How to price a product, sell it to customers, and build a sales team | Hacker News Reader

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

stripe.com

265 pointspetethomas21 comments

> ... 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.

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.)

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.

Actually, the implication that charging a price makes it more likely you'll buy once the pilot is over is spot on. There's swaths of research, both theoretical and empirical, that supports this. Think sunk costs, change of mindset in the user's mind because they're now a customer rather than some random end-user (it's easier to sell to an existing client, even if the initial sale is symbolic), etc.

Adding a price only makes it less likely that some leads don't move forward with a pilot. Specifically, self-entitled businesses that expect to get the moon for free; organizations that are price sensitive enough that working with them will end up earning you very little or worse; and users without a budget or influence on those who have one. You'll of course lose some potentially good clients along the way as well. A free tier can make good sense sometimes. Most of the other times, more than a few execs will go: "Yes, please! Let's price our less profitable clients out of existence."

I see where you are coming from, and agree. I also see where the article is coming from and it is from the point of view of the seller and particularly a new, small, little resource seller. When one is in that situation, the real goal is to determine buying intent rather than generate revenue even though that is an added bonus. What happens a lot is that people will say they like/love it, say they plan to buy, and then they don't. Sometimes that means months of wasted time on one potential client which is a huge cost to a new player with little resources.

Now the potential buyer is not necessarily lying or just being nice. Rather they may truthfully be unaware their brain has already decided "no". By asking for money or even to sign a non-binding agreement to purchase in the future, puts the person on the spot and forces them to answer honestly and bluntly. It is this weird, psychological trick to get at the true buying intent. And of course, even if they sign or pay for a trial, they still may decide no later. But hopefully it wasn't completely wasted because you got feedback from someone genuinely interested in paying for your product.

There is perhaps a difference between a pilot that requires active work from the client (integrations, friction) and pilots that are passive (adding users to a SAAS website).

In the latter, adding non-free price would be a better indicator of buying intent. Perhaps that is what the article writer had in mind. In the former, though, which is where my comments come from, being willing to do the pilot is already displaying a great deal of buying intent, so adding a price on top is a net negative.

I think these are all excellent points but may suggest that you would not be an ideal customer for an early stage company. On the other hand, painless mutual disqualification as fast as possible is a win for both parties.

I disagree. Quite often people drag their feet with actually trying the product during free pilot. If they have already paid for it there will be more urgency to integrate it.

Edit: if you dedicate resources to a pilot then it might as well be free but lots of companies don't automatically do that is my point

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.

>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).

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.

You quote them as saying “charge more”, but I don’t see them say that. Did they edit their comment while/after you responded?

It is in the 'Do you have any advice for founders trying to price their product?' section as a hyperlink.

Ah, so that part of the comment is in reply to the original post. Confusing but I see.

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.

> 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.

And at the end - don't think you don't have experience in selling, you already do that when you communicate. Genius.

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?

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.

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.

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

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