The "charge more" debate
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Justin:You get 2 months free when you go to clubhouse.io/build. Hello, everyone. Welcome back to build your SaaS. This is the behind the scenes story of building a web app in 2019. I'm Justin Jackson and like I said, my cofounder John is touring around Europe.
Justin:And this week I thought I would bring you a conversation that I had live with Ben Orenstein from the art of product podcast. And, he has an app called tuple. Jordan Gall, who is from cart hook. And, also we had a, a cameo by Patrick Campbell from PriceIntelligently. The whole conversation's really good and came in response to an article I wrote called, should you charge more?
Justin:That's in the show notes. Let's get right into this conversation. I'm Justin, and I'm here with Jordan. And we also have Ben or Ornstein.
Speaker 2:That's right.
Justin:And, Jordan runs karthook.com, and, Ben is one of the cofounders of tuples.app. And we're here to talk about pricing. Should you charge more? Why do people charge more? And, actually, the original genesis of this idea to go live was Ben contacting me about transistors pricing, and he had some ideas for me.
Justin:So we definitely wanna try to get to that. My objective for this conversation is that we would dig into and maybe challenge some of our assumptions about pricing. I know I've got assumptions about pricing. I'm sure you folks do too and folks listening do. And so maybe to start, why do you folks think that charge more has become kind of the default in bootstrapping circles?
Speaker 2:I think it's the default because it's usually right.
Justin:Okay.
Speaker 2:I think the most common failure mode for people starting out in business is that they pick their pricing based on emotion. And there's something deeply personal about sticking a price on a thing you built. And especially in the beginning, you're super aware of how crappy the thing you built is. You're aware of all the shortcomings, and you're not super good at putting yourself in the mindset of someone with a corporate credit card or with, like, a budget. And so you're like, I can't even imagine asking for $25 per month for this.
Speaker 2:That's so many dollars. And so it's just the it's way more likely that you under price than over price. And so charge more is too simple, of course. Mhmm. Like all two word pieces of advice, it does not cover all the nuance.
Speaker 2:I think the only good two word piece of advice is it depends. That covers pretty much everything. But so it's it's but it's good advice in general, especially in, like, the microcomfy bootstrapped. You're kinda getting into this. You're probably a developer, so you're not used to, like, knowing how to price things at, like, a corporate level and things like that.
Speaker 2:And so so I read your post, Justin. I thought it was good. Mhmm. I thought you did a nice job of bringing Nuance to that discussion. And I think sometimes I was actually just seeing on Twitter just now.
Speaker 2:Someone's like, yeah. Just charge more. That's the answer. What's the what's the problem? It's like, clearly, that is too simple.
Speaker 2:100%. If that were always correct, you would just eventually charge an infinite amount of because you would just always keep charging more and that would always be the right answer. Clearly, there's a point where you don't charge more.
Justin:Mhmm.
Speaker 2:And so I was glad to see you bringing nuance to that. But at the same time, I think it's a little bit of a backlash to a thing where it's like, oh, charge more is too simple. But it's like, yes, of course, it's too simple. But good advice is often too simple. Like, often for a newbie, you wanna give them the advice that's right 90% of the time, even though you're ignoring the nuance.
Speaker 2:And then as they get more experience, they can develop sort of that nuance themselves. Mhmm. And
Justin:I wanna get back to that in a second, whether you think charge more is good advice at all stages, or is there specific stages it's better? Jordan, what about you? I know you read my post and you said you agreed with almost all of it and then none of it. So what what's do you wanna add anything to what Ben said?
Speaker 3:So I think Ben gave, like, the the perfect answer in in the history of why charge more became a mantra, because it is usually right. The difficult part is that it, it depends supersedes that in terms of being always right.
Justin:And I
Speaker 3:think the best thing we can do in this conversation is bring additional nuance to it and, and go beyond, go beyond just the dollar amount of charging more or charging less, or where you value your product, but more connected to what you're actually trying to accomplish. Right? The, the, the main issue with it depends is there, there are 2 really big things at play first, the specific details situation stage market of your business or your app, your product. And then the second part, which doesn't get talked about when charge more gets thrown around, which is your actual personal goals. What are you specifically trying to accomplish?
Speaker 3:And that is different for everybody. And that's a difficult thing to even talk about because a lot of it is just assumed what that, well, you just want to make as much money as possible. That's, it's a relatively safe assumption, but that's not really always the case. And oftentimes that comes at a cost of employee satisfaction environment, the people you work with, the customers you work with. So I think the best thing we can do here is bring our own, our own specific, examples and knowledge, but everything has to be colored with an, it depends.
Speaker 3:And I think the reason for you're writing this post and this conversation happening is Chargemore has become a little bit of a religion, a little bit too ideological, and we just kinda wanna wanna poke on that.
Justin:Yeah. Yeah. I think there's, there is a danger when the the the common advice becomes too common, and you almost forget about the original nuance and the original kind of exploration of those ideas. And you also sometimes, what was once true so, you know, in the early bootstrapping days, what was once true is that developers were starting really low. There's a lot of $5 per month apps.
Justin:I don't know if that's necessarily true. And, you know, sometimes families pass down these odd sayings and these odd habits and routines, year after year, generation after generation, and no one knows where they came from. And sometimes I wonder if charge more is like that. Maybe before we because transistor might be a good example, but is is charge more good advice at all stages? Maybe that's part 1.
Justin:And, Ben, you can take this first if you'd like. And then, what is the outcome you're going after? What what why charge more? What's the what's the objective? What's the kind of concrete thing you're trying to achieve?
Speaker 2:I don't think charge more is the right advice at all stages for the reasons we've talked about. Like, there's it's just not very nuanced.
Justin:Mhmm.
Speaker 2:And so it's directionally correct for a lot of people. I think particularly in the in the early days, I would say you should maybe always be testing pricing.
Justin:Mhmm.
Speaker 2:Like, that might be the thing to be doing all the time. Like, charge more might not be the always right thing, but experimenting a little bit is probably right most of the time. Like that's how much that's a big,
Speaker 3:how much does that happen? It it not enough. It rarely happens and not even not enough. It the usual default is almost zero. Okay.
Speaker 3:We haven't changed our pricing in 2 years.
Speaker 2:Yeah. I don't know. But I
Speaker 3:mean, you guys or other apps that you're you're familiar with, it's it doesn't happen.
Speaker 2:And I I think that's a big I think that's extremely common. I think that's totally true. And I also think it's like a big it's I think it's a huge lever that most businesses just are not pulling.
Justin:Mhmm.
Speaker 2:It's like I think in terms of ROI on effort, bumping a number from like one number to another on the landing page and then updating how much you charge on the Stripe subscription is like worst case if you've, like, really embedded this a lot, like a day or 2 of work, and can just have, like, a crazy outsized impact on your bottom line.
Justin:Mhmm.
Speaker 2:And so to me, it's less about charge more, and it's more about charge correctly. Or, like, just test things. Like, I do want to get to your your specific case, Justin, for transistor.
Justin:Mhmm.
Speaker 2:But like, I think if you asked almost every business, like, are you currently running a pricing test? I would bet the answer is 98% knows. And that to me feels like the real tragedy here. It's like I've been testing pricing for 2 people since the beginning, and it's been all over the place. And I can't tell you how valuable it is to always be kind of like trying a different packaging or like it like a different like is it by seed?
Speaker 2:Is it per month? Is it per year? Is it variable? Is it fixed? Is it by tier what's in the tiers?
Speaker 2:And we just learned so much. And, like, I feel like we're really dialing in on something that, like, makes sense to our customers and that they like, and they feel like they're getting good value for. And it's very different than where I started. Yeah. And so I'm really glad I did that personally.
Justin:Yeah. See
Speaker 3:the It challenges you.
Justin:Yeah. So this is the interesting part is, so Transistor, our metrics are public right now. If you go to transistor. Baremetrics.com, you can see them. And, one of my feelings is that, especially when people look at our data and they go, man, you're doing good or you're not doing good or you're, have you tried this or thought about this?
Justin:As I think, we are still just a baby. We we have maybe 8 months of data since we launched. And to me, I almost have this feeling like, I don't know if I want to test anything right now. 8 months of data doesn't feel like a good enough benchmark. We're learning a lot right now from our customers.
Justin:But we don't we don't have a full cycle yet to see, you know, when do they churn? Does a podcast churn after a year and a half? Does it, you know, there's there's all these kind of questions. And so, that's that's one thing I'm wondering is if you can start testing pricing too early in, in the life cycle of your business.
Speaker 3:I don't know. And and you are prelaunch, and you're already testing, and it's having a good effect.
Speaker 2:Yeah. I mean, I was testing pricing before we had a product. Like, we had just, like, broken ground on the code, and I was trying different price points. And I I think we were stronger for it as opposed to weaker. I hear what you're saying about, like, you don't have enough data really like you don't really know your true churn rate.
Speaker 2:Totally agree with that.
Justin:But if
Speaker 2:you were running an AB test on the pricing page right now of 19 and 25, would that hurt your business?
Justin:That's the I mean, that's the other thing is that, it might not. But it's it seems like it's hard to know until I have a really strong benchmark. And so it feels like I haven't run the whole marathon yet. And, I don't wanna test, you know, my my, my pace for the first five kilometers when I I still haven't run the full race. So I always feel like I wanna, like, run the race this year.
Justin:And then next year come back and say, okay, based on how I ran the race last year, maybe now I can test some things. Maybe now I can tweak some things, but I don't know if I have a full benchmark. And, you know, with AB tests, this is especially true. You can test too many things. You can do tests that are too short.
Justin:And the bench the the baseline that you're testing against is kind of everything, not just in terms of things like churn that take a long time to show up, and for be able to track a cohort. Like, Ben, how are you tracking a cohort at this stage?
Speaker 2:Not really worrying about it, to be honest.
Justin:Okay. So how do you so how do you compare how do you really know what what's good or what's not, especially if you're trying to optimize for things like lifetime value and churn?
Speaker 2:Yeah. Well, I basically can't. Like, you're like, I can't figure out what lifetime value is yet. And so, what I can track is basically, like, close rate. So, like, I sent an offer to 600 people from our mailing list today.
Speaker 2:And, like, one of them had one price and one had another price. And they're close. Like, no one's getting screwed. They're, like, not very far from each other. But it's like, I'm gonna see, like, what which email works better and which one leads to, like, you know, more momentum.
Justin:Mhmm.
Speaker 2:So so, like, I'm I'm doing it right now. And over time, I can take a look at the plans and be like, okay. What is the churn on this plan versus that plan?
Justin:Yeah.
Speaker 2:But like you said, this is, like, months or a year away. But I wanna get back to what you said about, not having enough data. So you have almost 600 customers, and I would say you've got quite a lot of data actually.
Justin:Mhmm.
Speaker 2:Like you that's that's not that's not bad. That feels like enough. And That's a lot. I would yeah. I would pay attention to.
Speaker 2:So I think this thing is true. I think pricing is uniquely emotional. It is uniquely triggering of our, fight or flight response to some extent. And so your brain will very, very, competently come up with really good reasons why you shouldn't test pricing. Yes.
Speaker 2:Because it feels bad and it feels scary. And so you will have a thing that feels completely rational and reasonable
Justin:that
Speaker 2:is in fact based on emotion and fear. I'm not saying that that's definitely the case for you. It's just very easy to be in that case, I think.
Speaker 4:Yes.
Speaker 2:And and so, I would figure that I think most people are in that case. And so just like maybe watch out for that and default towards trying it, even if it likes you can make a decent argument against it. I think it's reasonable.
Justin:And and if we're testing prices up, should we also test prices down? And
Speaker 2:why? Fair question. Sure.
Justin:Sure.
Speaker 2:Yeah, sure.
Speaker 3:I think what you asked, maybe, 5 minutes ago, what is the point of testing pricing? I think it's a matter of, efficiency to profit, right? You don't want to maximize revenue. You want to maximize profit, that getting it just right. We know that there's a curve and a supply and demand curve, and there's an optimal point.
Speaker 3:It's very, very unlikely to actually hit that optimal point. And your initial pricing guess is almost certainly not at that optimal point.
Justin:Mhmm.
Speaker 3:So you wanna move toward that optimal point and that it's not a matter point. And how long are they willing to pay it for? So it's not just a straightforward maximization of price. Because if you go really high in the price, it also changes the nature of your business and the way you do customer success, the way people expect certain things and how they, so it's, it's not straightforward, but I think the goal is the healthiest company possible. And that's, that's the most profitable company possible.
Speaker 3:So you don't want to maximize the number of customers. You don't want to maximize the revenue you want to, you want to find that optimal point. And then from there, there's a bunch of nuance, but, I do want to address what Ben said, like on this whiteboard and back me, we had a big pricing conversation over the past few weeks, actually. But last week we had like a good 3 hour session on pricing. Everything around it is emotionally charged and it is it's paralyzing because anything you do has a, but what about right.
Speaker 3:What about our customers that are paying less right now? What about the customers that saw the pricing and came back 2 weeks later and the pricing is different? What about the the customers that thought they were getting this and are actually getting that and people that return there's just so much around it. It almost feels like you need, like, a support group of outsiders.
Justin:Mhmm.
Speaker 3:Right. This is, originally, someone at MicroComp. Ben came up to me and was like, Ben has this idea for, like, a pricing, like, therapy session because it's really what you need. Because when you sit at a at a table with other founders or other people in the space, they will come at you with far less emotion. And it'll at least help you identify the things that you're building up that are resistant, like the barriers to changing your pricing and raising it, or even lowering it or just testing it at all.
Speaker 3:So I find that the only way to do is to get outside of the company and people will say, oh, that's just not a
Speaker 2:big deal. Whatever. Just do this, just do that.
Speaker 3:Just grandfather, just whatever. Mhmm.
Justin:I mean, I think there is something I think the other part of me that is maybe skeptical about that is that, you know, I've spent an enormous amount of time in my, in this industry now talking to people, having conversations, all these things. And the idea that someone who has zero context or very little, could somehow understand the my industry better or the competitive landscape better or any of those things. Intuitively, that just seems a little bit odd, you know, and, that and maybe it's true. Maybe I'm just scared. But some of those fears that you have are good.
Justin:Like, there there's a reason I won't take advice, you know, I won't take advice from certain folks because I'll be like, well, I just don't trust you, or I I don't trust your judgment yet. And I don't think that's always a bad thing. Sometimes that fear you have when someone's saying you should just do it, like, just go for it, is good. It's good to be hesitant and to go, well, I I don't know if you really understand. Like, even me, I've had 8 months of of customer conversations, and it feels like every day I'm still learning something new about what success means for our customers, why they cancel, why they switch from another competitor.
Justin:I still feel like I'm rolling this ball up the hill figuring out what direction we wanna take. And I'm sure once I get to the top, it'll be a little bit clearer. But right now, I'm just in this grind of, like, figuring out who is our customer, what kinds of customers are best, you know, what happens to that, that customer that beta customer we live in at $10 a month. And I invested all that time in. Oh, I can see now.
Justin:Now it's been 8 months. I can see what happened. But without that time frame, in that context, it's hard. So who how how should we how should we, deal with that, especially for folks on the Internet that are getting advice from blogs and other things. How do we balance what we know on one hand, but what on other the other hand could be a bubble?
Justin:And maybe we're just not seeing, you know, what we should be seeing.
Speaker 3:I I think you're right to be skeptical of people's general advice for your specific business. But what you can bring to people ideally that you do trust. So in, in Portland, we have like a micro con group that we get together once a month. So, so those, those people have, they look, they know a lot, a lot about my business. They know everything that's happening along the way.
Speaker 3:At least they have good context. And even in that case, you can't put that on someone else to come up with what you should do. What you can do though, is come to them with what you're thinking. And then, and then the emotional side, the, here are my fears about what will happen that I feel like is useful for people to kind of push back on. So it really, it has to come from you internally, but those assumptions and fears, the things that are, that you feel are creating friction and barriers to you actually, going through with the change that I feel like people are very useful for.
Justin:Okay. Well, let's let's go into how how would I, for transistor, design a good test? Because I you know, here's a tweet from Ruben Gammes. He says, I've had pricing changes that seemed good at first initial 60 days and then had churn on higher tiers or more downgrades to lower. Also, some pricing changes that seem like a nice increase, but overall ended up with a slightly lower LTV.
Justin:So how do we know How do we construct a good test in light of things like that, especially at my stage when things are so early?
Speaker 2:Yeah. That might be tricky, honestly. Like, you can store something in your database when somebody signs up and be like, okay. Or, like, just just notice in Stripe. Like, make a special plan in Stripe.
Speaker 2:That's like the test plan at the new price. And then, like, Verimetrics will break that out for you automatically. Like, you can go check out the churn and the LTV and whatnot on that plan. That's probably the easiest way.
Justin:Mhmm.
Speaker 2:It'd be, like, have have, like, custom test plans and, like, the sign up page sends them to the right plan based on what they saw. And that's probably what I will do if I or what I would do if I were gonna test this in particular.
Justin:Yeah. But
Speaker 2:you're right. Like, the investing in a proper test is a little tricky.
Justin:Yeah. And so, Ben, what were some of your ideas? You said you had some ideas for transistor.
Speaker 4:What what was those?
Speaker 2:Believe it or not, it's not charged more.
Justin:Okay.
Speaker 4:Yeah. So Wait a second.
Speaker 2:Yeah. I know. So again, like, it's nuance. Like, I so I think you're so. All right.
Speaker 2:Here's here's here's where I am. First of all, by the way, yeah, your MRR grew like 26% last month. Like, props on that. So, like, you know, like, that's just awesome. That's amazing.
Speaker 2:So, you know, like, ignore all this if you want to. The machine is moving faster already. So, like, maybe come back to this later if you feel like it or never ignore all this advice. Who cares? You're doing a great job.
Speaker 2:Keep doing it. Here was my experience actually as a potential customer. This is what made me want to reach out. It was like, I was like, I bumped into your service as some of them might want to buy it. Yeah.
Speaker 2:So I hit your, your so I look at your landing page and your h one is transistor as a podcast platform for brands who want to grow their audience. Yeah. My god. That's interesting. I also looked at your bare metrics and I see that 86% of people sign up for the lowest plan, which is $19 per month.
Speaker 2:And in the last 3 months, no one has upgraded to a higher plan. Yeah. So so to me, you're actually not attracting brands. You're attracting people that want to start podcasts because you segment your tiers based on total number of downloads. Yep.
Speaker 2:Agree with all that so far?
Justin:Yeah.
Speaker 2:So so the first thing to me is like it's actually a little bit of a disjoint maybe where it's like you say you're for brands, but it actually kind of looks like you're you're catching people that are like newbies a little bit.
Justin:And
Speaker 2:so if you were for brands or if you were if you were successfully pricing, making your tiers such that brands were attracted, I would expect to see people signing up directly into those tiers and that representing a bigger portion of your revenue.
Justin:Mhmm.
Speaker 2:And so I actually bumped into this personally, and I was like, okay, what might be happening here? So I host with Fireside right now. Yeah. And they charge, I think, $30 a month or maybe even $20 a month, with, like, no limit. Just like you're just $20 a month.
Speaker 2:I don't like them as a host very much. And in particular, I think you you are have a better product. So their landing pages are not great. Their dashboard is very ugly. I don't like the analysts represented poorly.
Speaker 2:And it's just I I when I look at at transistor, I think this is a better product.
Justin:I I
Speaker 2:it looks better than what I have.
Justin:And so
Speaker 2:I thought about switching. And Derek and I were I was like, I talked to Derek, my co host. I was like, hey, ma'am. We should we should maybe switch.
Justin:Yeah. And I
Speaker 2:looked at your pricing. And because the amount of downloads we get, we would be in your top plan,
Justin:which
Speaker 2:would be $100 a month.
Justin:Yeah.
Speaker 2:And so I'd be going from 20 or 30 to 100. And now I'm a professional podcaster. I pay 100 of dollars every month to have my podcast edited. But to me, the hosting part is not worth 100 of dollars a month or even really a $100 a month because at the end of the day, it's kind of just an RSS feed. And so it annoys me that my admin dashboard is ugly and the landing pages aren't better, but it's not like a hair on fire problem.
Speaker 2:Yeah. And so I think your $19 plan is actually perfect for catching people that are new to podcasting and are aspirational. But I think your download limit that pushes someone into the next tier up is actually a bit too high.
Justin:Mhmm.
Jon:So, like,
Speaker 2:I would maybe drop it. So, like, I think that is right now. What am I seeing? Pulling it up. So you up to so I get $5,000 a month for $20 and then up to 15,000 for $50.
Speaker 2:And so my advice, I think actually, and again, discard all this if you want, lower that limit so that people get bumped up into the next plan more frequently and lower the price. Like maybe it's 19 39 or something like make it. Maybe it's not quite so painful a jump, but make it happen more often.
Justin:And
Speaker 2:it's just to me, like, you should be attractive to me as someone that, again, already spends a lot of money on this kind of thing.
Jon:Mhmm.
Speaker 2:And so the $100 a month feels too much for my my current download amount.
Justin:Yeah.
Speaker 2:And so maybe it's like yeah. So that that's that's my
Justin:So let me just, kind of speak that back to you just so I just so I understand. And for the the watchers at home, I've got our pricing plan up here right now. By the way, this part is super helpful. I, this is having an outside perspective on pricing is really interesting. So what you said is our $19 plan, you would reduce the number of downloads per month.
Justin:Is that correct?
Speaker 2:Yeah. I want people to yeah. I would want people to get upgraded more frequently.
Justin:Okay. This is interesting because right now we're considering actually going the other way. We were we're considering bumping, it to I think it's 15,000, 45,000, and a 150,000. So you would say make it less downloads, and then make the next tier $39 a month.
Speaker 2:And I think no expansion. Yeah. The exact numbers I think are not important, but I think no expansion revenue in 3 months is a big warning sign. If you're signing up lots of newbies and they're not becoming successful and paying you more money, that's a war. That's a danger.
Speaker 2:Like you're signing up people that want to have a podcast, but after a couple months, like, well, it sounded nice to have a podcast, but it didn't really get off the ground. So I'll pay you $20 a month for a little while because it's pretty cheap, but then I'm gonna cancel. But we really want to have amazing education and actually have your customers get the job to be done, which they want, which
Justin:is to be a famous
Speaker 2:podcaster probably, or to make more money from their podcast or whatever it is. Yeah. So it's like get expansion revenue, I guess, is the high level goal. And so to me, the first download limit is too high. So I drop that one on the on the cheap plan so they get upgraded more often, but then make it higher on the next plans.
Speaker 2:Because I don't think you can charge a $100 a month for podcast. Like, you can't charge me a $100 a month for podcast hosting, even though I'm getting 30 or 40,000 downloads a month.
Justin:Mhmm. Mhmm.
Speaker 3:Not if it's just based on the number of downloads.
Justin:1 what we've basically realized talking to customers, First of all, our our unlimited podcasts per tier is, a big it's attractive to a lot of our customers. So the fact that you can start more than one show on your single account has been quite popular. And a lot of folks are coming to us for that. Our plan was because we're seeing the same thing. 80% of podcasts never get beyond 1100 downloads per episode.
Justin:So that's one truth. The other truth is that the the biggest complaint we get when people sign up is, oh, you limit by download. And the everyone thinks when they sign up that they're going to have a show that's gonna rival Joe Rogan, and they're all worried about getting tons of dough. So we have an emotional bit of friction when they sign up, which is one reason we were thinking about raising the downloads per month, and making it because that's the number one complaint we get. Even from That's interesting.
Justin:From brands as well. So we have, you know, brands like Discovery and, VH1 are using us right now and they, some of them are in the $19 tier. Some of them are otherwise.
Speaker 4:That hurts.
Speaker 2:That seems wrong.
Justin:Well, this is another Well, it depends. Again, like, ABC, for example, an ABC affiliate has started with us on the $19 plan and with one show and then eventually upgraded. Right? Because they added more and more podcasts for their affiliate. So it worked in that sense.
Justin:Anyway, all this to say, we've got this emotional bit of friction when people sign up. And but on the other hand, we do wanna make it more attractive for people to upgrade. And so our really our plan was to add features in those $49.99 tiers that get people to upgrade. We still, I think, need to have something on restricting downloads. It's our biggest cost.
Justin:If I took Adam Wadden's podcast, I would have to charge him $399 a month in order to maintain profitability of 80, like, 80% SaaS margins. So bandwidth can be a huge, huge cost. We've solved that problem temporarily. But we we always wanna have some insurance that if someone signs up and is the next Joe Rogan, that we have some sort of way of of restricting their downloads.
Speaker 2:Totally. Yeah. I imagine Patrick is in the comments calling this the value metric,
Justin:and I
Speaker 2:think we'll
Justin:I I
Speaker 2:was gonna write value.
Speaker 3:I don't I don't know I don't know if you do because you're you're sure. It's a value metric for your business internally and the fact that it costs more money when someone downloads. But is that the value that your customers are getting out of your service? The, the number of downloads is, is, is that the con is that the closest connection to value between your price and what people are actually getting out of your service? It might be.
Speaker 3:It might be, but it's it's worth looking at and
Justin:Yeah. Consider. I think given what given what we have with our customers, the friction point is that they they get they worry about the download limit. Oh my gosh. What if it's not enough?
Justin:What if, you know, what if we're really popular? But the the truth is that once they start podcasting, they realize all of these other benefits. And this where value based pricing actually gets really difficult. Like, Jordan, you have a product that makes people money. And so if they invested a $100 and you made them a1000, that's just a clear value metric.
Justin:I have a product where the actual value that's created is a bit more ephemeral. It's oh, now every week I'm talking to my co founder, like the Founder Quest podcast. All 3 of us get together and talk every week, and we publish this thing. That in of itself is this huge benefit, this emotional benefit that they didn't have before. Oh, we're getting we're connecting more with our customers.
Justin:They understand us better. So there's a brand benefit.
Speaker 2:I know the Honey Badger people a little bit.
Justin:Mhmm.
Speaker 2:And, actually had Ben Curtis on my podcast. And she said, like, that podcast, that particular podcast is a marketing effort for them. Mhmm. So if they got a 120 downloads per episode, they would not do it for very long, I suspect, even though they enjoy talking to each other. Mhmm.
Speaker 2:Yeah.
Justin:Yeah. Although, again, I've got a I just have a bit more qualitative data, which shows that that folks often start and they wanna have thousands of downloads. And then they get 500 downloads, but they got 2 new clients. And so their their their metric changes. Yeah.
Justin:So the the tricky part is that everyone in their mind is used to, I need 10,000 visits to my website in order to convert somebody. Whereas, you know, the conversion changes usually with podcasting, but their their worry early on is they're, like, wait a second. You're gonna restrict how many people can listen? For a while, I thought we were crazy to restrict, but now Simplecast just changed their pricing, and now they're doing the same thing. I think everybody realizes that our cost center is bandwidth, but our value center is everything else.
Speaker 3:Yeah. You don't you don't wanna be driven by your costs. You don't wanna price based on your costs. You wanna price based on the value generating. Ideally, that has an increasing increasingly large disconnect from your actual costs.
Justin:Mhmm.
Speaker 2:Yeah. So first of all, I think making that point that, like, you actually need fewer listeners than you think to do like, to drive good leads into your business is an amazing part of your sales pitch.
Justin:Mhmm. And I
Speaker 2:would totally use that as my first thing. When people push back on downloads, you say, actually, you need fewer downloads than you think. And this could even be on your landing page.
Justin:Mhmm.
Speaker 2:Like case study of whatever consulting corp. They get these many listens and they drive 2 new leads a month. That's pretty great.
Justin:Yeah.
Speaker 2:But at the same time, if they got 10 x as many listens, I bet they would get close to 10 x as many leads. So it's still that value metric still feels pretty good to me. It's not perfect, but, I mean, no value metric is probably. And so Mhmm. It's like a a pretty pretty darn good proxy to me.
Justin:What about in this next last 10 minutes here? What about the idea of keeping downloads per month on there? And maybe even see, I'm not sure how to take your initial idea, Ben, of lowering the download since it's such a friction point. Like, I want to I want to judo people into signing up as opposed to saying, well, hold up. Let me teach you a few things about how podcasts conversions work.
Justin:You know? Like Yes. Yes. That would be tricky. Sorry.
Justin:Go ahead, Ben.
Speaker 2:Well, I'm just like I think, basically, I'm curious of Patrick Campbell thinks of this, but, like, I bet a really good value metric gets complained about because people accurately notice that if they are, maybe, I don't know. It's like, I can see that if I'm really successful with this and I have a giant podcast, I'm gonna end up paying you more and I'd rather pay you nothing. Like, rather I'd rather it got cheaper over time or something. Mhmm. You know, like, I think there might be an extent where it's like customer complaints are not the best proxy for pricing quality in a sense.
Speaker 2:It'd be nice if they never complained about it. But Right.
Speaker 3:And which complaints to listen to
Justin:are
Speaker 2:Yeah. That that's a big
Speaker 3:question mark. I mean, if you are if you're focused on the number of downloads, it it does feel like you you can be in danger of competing as a commodity. Whereas it, I don't know your audience and the customer base of what they need, but it does feel like yes, less friction and getting started is good, but really, but really the, the ability to move up in tiers should be based on additional value.
Justin:Mhmm.
Speaker 3:And that would be related to features and what they can do and the analytics they get as opposed to just strictly on, well, this, there's always a danger. Like, let's say, let's say drip, right? Drip prices based on the number of people in your email list. If I become more successful and have more people to my, to my list, and then I have this weird, perverse incentive to like prune out my list. Cause I, I don't want to pay you as much.
Speaker 3:Would really, you just want them focused on generating more value and more revenue and seeing your tool as more important to them. And I, I worry that the, the really hard focus on just the number of downloads can lead you in, in the wrong direction in terms of adding value to the service overall. That was just It is early though.
Justin:That was just the baseline. That was, like, what got us in the game. And Right. Our plan now is now we've got all this you know, we had ideas of what we thought people wanted, but now we can see it. And so, for example, one thing that we'd like to add is dynamic, dynamic ad insertion or what we're calling dynamic content insertion, which is the ability to put dynamic content at the beginning, middle, and end of your podcast, as well as in your show notes.
Justin:So if you're if this month Adam Wadden is promoting his new refactoring UI, but he wants that to be in his entire back catalog, he could do that all. But that's going to cost $99, which is what megaphone, charges. They're kind of the closest competitor in that space. Another thing, for example, is that people will start you're an ABC affiliate, and you've got multiple podcasts with their own websites. But now we wanna have one website that lists all of our podcasts and has kind of some features for our group of podcasts.
Justin:And that's something we're thinking about adding in the $49 tier. Is that a good way of moving forward and creating differentiation, and expansion revenue?
Speaker 2:Sounds like it was worth a test.
Justin:Yeah. So the the thing we can't we can't test that right now because we don't we don't have the features. And so this is why I'm wondering if I even should be testing now if I should wait until, we have some of those features built and then work on it. So, like, our lack of expansion revenue right now, 8 months in, makes complete sense to me because I we really haven't built anything besides number of downloads that would encourage someone to upgrade. I totally get it.
Justin:I'm like, that makes sense. I'm I'm I'm surprised when people do upgrade. For me right now, I'm thinking, ah, really, we need to solve this next problem, which is to get out of the download game and, you know, build features that allow people to upgrade.
Speaker 3:So let let's let's get Patrick in here.
Justin:Just a quick break to talk about something I saw on the Balsamiq site. As you know, Balsamiq's been sponsoring this podcast all month long. They have this sweet little online course called intro to UI wireframing. It's made for founders, product managers, and anyone else who wants to learn the basics of how to create user interfaces that are easy to use. They talk about different UI controls, design patterns, principles, and how to save time by using templates and even what process to follow to go from idea to finished product.
Justin:It sounds fancy, but it's all very approachable. It's designed to make you go from 0 to decent in a very short time. I've been reading this course and it's already helped me out a ton. Check it out at balsamic.com/learn/courses. That's bal samiq.com.
Justin:Alright. Back to this conversation.
Speaker 3:Mister Patrick Campbell from, Price Intelligently, ProfWell, welcome to the conversation. I'm sure you you had a rough time just watching and not being able to interject.
Speaker 4:No. I was really enjoying it, actually. It was a good time
Justin:just because I think it was, like, you
Speaker 4:know, it was really cool to kinda see how you guys think. And I I think, like, everything you're saying, like, is totally a problem. Like, Justin, like, everything that you're facing is, like, exactly and I think you're thinking about the right way. I think the the one thing that I kinda quibble with is, like and and, Ben was kinda getting at this in a couple of different ways is, like, who is who is that target? Right?
Speaker 4:So you you you have these these people across a bunch of different, like, sizes. Right? Mhmm. Like, for I think we're on, like, your $50 tier, and you have, like, someone just starting off who has, like, just their family listening, and then you have some big dogs listening. And I think that if you try to be everything to all people, like, it becomes more complicated.
Justin:Mhmm.
Speaker 4:Like, if you choose, hey. We're going after big dogs. Like, we're going after maybe not Joe Rogan because that's kinda like referencing Apple. It's like just a such a different type of company. But if you're going after people who have a 100,000 downloads a month and you're going after whatever, if you make that choice and at your size, like, I think you need to make that choice because then you wanna add insertion and all these other things.
Speaker 4:Like, we don't wanna add insertion, you know, for our, you know, transistor account. What that does is basically it makes everything else kinda fall into place. So, yeah, there's still gonna be people complaining on the low end, but it's like, that's not my target. Like, they're not I mean, you can go as bold as saying, like, you are not my target. Get off the platform, which I don't think you wanna do.
Speaker 4:I don't I wouldn't suggest it. But those people will still come in, and and you'll be able to, like, get them. But, like, once you choose that target, then you can start to, like, break away. But if you're trying to do everything to all people, it's just not gonna it's not gonna play
Justin:out. Yeah. Mhmm. Yeah. I mean, that's good advice.
Justin:I I I wonder somehow, like, I know we gotta leave here, but sometimes before we launch, we have these these ideas of, oh, I'm gonna go after this customer. Wouldn't that be great? I'm gonna be the I said I was gonna be the WP engine of podcasting. K. You don't really know until you launch.
Justin:And part of it is sometimes a price point attracts a certain customer, but sometimes you don't know until you launch. And so now we've got 8 months of data. I I think we can incorporate some of that. Like, I I know what customers I want more of. And so I'm I'm thinking I want to build things for those customers.
Justin:But, I don't know how at the beginning, without guessing and just being a dreamer, like, oh, this is the kind of customer I'm gonna attract. Well, you don't know until you until it shows up. And I think the other thing that's been surprising is, you know, everyone thinks these businesses all have a lot of money. But, you know, this ABC affiliate, the guy that's signing up for that is, like, listen, I I sign up for you because it's $19 a month, and I can put all of our podcasts in there. Right?
Justin:And there there is a, even companies have to sometimes make decisions based on price. Right?
Speaker 4:I I would argue that the ABC affiliate, just because it has the word ABC in it, is not like they're closer to ProfitWell than they are to a b c. Does that make sense?
Justin:Sure.
Speaker 4:Like, I like, I'm not saying I'm not saying that their value metric is different or not different or there aren't nuances between those 2. Like, we we fall into that trap, and I think all of us on the call with different businesses have fallen into that trap where it's like, oh, like, this is a this is a, b, c. Like, this is this big dog. Let me, like, make a lot of changes, and it's like, oh, it's actually just this, like, sublevel. Like, if they all fit on that $19 plan, like, it's not a really big podcast, like, base, is
Justin:it? That's right. But it's still it's still serving a job for them. Like, ABC is using Squarespace. ABC is using Mailchimp.
Justin:There are some ABC affiliates that are on the free plan for Mailchimp. The one thing I worry about in the tech sector is we are in this bubble where everyone's like, charge more. I'll pay more. And we have folks that have they believe in charging more. And so if you were gonna ask them in a survey, would you pay more?
Justin:They'll say yes. But when I'm talking to the ABC affiliate, they're not like charge me more. They're they're saying, no, this is a great this is a perfect service for what I'm getting. And I don't this is really what I need. And they could be a great customer that sticks with me for 5, 10 years and never bothers me.
Justin:Like, they've they've never even contacted me. Yeah. They just got set up, and now they're and now they're running. So I know that there's folks that will pay more for dynamic ad insertion. I know that there's folks that'll pay more for these other things.
Justin:But what's wrong with having the $19 plan and having all sorts of different organizations, you know, stick
Speaker 4:around. I think that the problem, like, I see with so one, I I'm not a big fan of, like, the charge more mantra. I really liked your article because it's not that it's necessarily wrong or right. I do think it's really important because most people do devalue the products that they create.
Justin:Mhmm.
Speaker 4:And I think so, like, I think what Patrick McKenzie has done has been great because it's like, hey, value yourself more. Like, that's basically what he's saying with that, at least in in my interpretation. Mhmm. I think, though, that, like, taking a step back once you have that once you've heard that and are like, oh, I should explore my pricing, you realize, like, do I charge more or do I not charge more is actually a much more nuanced question than, like, just simply adding, you know, a 0 or something like that to to the price. And you're dealing with all the right nuances of that question.
Speaker 4:Right? Like, you know, do I want people who are these $19 customers and it's a really, really great entry level, etcetera? Am I willing to sacrifice some of that entry level volume to go after the larger folks. And you can try, like, with with some results, you can try to, you know, accommodate those different folks. But oftentimes, like, when you don't have expansion revenue, when you don't have these types of things, like, you only have so many choices.
Speaker 4:Right? You can add features to get people to upgrade, which is an inefficient way, but it might be, like, the best for your space, or you can use, like, a value metric, and not all value metrics are gonna make everyone happy. Right? And as the podcast hosting space gets more and more competitive, it's it's finding that positioning and that persona that I think could be really, really important. And still, like, I would just repeat trying not to be everything to all people.
Speaker 4:And that's what I love about, like, what Ben's trying to do with 2 people, which is, like, you know, it's it's very specific. Right? Like, and you go to his website, like, I literally like, I just forwarded it to, you know, because we have 2 offices and so it's like pair programming is tough, but it's like, you know, even even like in his little, like, email, it's like dissatisfied pair programmer@slack.com.
Justin:Right? Like
Speaker 4:Mhmm. It's, like, super specific. Right? Now you can be that specific, but even ConvertKit, when they got really specific and they've kind of expanded now, they were like, we are email marketing for bloggers. Right?
Speaker 4:And that just, like, took them off. Right? When you go general, it just costs more. Like, you need salespeople, you need a bunch of different things. Like, if you go really specific, it's a lot more targeted.
Justin:So I
Speaker 4:don't know. That's that's some, you know, easier said than done advice, but, like, that's you know, if you're like, I want I wanna get as many customers as possible. Okay. Well, then all of your pricing decisions are gonna fall into place. You're gonna have a lower entry point.
Speaker 4:You're gonna have very generous, value metric limits. You're gonna raise the value metric limits like you decided. You're gonna try to spur people up to bigger tiers with ad insertion and some of these things, and you're just gonna kinda let the chips fall where they may, but you're gonna sacrifice some stuff, I guess, is is the trade off.
Justin:Yeah. No. I appreciate that. The, the it really is hard being in it. Mhmm.
Justin:Because they you know, even even folks in the comments, which are great. I'm glad people are interacting. But they're making a lot of assumptions. And when you're in it and you know that you've tested some of these assumptions in real life, there's like, right now, a ton of our new customers are coming from affiliates. And the fact that these folks are finding us you know, they're searching in Google.
Justin:And, like, my my audience plays a very small percentage of our growth. It's folks searching in Google, how do I start a park podcast? And, you know, one of those one of those customers that gets me excited is someone who searched how do I start a podcast? She is the brand director for a big VC firm that has tons of LPs and, or VCs or whatever they're called. It's tons of VCs, not LPs.
Justin:And all the VCs want a podcast. And so she's like, I'm researching because they all they all feel like they're missing out. We all they all wanna start a show. That's great. That's a great customer for us to have.
Justin:I I'm not exactly sure in this space, and we're already trying to be targeted. Already someone was saying they went to our website and they saw brands, and they're like, nah. Not for me. I'm not a brand.
Speaker 4:Right.
Justin:So we're trying to exclude hobbyists. But You
Speaker 2:haven't though.
Justin:Yeah. I
Speaker 4:don't think you have either.
Speaker 2:Everyone is on your lowest plan, and no one's upgrading. You are definitely not for brands. You're totally obvious. Right?
Justin:No. It's not true. We we I like that. That's what's happening. That's true.
Justin:But most of
Speaker 2:You don't get to pick. Right? Like, it's
Justin:I know you're saying that, but most of the folks who sign up have a business.
Speaker 2:But no one is getting very many downloads from this their podcast.
Justin:Yeah. Because they beat their podcast. Real estate the real estate guy only needs 300 downloads to get 2 good leads.
Speaker 4:But would you consider that but I would group that with the hobbyist, at least in my opinion. Like, making some assumptions about your business. Like so first, like, no one's gonna know but you. Like, you're gonna know more. Like, we're like, I'm just here to be like, have you thought of this?
Speaker 4:Have you thought of that? Yeah. It's doing a good job with that too. But, like, I think the one thing to kinda think about is, like, I look at a hobbyist who's like, I wanna start a podcast. I've never done this.
Speaker 4:In a business that's like, oh, we should have a podcast. Like, similar to, oh, we should have a blog. Like, to me, those are very similar. Right? So, like, for like, think about us.
Speaker 4:Like, at Provo, we're like, media. Like, we're we're doing all this video, and, like, now we're gonna do more podcasts and all this other stuff. Yeah. Like, I've told you before. I was like, I would pay $100 a month for a current, you know, transistor plan because we're taking it very seriously.
Speaker 4:Yeah. So, like
Justin:I can change your plan right now. Well, don't do that quite yet. No. Go for it. It's alright.
Justin:I mean okay. This is actually good. I I do like this. This is this is starting to to spur me on here. I'm I'm I'm with you.
Justin:Let's do this. So Cards Against Humanity was our first big our first big customer. And they have probably 10. They have 3 studios in there. They have 10, 10 podcasts that get recorded there regularly.
Justin:In the boardrooms, when they were talking about, okay, we're gonna launch a new show. They were saying, well, let's just use Simplecast. It's It's $12 a month. When you're in an environment where the competitors have already anchored the price and I I brought this up in the post. Like, in in email marketing, Mailchimp has has anchored the price.
Justin:ConvertKit is marginally higher, but not very much higher. What do you do when you're in a competitive environment where even a bigger company, a bigger brand is still saying, but podcast hosting should cost about 12, 15, $19. It it feels like the way people buy products in the real world is they don't say, you know, who's gonna get me the most they go, okay, let's start by just looking at all the options. And, oh, this one's good. We've used this before or someone's used this before and it's cheaper.
Speaker 2:So I think a reality of the podcast hosting space is that it is currently a bit of a commodity. Mhmm. And the price anchoring is definitely low.
Speaker 4:Mhmm.
Speaker 2:And so I think if you just decided to, like, make your cheapest plan at $50, you might have a hard time getting people to sign up for you
Justin:Mhmm.
Speaker 2:If you're offering the normal podcast hosting stuff. But if as you add these things, like if you're like, okay, we are for brands, what can I build that makes it worth $100 a month to somebody? Dynamic ad insertion maybe is worth it. Yeah. There may be other features that no one has invented yet that you can get by having all these conversations and really knowing your customer and figuring out how do I make this?
Speaker 2:Like, how do I help them achieve their actual job that they have here like how do I make them achieve their dreams really.
Justin:Mhmm.
Speaker 2:And then there might be a $100 plan in there or a $500 plan in there if you can pull that off.
Justin:Yeah. I think that's the plan, but to get this thing off the ground, I knew we'd have to start somewhere. So I'm completely open to, like, in the future, once that stuff's built and those things have been proven true, eliminating the $19 plan and just having a 49 and a 99. I'm just wondering if there's anything that you're seeing that I'm not seeing in terms of our well, maybe we can't target because we just don't have that stuff built yet. Right?
Justin:Maybe we haven't we haven't built enough to know. Because we right now, we were we started the marathon, you know, way behind our competitors. So we were just running as hard as we could just to catch up to them. And now we're we're caught up to that commodity level. Yeah.
Justin:But now it feels like the work begins. And so I I wonder if I just need more time.
Speaker 2:No. It was all good. I think you're at a bit of a crossroads right now. So I think your initial thesis was kind of like, we can make this for brands, this WP Engine. It'll be more expensive, but really good.
Speaker 2:Mhmm. The people that you have attracted are mostly it seems like more on the small time success side. They're fairly aspirational people. And having run a podcast hosting thing before, most people want to start a podcast and then they get 3 or 4 episodes and they're like, oh, this is kind of boring, actually.
Justin:Yeah.
Speaker 2:Like we only had like 29 downloads the last episode and they they like they let us sit for a while because it's cheap. Then they churn out. Mhmm. They never achieved their goal of being famous or getting a ton of leads or whatever it is they wanted from their podcast.
Justin:Mhmm.
Speaker 2:So I think you could say, we are really attracting aspirational podcasters. Let's double down on making them successful. Let's keep our $19 month plan. That's a great entry point. Let's find a way to get somebody to actually achieve those goals.
Speaker 2:And that's like, let's invest heavily on education and customer success and reaching out to people and teaching them how to make it better. And the marketing side of podcasts and how to recruit guests and all this stuff and help them like get upgrade themselves to the next tier of success and pricing. Or you could say, yeah, we've attracted these newbies for for so far. That's fine. But they don't wanna pay enough.
Speaker 2:And we wanna be the premium podcast podcast hosting for brands. So let's over time, let's phase out focusing on those people. Let's make our pricing not attractive to them, but is attractive to brands because we're gonna build these brand specific things. And this is just I'm basically just echoing what Patrick said earlier, which is like knowing who you wanna go after will really affect so many things, including pricing, but also features and the value metric and all that. And so just sort of just deciding, like, which of these audiences are you most interested in able to serve and then tailor everything
Justin:important. Yeah. No. That's great. I I do like the fact that you guys are both pushing me in some ways past where I'm comfortable.
Justin:Because there there is part of me that just wants to be comfortable right now. Because right now, growth is good.
Speaker 2:Of course.
Justin:And we just hit 10 k. And, you know and, to be honest, the deep insecurity, of course, is when's the churn apocalypse gonna come or when or we're probably doing this all wrong, or, you know, what have you. Like, there's there's lots of insecurity that is probably holding me where I'm at. There's still lots of unknowns too, like, how big is that? How big is that pie?
Justin:And maybe this pie I've got is great already. Sorry, Patrick. Did you wanna add something else? We'll probably wind down here in the next little bit.
Speaker 4:No. I think Ben said it beautifully. Like, the only thing I would add is, like, I think we chatted about this before is, like, what's your DNA? Right?
Justin:Mhmm.
Speaker 4:So, like, our DNA at at is, like, very much, like, higher level sales, like, inside sales. Like, we just kind of develop that over time. Like, we don't have, like, a really good growth hacker. We don't have this kind of thing. And so, like, it's just not in our DNA to go after that type of market.
Speaker 4:And I think that that's one thing. Like, I think all the customer stuff that Ben was saying and then we had said before, I think is really good, but that's the other thing is, like, even if the customer is the right thing to go after, your DNA just might not fit it. And I think you're really good with, like, the that startup market. Right? It doesn't mean you can't be good at the, like, you know, brand side of the market.
Speaker 4:It just means that, like, it's a little bit easier to go after that side of the market and, you know, make those decisions.
Speaker 2:Yeah. Love it.
Justin:Cool. Well, this is this is great.
Speaker 2:I agree. It was fun.
Justin:Hope I
Speaker 2:didn't beat you up too badly.
Justin:No. No. I think this was good. I think I think we I really did like the arc that we we covered. I think digging into some of our assumptions and the the built in ideas in the space is helpful.
Justin:I think we've also showed that it real it depends is is really true. And, and I think also the advice we give to folks matters. Like, if you're not willing to have a good conversation like we've had here, we should be careful about the the things we say. Because I I think there's some there's something about giving just very blunt advice and leaving people that doesn't seem helpful. So I I thought this was great.
Justin:Thanks, Patrick, for joining us. Patrick is at Price Intelligently. Go and check out Ben's, app. It's tuple.app. And then we have, Jordan Gall.
Justin:He is at karthook.com. And thanks everyone in the in the chat here. Derek Rymer, Kyle, Matt, all you folks. Great to see you. And, maybe we'll do this again.
Justin:Alright, folks. Hope you enjoyed that. I wanna give a shout out to our Patreon supporters brand new. This week is Shane Smith, Austin Loveless, Simon Bennett, Corey Hanes, Michael Sitver, Paul Jarvis, and Jack Ellis, Dan Buddha, Darby Frey, Samori Augusto, Dave Young, Brad from Canada, Kevin Markham, Sammy Schuichert, Dan Erickson, Mike Walker, Adam Duvander, Dave Junta Junta, Kyle Fox at GetRewardful, and Clubhouse and Balsamic are our sponsors this month. Thanks again.
Justin:I will see you next week.
