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Comment by pc86 | Hacker News Reader

It's not explicitly mentioned in this way here, but I feel like the underlying assumption is something like "If you think they need the $20k plan, and you sell them on $10k, they'll increase to $20k based on usage then expand into $30k [(this is basically the chart in the article)] - but if you sell them on $20k, they'll stay there."

I don't see why you would intentionally undersell. How does that have any bearing on whether or not they expand into higher tiers, or whether or not they refer new customers to you?

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I imagine there's a psychological barrier to upgrading a plan. Make the customer break that barrier on their own, due to the necessities of their current usage, and they'll have less compunction to upgrade later on. Psychological barrier already broken.

Whether the decreased initial revenue is outweighed by the increased number of upgrades later on is a different question. Personally, I'm skeptical the strategy pays off.

You are underselling TODAY, building satisfaction with the purchase and desire to get more, as opposed to resentment at having overpurchased and now seeing you as yet another vendor who oversold us a bunch of stuff and is now worth less than the spend, and is now pinching the budget. The former is likely to turn you into a valued provider, and the latter is likely to have the customer looking elsewhere in the future.

Typically, existing customers business costs only 20% of acquiring new customers. To succeed, you want to maximize ongoing relationships, not keep churning for new customers at 5x the acquisition cost.

I get the idea behind it, but the numbers have to make sense. You forgo revenue now for more revenue later, taking into account revenue now can be reinvested and SaaS companies typical grow really fast. If you undersell by 20%, you don't have that 20% right now to spend on more sales/engineers.

If the customer is really going be happy with 30K worth eventually, get them there now instead of 18 months later.

It's not explicitly mentioned because this is a followup to a post where the author does explicitly mention this (linked from the first line of the article): https://tomtunguz.com/deliberately-underselling/

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