Those are simple, yet *perfectly on-point slides* . Amazing value from all your presentations so far. To give you guys also little bit of experience from Edgy, esp. for Edtech startups here: At first I wanted to start off with online courses & curriculums at around $300. Only later I realized I could just throw a *2-month mentorship* into the room and see how the customers react. I chose $2,500 as starting price -which I thought they'd never pay. => *I had more signups for the mentorship than for the courses.* We went through the first row of mentorships, and the guys got amazing value. All of them have stopped losing money (which the majority of first time traders keep doing, we're talking about losses in the 5-6 figures in some cases here), and most of them are already making great gains in the short-term, but of course being consistently profitable comes with time. Conclusion: *Never underestimate the value guys.* If you turn the value around in our case, the avg. customers are saving 4-5 figures at least. This is the real value they're getting/saving.
I never understand how to measure perceived value. What in the hell does that actually mean if anything. Yes, I can Google the word but it still is this mysterious terminology that no one has yet to clearly define
Great talk. When you talk about customer value and 10X, are you talking about customer revenue or profit? For example, we help businesses sell more wine online. Shall we take 10% of the sales generated by our service or 10% of the profit generated by our service?
I wanna start a startup and have idea, but I am having issue is that idea can work only in 20 to 30 days per year, service startup, total users are some thousands to million ( as I searched and got data from Google ), I wanna create marketplace, should I do start or wait to learn more things first, I am student and next year going to graduate
I guess I'm stupid. How does Conversion Rate factor into the revenue figures in the 'How to optimize prices section' (P CR SV R)? Is he just saying "If 20% of users buy we'll have a sales volume of 40"? Meaning, for example, 200 people downloaded an app and, because of the 20% conversion rate, 40 people wound up purchasing something within in the app? So: $5 * 0.2 * 200 = $200
Can someone explain this to me. When he was showing that graph of what you should charge, were those revenues, monthly, or yearly, depending on the business? So, for example, what enterprise be $10,000 a month or $10,000 a year
Hi, Calculations at 9'51 appear wrong to me - the conversion rate is not taken into account is it? A - $5 * 40 = $200 B - $10 * 25 = $250 C - $15 * 20 = $300 D - $20 * 5 = $100 In this case, "C" is the preferred pricing strategy (higher revenue), however, when taking into accout conversion rate it gives the following : A - $5 * 40 * 20% = $40 B - $10 * 25 * 15% = $37.5 C - $15 * 20 * 10% = $30 D - $20 * 5 * 2% = $2 Taking into account the conversion rate, "A" appears to be the preferred pricing Would someone please explain to me the part I am missing on this one? Just to fully understand, many thanks!
Started watching thinking, "God this is awesome stuff, why didn't I watch this earlier?!" only to realize it was posted today. Now I have to completely overhaul my pricing strategy but I'm not late to this video party, so I've got that going for me...
Is there a resource for things a founder should be doing that provide value vs things that do not? The resources that I can think of, off the top of my head: - "All that startups do, is basically these 7 things" - via Luke Iseman --> --th-cam.com/video/aVyjZbk6nY8/w-d-xo.html - What Steve Blank has to teach about this, I am guessing. Any other resource that anyone else would like to recommend? Many thanks in advance!
I'm liking the 10/5/20 rule. Setting yourself up for 'relatively' easy 10x'ng of your product. Because if customers are coming in feeling that the value is 10x the price in the beginning, they'll see that value manifest as they use the product/service and ultimately will be accepting of the price eventually growing out toward that value point. Of course, that 20% 'acceptable loss' won't, but it plays into the strategy. I always worry about pricing, 'too high?' 'too low?'.... I mean I know the value and therefore the acceptable pricing of what I deliver, but in the beginning, you probably can't portray that value straight off the bat and you have to prove it. So this idea warms me to the fact that I may have to charge a tenth of what I think is right, to begin with.
Great talk! I'm wondering about the margin between cost and price when selling to consumers and enterprises. Which percentage should be good for an early stage startup with a SaaS product? We have a potential customer that is enterprise level (our first ) but we are struggling to find a suitable price that would yield a reasonable margin to sustain the business. Is it possible to get a 30% gross margin and still be able to invest in growth?
04:19 value based pricing 06:56 first 2 stages, production development stage, introduction, you're not in the growth stage, early adopters, they don't look like mainstream customers that you find in the growth and maturity stages 07:49 what you are trying to do fundamentally, is requiring users to change their patterns
It was Kevin's formula in the video -- 10*5*20. It means that if your values x10 to costs you can increase prices by 5% until you lose 20% of customers. What does it mean "until losing 20%"? Can smb help to puzzle out this definition?
The way I understood it is that your first calculate your price item from cost up or from the perceived value down. If you adjust your pricing because of the competition just make sure did you are aware of your underlying costs. Sometimes low prices can be perceived as low value but this is not always the case with consumer products more likely with B2B sales. Also I think his math was off because if I raise my price by 5% and lose 20% of customers, so 1 out of 5. Then if I charge 100 I will gain 20 (4x5) with those 4 customers but I will lose 100 with the one who left. That gives me a total loss of 80. I think he misspoke it is not 20% of your customers but 1/20 so 5%
Raisig pricing or keeping them higher may not be a good idea if your market penetration is less than 5 percent. It would make more sense to be more aggressive on getting more users.
Seems quite reasonable but recently we were giving our product for free and its not pretty lots of business don't take for real and they ask what is the catch top often
There is one thing I don't get in the "How to optimize prices" section (@10:35): Would it make more sense to optimize by profit instead of revenue? Could I have the best revenue by no profit at all in some cases? Please don't get me wrong. This is a highly valuable content you have provided here. I really appreciate it 👍🏻
10 / 5 / 20 seems strange because if I raise my price by 5% and lose 1 out of 5 customers. So if I charge 100 I will gain 20 (4x5) with those 4 customers but I will lose 100 with the one who left. That gives me a total loss of 80. Or is my math off?
Taking advantage of how fresh the last 2 videos are - how would you guys approach customer acquisition where the community is the most important factor of the whole product/service and it really can't be a free one because of the cost (we will have 30 days of the trial period though)? How can a startup gain as many users as possible before actually launching the service (it will be completely useless without the people using it)? I love Y Combinator and the community around it!
Can you make a freemium model? Are there some aspects of the product/service that you could charge for? You say it can't be free because of the cost, what is the cost based on, bandwidth/hosting? If it's community based, then start locally; so if you were making an app like LetGo, make a "NYC LetGo" - you can spend extra time to make it more personal and perhaps get local businesses to sponsors/offer coupons, based, then pivot to wider areas as you gain traction. (without knowing more, I'm not sure what to say, my situation is different as my product requires my users to have high-end PC hardware/ VR rig setup, that 99.9% of my users currently do not have have, so I can't just send them a demo to gain traction. That's a problem I'll have to overcome) Good luck
I wish I could tag Kevin to ask this question. Can we apply 5% / 20% rule when we have 0 customers? We're kinda desperate for new clients right so can we afford losing 20% of the deals?
Important information about refunds: what a joy
Those are simple, yet *perfectly on-point slides* . Amazing value from all your presentations so far. To give you guys also little bit of experience from Edgy, esp. for Edtech startups here:
At first I wanted to start off with online courses & curriculums at around $300. Only later I realized I could just throw a *2-month mentorship* into the room and see how the customers react. I chose $2,500 as starting price -which I thought they'd never pay.
=> *I had more signups for the mentorship than for the courses.* We went through the first row of mentorships, and the guys got amazing value. All of them have stopped losing money (which the majority of first time traders keep doing, we're talking about losses in the 5-6 figures in some cases here), and most of them are already making great gains in the short-term, but of course being consistently profitable comes with time.
Conclusion: *Never underestimate the value guys.* If you turn the value around in our case, the avg. customers are saving 4-5 figures at least. This is the real value they're getting/saving.
Thank you very much. loved every second of it.
God bless you all.
Kevin Hale never disappoints with these presentations! Good stuff brother! Keep being excellent!
Yeah, he's the best YC teacher IMO. That says a lot, because there are several really good teachers in YC.
Thank you for sharing Kevin ❤
Very insightful. I've watched this 4 times now, I'll watch it again soon :)
Also... why is Kevin in Prison? He seems like a nice guy.
LOL just caught on to that haha
He's just giving a course to the inmates on the prison startup economy
I never understand how to measure perceived value. What in the hell does that actually mean if anything. Yes, I can Google the word but it still is this mysterious terminology that no one has yet to clearly define
Great talk. When you talk about customer value and 10X, are you talking about customer revenue or profit? For example, we help businesses sell more wine online. Shall we take 10% of the sales generated by our service or 10% of the profit generated by our service?
I believe he is talking about perceivable value by the client.
@@777Kiq yes, but is the value in revenue or profit?
Excellent!
When it is talking about price in the quadrant, is he talking about monthly subscription?
Pure gold!
Thanks
This was helpful
And do you think saas should have a free version? Or does it devalue the value?
I wanna start a startup and have idea, but I am having issue is that idea can work only in 20 to 30 days per year, service startup, total users are some thousands to million ( as I searched and got data from Google ), I wanna create marketplace, should I do start or wait to learn more things first, I am student and next year going to graduate
Great stuff!👊
On the price vs complexity graph, are these numbers customer lifetime value, annual or monthly?
That's what I was thinking...
It more looks like monthly numbers, but I am not 100% sure
nice.
10.5.20 #cheers
#MGMT1328885 Very informative
I love Kevin's talks! Pricing feels like voodoo. The fact that this works is amazing, excellent simple tips to follow.
I guess I'm stupid. How does Conversion Rate factor into the revenue figures in the 'How to optimize prices section' (P CR SV R)? Is he just saying "If 20% of users buy we'll have a sales volume of 40"? Meaning, for example, 200 people downloaded an app and, because of the 20% conversion rate, 40 people wound up purchasing something within in the app? So: $5 * 0.2 * 200 = $200
This presentation definitely has 10X value, being in Freemium model. Thanks Kevin!
There should be a book with all the information given in these videos :D "The YC way" :D
This was by far the most helpful and valuable presentation I've seen! Thanks!!
Can someone explain this to me. When he was showing that graph of what you should charge, were those revenues, monthly, or yearly, depending on the business? So, for example, what enterprise be $10,000 a month or $10,000 a year
Very insightful..Kevin's presentation is worth over millions of dollars to me.
Hi,
Calculations at 9'51 appear wrong to me - the conversion rate is not taken into account is it?
A - $5 * 40 = $200
B - $10 * 25 = $250
C - $15 * 20 = $300
D - $20 * 5 = $100
In this case, "C" is the preferred pricing strategy (higher revenue), however, when taking into accout conversion rate it gives the following :
A - $5 * 40 * 20% = $40
B - $10 * 25 * 15% = $37.5
C - $15 * 20 * 10% = $30
D - $20 * 5 * 2% = $2
Taking into account the conversion rate, "A" appears to be the preferred pricing
Would someone please explain to me the part I am missing on this one? Just to fully understand, many thanks!
I'm not sure, but I guess that the Sales Volume is already the end result after Conversion Rate has been applied.
Golden presentation, thank you Kevin!
What are "logos"?
Started watching thinking, "God this is awesome stuff, why didn't I watch this earlier?!" only to realize it was posted today. Now I have to completely overhaul my pricing strategy but I'm not late to this video party, so I've got that going for me...
All of Y's content is golden, truly grateful that they're sharing with the public
Is there a resource for things a founder should be doing that provide value vs things that do not? The resources that I can think of, off the top of my head:
- "All that startups do, is basically these 7 things" - via Luke Iseman --> --th-cam.com/video/aVyjZbk6nY8/w-d-xo.html
- What Steve Blank has to teach about this, I am guessing.
Any other resource that anyone else would like to recommend?
Many thanks in advance!
I'm liking the 10/5/20 rule. Setting yourself up for 'relatively' easy 10x'ng of your product. Because if customers are coming in feeling that the value is 10x the price in the beginning, they'll see that value manifest as they use the product/service and ultimately will be accepting of the price eventually growing out toward that value point. Of course, that 20% 'acceptable loss' won't, but it plays into the strategy.
I always worry about pricing, 'too high?' 'too low?'.... I mean I know the value and therefore the acceptable pricing of what I deliver, but in the beginning, you probably can't portray that value straight off the bat and you have to prove it. So this idea warms me to the fact that I may have to charge a tenth of what I think is right, to begin with.
Great talk! I'm wondering about the margin between cost and price when selling to consumers and enterprises. Which percentage should be good for an early stage startup with a SaaS product? We have a potential customer that is enterprise level (our first ) but we are struggling to find a suitable price that would yield a reasonable margin to sustain the business. Is it possible to get a 30% gross margin and still be able to invest in growth?
04:19 value based pricing 06:56 first 2 stages, production development stage, introduction, you're not in the growth stage, early adopters, they don't look like mainstream customers that you find in the growth and maturity stages 07:49 what you are trying to do fundamentally, is requiring users to change their patterns
#MGMT1328885 I get this! Useful, simple and easy to understand. Yay! 1006
It was Kevin's formula in the video -- 10*5*20. It means that if your values x10 to costs you can increase prices by 5% until you lose 20% of customers.
What does it mean "until losing 20%"? Can smb help to puzzle out this definition?
Yes, 20% relatively what? Some random price you have tried for the first time?
1 year later, talking 20% of conversion fail.
The way I understood it is that your first calculate your price item from cost up or from the perceived value down. If you adjust your pricing because of the competition just make sure did you are aware of your underlying costs. Sometimes low prices can be perceived as low value but this is not always the case with consumer products more likely with B2B sales.
Also I think his math was off because if I raise my price by 5% and lose 20% of customers, so 1 out of 5. Then if I charge 100 I will gain 20 (4x5) with those 4 customers but I will lose 100 with the one who left. That gives me a total loss of 80. I think he misspoke it is not 20% of your customers but 1/20 so 5%
"Early adopters are not price sensitive"
I think this is not true in many cases.
Raisig pricing or keeping them higher may not be a good idea if your market penetration is less than 5 percent.
It would make more sense to be more aggressive on getting more users.
Mgmt 013 2885 knowing who your customers and pricing. Good marketing
Price thermometer, optimize price table and 10/5/20 rule of thumb are valuable tips that can be applied immediately. Thanks Kevin, much value here!
#MGMT1328885 I get this! Useful, simple and easy to understand. Yay! 1038
When starting out, to get users on board can pricing be low ? otherwise how to do get usage and engagement going ?
Seems quite reasonable but recently we were giving our product for free and its not pretty lots of business don't take for real and they ask what is the catch top often
There is one thing I don't get in the "How to optimize prices" section (@10:35):
Would it make more sense to optimize by profit instead of revenue? Could I have the best revenue by no profit at all in some cases?
Please don't get me wrong. This is a highly valuable content you have provided here. I really appreciate it 👍🏻
Your right, Cause the $5 customers have 20 times more cost than the $15 customers. Thanks the Idea just popped up when I was reading your comment!!!!
10 / 5 / 20 seems strange because if I raise my price by 5% and lose 1 out of 5 customers. So if I charge 100 I will gain 20 (4x5) with those 4 customers but I will lose 100 with the one who left. That gives me a total loss of 80. Or is my math off?
I think he misspoke it is not 20% of your customers but 1/20 so 5%
What should be the difference between cost and price for saas?
What about $10k-$25k sir
Just the issue my startup was currently facing. These YC videos are a godsend
Can you share your experiences and how it's going? Did you fail or succeed? If so why?
Taking advantage of how fresh the last 2 videos are - how would you guys approach customer acquisition where the community is the most important factor of the whole product/service and it really can't be a free one because of the cost (we will have 30 days of the trial period though)? How can a startup gain as many users as possible before actually launching the service (it will be completely useless without the people using it)?
I love Y Combinator and the community around it!
Can you make a freemium model? Are there some aspects of the product/service that you could charge for? You say it can't be free because of the cost, what is the cost based on, bandwidth/hosting? If it's community based, then start locally; so if you were making an app like LetGo, make a "NYC LetGo" - you can spend extra time to make it more personal and perhaps get local businesses to sponsors/offer coupons, based, then pivot to wider areas as you gain traction. (without knowing more, I'm not sure what to say, my situation is different as my product requires my users to have high-end PC hardware/ VR rig setup, that 99.9% of my users currently do not have have, so I can't just send them a demo to gain traction. That's a problem I'll have to overcome) Good luck
@@blakemccorkle18 Thanks for the input! It's so awesome to see people actually engaging in the YC community, even on TH-cam! I really appreciate it!
Wht do I do
Thanks Kevin. That was very insightful. 🙏
what does "conversion" mean in this context?
Great info, loved the numbers approach and simple presentation
thank you
#BUS25F42 This question makes so much sense.
Great talk with clear tips on pricing! Thank you!
chingoneria de plática
thumbs up
great pointers about the pricing with values
You’re helping doreapp.co a lot
nice.
Great stuff
Excellent presentation.
kevin hale crazy 🔥 back at it again with another transformational talk
Incredibly efficient talk. So much great information, condensed and actionable. Thanks Kevin!
I wish I could tag Kevin to ask this question. Can we apply 5% / 20% rule when we have 0 customers? We're kinda desperate for new clients right so can we afford losing 20% of the deals?
After you get first customer, you play with increasing pricing.
@@F0XHALE if we're set to increasing pricing why is it a bad idea to undercharge at first and go from there?
giorgi kakhiani more money. Don’t leave money on table unnecessarily
@@F0XHALE Hey Kevin. When you talk about inbound marketing (
Thank you 🌷
Incredibly useful. Thanks!
ON THE STRUGGLE BUS!!!
Need a T-shirt saying this :D
🔥
How can you determine the value of your product?
love it. Thanks for sharing
very valuable info - thanks for sharing Kevin!
Great video and excellent timing for an app I'm about to launch. Thanks!
Hi could you do pricing lesson for therapeutics and diagnostics?
Why am I looking this after 8 years on my business?
Crystal clarification, thank you Kevin
Find it very useful.
Interesting
This is great!
What are some non technical jobs at YC