Pricing experiments ✶
This article provides a great overview of a lot of insights and lessons from studies about pricing over the last few decades. It covers a number of approaches:
- Decoy pricing
- The magic of number 9
- Anchoring and the contrast principle
- Straightforward pricing
- Pay what you wish
- Offering 3 options
- Price perceptions
- How to split test prices
Each point is covered in enough depth to be useful (this is not one of those "7 ways to tweak your pricing" articles that provide nothing useful. Have a read, and you'll probably learn something.
Dealing with a bad techcrunch review ✶
Update: Thanks to David Verhasselt for letting me know the link is dead. Luckily, I found a mirror here.
Josh Liu, London-based founder of MinuteBox, reacts to a bad TechCrunch review of his startup, and draws some key lessons:
- Great execution is key to getting your product understood;
- It is your responsibility to explain your product well, not the journalists';
- Not everyone will like your idea, and that's ok;
- Connect to the tech community to find the right team and/or cofounders.
This point is a familiar story:
When I was starting to work on MinuteBox, I knew no one in the tech community. I did not like social networking events. I was full of myself. I thought I had learnt a lot of things in business school. I just needed a developer and a designer to launch my business. Eventually, I found a developer and a designer through my friends. They are extremely nice people and were very helpful to me. However, they were not the right talent to execute the idea.
Sell the dream, not the job ✶
Some great advice on startup recruiting from Roger Ehrenberg:
You’re not hiring to fill a role; you’re selling a dream. This doesn’t mean being fluffy (which engineers hate); it means clearly articulating the company’s big vision and how the right person will help the company disrupt and transform the market.
The rest of the article is worth your while too. Every founder will find themselves needing to recruit someone some day, and those early hires determine the fate of your company, so you have to hire the best you can.
If you ever feel alone in this... ✶
I have never suffered from depression. I used to feel pretty miserable as a kid (which perhaps is comparable) due to generalised bullying, but there was never a chemical imbalance side to it.
However, particularly in view of recent suicides in the tech scene, it is great to see people with that sort of experience stepping up and offering a helping hand. Darius Monsef:
I haven't thought about killing myself in 20 years, but I've been there. So if you're ever so depressed and stressed out, and you think you're alone. You're not. I've been there. It can get better and i'll bear that burden with you. Send me an email with the subject, “I feel alone in this” and you'll be the next email I write or the call I make.
Beyond that call to action, the whole article is worth reading for a reiteration of something I've discussed in several of my talks:
A person who is $50k in debt has a very hard life. They have no budget for luxuries or means to try and improve their life. They eat the cheapest foods and aren't able to travel. A person with $0 debt, but $0 savings has a quality of life worlds different. They may not have luxuries, but they have way more comfort and abilities to improve their life. Somebody with $50k in the bank is again dramatically better off than somebody with $0… And the quality of life dramatically increases again when you have something like $500k in the bank. That person is able to enjoy high quality foods, travel, live in luxurious comfort and use their capital to try and make their and those close to them lives better. A person with $5M does enjoy a higher quality of life, but not as dramatically better… they might fly in chartered planes vs first class, or drive a $120k car instead of a $70k car, but overall their quality of life is similar. And the increase in quality of life dramatically tapers off as you get to somewhere like $50M. I've personally experienced most of these levels of wealth, and while I haven't yet experienced the very top levels I've spoken to friends that are there and generally they agree.
I've never been $50k in debt (I think my max was about £12k), but I am now slowly but surely climbing up on the other side, and I couldn't agree more. From a personal standpoint, money is a hygiene factor. How much soap can you use?
There's only one good reason to accumulate more money than that, and it's that it can be traded for influence to make things happen. Bill Gates is giving us a great example of what you can do when you have mind-boggling amounts of money, that you can't do with just a few millions. But that's a different goal than wanting to make billions for yourself, which, in my opinion, is both incredibly unlikely and not particularly worth the effort.
There are many more points (and a great slide) in the article. Go read it.
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Always drill down to fundamental metrics ✶
In a nutshell, conversion rate by itself doesn’t tell much (unless you have extra information like traffic, sales price, lifetime value, traffic mix, etc.) So a website with 1% conversion rate may not necessarily be worse as compared to a website with 10% conversion rate. Conversion rate in isolation is a useless metric.
As we've mentioned before:
... at the end of the day, the relevant metrics depend on what you're trying to figure out, what hypothesis you're trying to test.
If you're acquiring a company, there are certainly relevant fundamental metrics: revenues, gross, operating and net profit margins, and the trends of the market and the company within it (for a business acquisition, as opposed to a talent or technology acquisition). As Paras points out, conversion rate, in isolation, is less than useful.
How to hire a programmer ✶
Jeff Atwood outlines a solid process for hiring programmers:
- First pass a few simple "Hello World" online tests.
- Ask to see their portfolio.
- Hire for cultural fit.
- Do a detailed, structured phone screen.
- Give them an audition project.
- Interview in person.
Jeff rightly emphasis the "cultural fit" test. We may all bemoan HR departments and their psychometric nonsense, but poor cultural fit does, in practice, seem to always lead to trouble down the line.
Public speaking for normal people ✶
Public speaking is a fundamental entrepreneurial skill. If you can't do it - you should learn to do it.
Tragically, many people come out of the European educational systems with little or no public speaking experience, not even in front of their classrooms. By contrast, in America, most children are regularly forced to do "show and tell" or other classroom speaking activities, which eventually takes away much of the fear of public speaking.
Ultimately, the only way to get over your fear of public speaking (if you have one) is to do it, repeatedly, until it goes away. One place to do so is Toastmasters, a non-profit organisation which has chapters all around the world.
However, practical tips are also welcome. Here are some tips from Jason Freedman. Summarised:
- Have a standard "routine" that you do before very speech, that gets you in the right frame of mind.
- Do not use powerpoint - if you do, have only a few words per slide and don't look at the slides.
- Pick two people in the audience and speak to them.
- Don't worry about your "Ums" and other filler words/sounds.
- Don't memorize your talk or, even worse, read it out.
- Practice in front of real people, not alone.
Read the whole article here.
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How to optimise facebook campaigns ✶
Ilya Lichtenstein proposes some solid advice for running Facebook advertising campaigns. The highlights are:
- Expect to start off losing money (and so run lots of smaller campaigns to tune and optimise them).
- Cut low-performing ads after about 30 clicks, and invest more in high-performing ads.
- A good CTR to aim is about 0.1%.
- Expect CTR to slip over time due to saturation and banner blindness.
- Use the reports help tighten your ads' focus.
- Lower your bids until you find the sweet stop (and disregard suggested bids).
- Once you've found profitable ads, scale up the spending, and look at foreign markets for extra-cheap traffic.
There are many more insights in the article. Read it if you want to learn how to get value out of this source of paid traffic.
Advice for dealing with journalists ✶
Great article by SEOMoz's Rand Fishkin that both provides examples of risks of dealing with journalists, and key principles for how to avoid getting yourself in trouble. I'll skip over the stories (read them in the article), but here are the key principles:
- Know what you want out of the press (no press, or any press)
- Have a clear and compelling story so that the journalist doesn't make up a less-than-ideal one for you
- Ask about the journalist's motivations so you don't inadvertently support a story that will naturally paint you in a negative way
- Study your interviewer beforehand
- Be very careful with your phrasing to make it harder to misquote you
- Prefer email interviews to verbal ones, as you can be more careful with phrasing more easily
- Everything is "on the record"
- Beware later questions and off-the-cuff "follow-up" questions
- Don't be afraid to call out journalists publicly
On my first startup, I made the mistake of not talking to customers at all until launch day. As a result, the product sucked - it was not fit for any market. And because it was unfocused, it was impossible to define any sort of effective marketing strategy, either. This is the kind of expensive mistake you don't make twice, and I extracted it as a one of my "N tips" posts later (see tip number 4).
So imagine how surprised I was when I managed to make a variation on this mistake again with the next startup - albeit in a different flavour. We launched within 2 months, had active users from the right industry right away, saw the product spread... and yet when it came to charging people, the process of getting those happy users to pay was harder than pulling teeth from a cat! Moreover, when trying to sell to other potential customers, who had been unwilling to use the product for free but seemed more inclined to pay for it, there was always a feeling that the product was exciting and had potential, but it didn't quite do what they needed in order to justify paying for it.
In startup lingo, that's known as a product/market fit issue.
Fit the right market
It turns out that getting a prototype out there is not enough. You have to get the prototype into the hands of the right market. If you're planning to sell a paid SaaS product, this means finding early users, from day one if possible, who will pay. Otherwise, you're getting product-market fit - with the wrong market.
In that context, it was good to see, recently, the following story about SyncPad, who did launch to paying customers right away - which enabled them to discover that their paying market was not who they thought initially:
After Davide launched his app he hit the streets and began talking with his actual customers. What he discovered surprised him. Instead of taking the art world by storm, Davide discovered that his true customers for SyncPad were in the business market. He found that companies were using SyncPad to help manage meetings (both remote and locally), real time visual communication, and for presentations.
SyncPad made some wrong assumptions about who their customers would be, but by charging early, they found those assumptions out very quickly, and were able to pivot their product into the right market.
The price selector
Price is a very strong selector when it comes to users. The people who pay are often not the same as the people who want a free product. This is especially obvious in the B2B market, where "how much the customer wants to pay" allows you to select between enterprises, small businesses, freelancers, etc.
If you build a product with the feedback from free users, you'll build a product that's great for free users. If you want to build a product which users will pay for, you need to be charging them as early as possible so your product feedback comes from paying users.
One approach for charging early is to ask users to pay from day one, even while your product is in early beta. Even though they're helping you out a lot by being some of your first users, you need to validate that they are the right kind of user, and the only reliable way to do that is to ask them to pay you.
Of course, you can't charge them the full price. They'll laugh you out the door and you'll lose a potentially very valuable relationship. So, what do you do?
You give them a steep discount. "We're still early in the development, so you will get a 90% discount for the first three months, and we'll review the price upwards as more features are developed." This can also lead very nicely into a discussion of what feature they would most like to see in order to accept the price increase in three months. This can turn into your product road map, if you manage it well.
Of course, perhaps no one will want your product even at a 90% discount - but if that's the case, you should revise your assumption that they'll be willing to pay for it at full price, ever, and perhaps pivot into a different product, one that people are actually willing to pay for.
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