Lenny Rachitsky: commitment

Transcript context

…Correct. Either productize to a price point and the willingness to pay, or at least use willingness to pay as an access to prioritize what you're building. Either way, you'll get it right. Okay, so let's actually talk about how to have these conversations. I imagine that's what a lot of people are wondering right now. It's like, yes, I'm convinced I will have these conversations, but then the classic issue with customers, you ask them what they all do and you can't trust their stories of what they'll actually do. So what advice do you have for folks when they have these conversations? What questions should they ask? What words should they use? I know you have a few frameworks that you suggest, you can talk about that. Yeah, we can go deep into this and you can pull me back or ask me to go deeper, whatever. It doesn't matter. So I've written an entire chapter in the book, chapter four, it's called How to Have the Willingness to Pay Conversation. If there's one chapter, just read that. It's quite detailed and goes into how to actually do this. But look, if you go and ask someone, how much should I charge for this product? You're actually going to get garbage back. That's your job. No one is supposed to tell you how much to charge, and that's the worst way to have the conversation. There are some really interesting and nuanced ways of having the conversation where you still tease out what people are willing to pay for without directly confronting someone as to what you should be charging. So let me go into a few methods and I can pause to see if you have any questions. So the first one is, what we say is frame. The first one is, what we say is, "Frame the question in a more relative manner", because, and sometimes I say tongue in cheek, that, "People are absolutely meaningless, relatively super smart." What I mean by that is, if you go and ask someone, "How much should I charge?" You'll get a meaningless answer. But if you actually ask it in a relative way, people actually give responses that are meaningful. So for instance, if you're a B2B SaaS company, and you're trying to see if your product actually has willingness to pay, one way to have that conversation is to say, "Okay. Hey, do your customers, do you use products like Salesforce in your install base?" "Yeah, I do use." "Okay, Salesforce was indexed at 100 in value. Where do you think we are in terms of the value that we bring to your, let's say, day to day business operations?" That people can answer all day long. They might say, "80", they might say, "120", depending on whether you're more or less compared to, let's say, what a Salesforce can do, which is an established [inaudible 00:25:56]. And then if you say, "Okay, if Salesforce was indexed at a 100 in pricing, where do you think we should be?" That also people can say, okay, if they say 110, what they're saying is, you can be more premium than that and we would still pay for it. At least you've gotten some information that is meaningful at a very basic level. So this is some relative ways of asking these questions are the most basic ways of actually doing it. Then we have questions where there's some methods where we actually want to understand, are there some psychological thresholds or budgets when it comes to willingness to pay? So the way to do this is let's take your product that you're going to launch, pitch the value to your customers, have that exact sales and marketing conversation that you'd have after you launch the product, but before. And then you ask them, "What do you think is an acceptable price for this innovation?" Look, everyone would like to low ball, they'll negotiate with themselves.…

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