Mastering Pricing Strategies: Key Takeaways from a Video on Pricing, Conversion, and Retention

Reading Time: 2 min read

Pricing Strategy

Price Dev Value Discrepancy: The value that customers receive should match the price they pay. The ideal situation is to have a high price and high value, and a low price and low value.
Onetime Value vs. Consumable Value: Separate one-time value from consumable value and price accordingly. For example, a course may have one-time value, while a software subscription has consumable value.
Long-Tail Pricing: Consider a pricing model that has a high upfront payment and lower recurring payments to extend the look-back period and increase the likelihood of customers renewing.
Annual Billing: Annual billing has a lower churn rate than monthly or quarterly billing. If you can get customers to commit to an annual payment, it's likely they'll stick around longer.

Converting Customers

Conversion Rate: Focus on increasing the conversion rate of customers to annual billing, which will lead to higher lifetime value.
Look-Back Window: Extend the look-back window by accumulating value over time, allowing customers to see the cumulative benefits of your product or service.
Value Reporting: Report data on a cumulative basis to showcase the value customers receive over time, making it easier to price and display value relative to price.

Customer Retention

Contract Signatures: In B2B, contracts matter more, but in B2C, they may not have as much value. Focus on improving the quality of the prospect, product, and targeting.
Customer Success: Focus on customer success and having the right technology in place to report and communicate value to customers.

Mathematical Approach

Lifetime Value (LTV): Calculate LTV by taking price and dividing by churn rate. A higher LTV means more revenue and more opportunities for growth.
Mathematical Equations: Understand and apply mathematical equations to make data-driven decisions in your business.