The delicate art of raising prices

Is it time 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?

Recommended reads:

6 Ways I Sabotaged My Own Startup’s Culture — Jan Cavelle created a culture that was truly amazing, until it went absolutely toxic.

One Type of Founder Investors Hate Funding — Aaron Dinin explores the unexpected things that can make investors say “no.”

You Should Be Building in the Hidden Layers — Nir Zicherman, VP of Audiobooks at Spotify, implores entrepreneurs and investors to build the hidden layers that will be key to a new industry’s growth.

Sweet Tweets (RIP)

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