The Art and Business of Raising Your Prices

How to price your startup’s offering

Let’s face it: pricing isn’t sexy.

But with 50–60+% of businesses falling over within their first three years, this is the part of the marketing equation that’s absolutely critical. If your business isn’t making money, it is certainly not sustaining you or itself over the longer term.

If you’re struggling, Kristin Austin has 5 pillars to help you figure it out: 

1. Ask yourself, is your self-doubt true? — Will people laugh? Probably not — especially if you’ve done your research and know what others are pricing similar items/services at. And even if someone does laugh, keep going.

2. Are you worth that much? The answer is yes — If you’ve already helped someone with the problems your business solves, reach out and ask them how they felt after you sorted their problem. You might be amazed at their feedback.

3. Do your research — Look at where others are pricing themselves. You don’t have to place yourself at the top or bottom or even in the middle. BUT…knowing what’s out there will give you a sense of the market range.

4. Keep to the facts and figures — Determine how much it costs to produce your product/service. Think about your overheads — 401K, taxes, utilities, computers, stationery, websites/hosting, marketing, phone calls, rent, bank fees, registrations, vehicles, insurances, accounting, legal advice). List everything you can think of. Then, work out how much you want to earn during the year.

5. If you’re still stuck, work with someone else — Having an objective party challenge your thinking can take any emotional baggage out of your decision-making and ensure that you’re pricing appropriately for your business’s long-term sustainability and your clients/market.

👉️ Learn more about Getting your business pricing right

How to raise the price of your product

There are only two ways to get Lifetime Value (LTV) as high as possible; Get users to stay around longer or get users to pay you more per month/cycle‍.

But raising prices is risky, with many knowable and unknowable impacts at play. Despite the complexity and uncertainty, Dan Layfield, former Head of Growth at Codecademy, is a big believer in testing your pricing several times per year.

Price is where you have to put a number on all the hard work that you have done and see if the market accepts it. That alone produces anxiety and fear of failure. But with the right strategy, you can raise without losing your users.

If you want to test pricing, steal Dan’s playbook:

1. Decide who you’re raising prices for — the least risky is raising prices for new users who have never tried the product. The riskiest version is raising prices on the existing users. This is where companies typically experience the most blowback.‍

2. Run a pricing test — At Codecademy, Dan deployed the following test:
   - Scrub any mention of pricing: Limit places like blog posts, forums, and drip email sequences where users might not see the same price package they see on the product.
   - Set up & run an A/B test: Design the test to both controls for risk and make sure you measure to a high level of confidence.
   - Communicate results widely in the company: Ensure everyone understands the value created and you have full exec-level buy-in on the results.

3. Announce your price raise — Be clear on who will and will not be paying more, and explain why. The most common argument that a company makes in these posts is that they have added a lot more value to the product. (Whether this is true is debatable.)

👉️ Learn more about raising your prices here: Raising Prices For Your Product: Should You Do It? If So, How?

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