. A real life example: I am in search for an api doc solution for my SaaS. A certain "docs" SaaS costs about $1200/year for their basic service, which includes an ad for their service at the bottom of your doc pages. To not have their branding ("white label") costs $4800/yr. That SaaS is certainly taking the "charge more" advice to heart and because of it I will never try their service, and instead am trying open source solutions like docusaurus.
- ddebernardy 8y ago
  But you're probably not their target audience. If you're charging $1200/year for basic service, the last thing you want is would-be users who try the service unassisted on a self-service basis, fail to use it properly, and decide that no, it's actually not their thing. As a sales manager, what you want instead is to get these users to interact with an account manager and make damn sure they succeed when they decide to try.

philipodonnell 8y ago

> ... You want paid pilots. When it comes to enterprise, you want to uncover real buying intent as fast as possible. ... In the enterprise world, if you’re not putting a price tag on your product, it’s not going to be valued. I disagree with the idea that you should never offer free pilots to enterprise customers. Some pilots do not demonstrate buying intent: they are qualifiers. Often times pilots are necessary to get enough information to justify the purchasing decision. Salespeople always claim a product will solve 100% of my needs. The reality is that it is actually somewhere between 20% and 80%. Where it is on the spectrum will determine whether I should be a customer. I need the pilot to know where that level is. Just because you are not asking for money does not mean the pilot is "free". I have to justify the time I'm spending on this pilot, I have to set aside other priorities potentially disappointing stakeholders. I have to request resources and people. I carry the reputation risk since I am the one driving it internally. If you are asking me to pay an even higher price than that, by forcing my reputation risk to also include a budgetary impact, or force me to slog through procurement, I am going to skip your company, even in favor of a higher ticket-price competitor. There should be greatly asymmetrical costs incurred by you compared to me to justify that.

ddebernardy 8y ago
I think you misunderstood. When you're in sales, it's an open secret that large companies give managers a discretionary spending limit under which procurement doesn't get involved. At all. The exact amount depends on the business, but the figure isn't hard to come by - you basically just need to ask an insider. If you don't have such a discretionary spending limit yourself, but still interact heavily with outside sales, it's because the sales you're dealing with view you as an inside asset - credit to you, you're what's called an influencer - that allows them to get to your boss who does. (Alternatively, you might actually be working for a small or medium business. Which is cool but keep in mind that these can be very different in this respect, in that many managers in them have little to no discretionary spending limit.)
- philipodonnell 8y ago
  Even if the money is available via discretionary spending, the article is arguing that the lack of an explicit price of $X>$0 means that the client has no skin in the game, as if the cost to the client goes from $0->$X. The implication is that charging a price makes it more likely I will buy once the pilot is over because I now have "skin in the game". My point was that this is not true. The cost is not zero just because there is no price. I already have skin in the game. I am willing to incur those costs on a pilot to decide whether to use your company but the decision will be based on how much benefit your company demonstrates during the pilot. Adding a price to those costs just makes it less likely I'll do a pilot, that's it.

lostmsu 8y ago

Any particular suggestions on how much exactly a typical software engineer would underestimate its enterprise product?