👋 Hello, I’m Lenny and welcome to a ✨ once-a-month-free-edition ✨ of my newsletter. Each week I humbly tackle reader questions about product, growth, working with humans, and anything else that’s stressing them out at the office.
If you’re not a paid subscriber, here’s what you missed this month:
When this question came in, I took to Twitter to find the smartest person in the world on SaaS pricing…
Many suggestions came though but one name came up again and again: @Patticus, aka Patrick Campbell.
I cold DM’d Patrick and asked him if he’d be up for writing a guest post. He instantly agreed 🙌🙌🙌
For those that don’t know Patrick, he is CEO of ProfitWell, and generally regarded guru on anything SaaS. Unrelated to this post, I started using ProfitWell a couple of months back to track my newsletter metrics, and the amount of insight you get into your subscription business is unreal. AND IT’S FREE. If you’re running a SaaS business, definitely check it out. This is not a sponsored post — I just love the product.
🚨 Bonus: Patrick Campbell is doing a live AMA at 5pm PT today (10/27) in our subscriber-only Slack group. Ask Patrick any question you have about pricing your product live!
With that out of the way, let’s dive in!
by Patrick Campbell
Pricing is one of those topics that sits at the nexus of uncomfortable and long-term, which means companies often don’t think about it for far too long. Even when they eventually figure it out, they don’t touch it again for years.
The most successful companies optimize monetization in some manner every quarter. You may be thinking, “they change their price every 3 months!?” No, and that's the first lesson of monetization: pricing goes so much further than the actual price. Let me explain.
If we go to a thirty thousand foot view, you have to think about what you're actually doing with pricing. No matter the business you're in — non-profit, retail, SaaS, DTC, B2B, whatever — you've created some sort of value. You attach a unit of measurement to the value you created: your price. Put simply, your price is the exchange rate on the value you're creating in the world.
But price doesn’t live in a vacuum. Everything in your business — from sales and marketing to product and finance — is used to drive someone to buy the product at the price you're offering. Dozens of aspects of your business influence your price, and how effectively it converts customers: