Rahul Vora: evaluation

Transcript context

…a game. If people were to listen to this segment of the podcast, they would never guess we're talking about B2B software and email, which I love. Let's talk about pricing strategy and your approach to pricing. Another very contrarian approach that you guys took where you charge $30 a month for email. That was free, that people don't need to pay for anywhere. And it's worked. And now a lot of companies are thinking of it this way. You've even raised your prices recently. What have you learned about pricing strategy that you think might be helpful to folks? I always say the same thing when it comes to pricing, which is before you figure out pricing, you must first figure out positioning. And Superhuman is the best email tool on the market. We fortunately have the metrics to show this. One of the cool things about selling an email tool is you can compare the 30 days prior to using Superhuman to the 30 days after, or the year before to the year after. And we do that, obviously. We're able to show that people get through their email twice as fast with Superhuman, that they respond one to two days faster, and that they save four hours or more every single week. Because of that, we're very confident in saying that Superhuman is the best email tool on the market, and that we're building it for high-performing teams and high-performing individuals. In other words, we serve the high end of the market. But once you understand your positioning, you can then move on to pricing. And one of the best books on this is a book called Monetizing Innovation by Madhavan Ramanujam. And Madhavan covers a lot of ways to develop pricing. We used one of the easiest methods, which is the Van Westendorp price sensitivity meter. And in the early years, we asked, I think it was around 100 of our earliest users, the following four questions. Number one, at what price would you consider superhuman to be so expensive that you would not consider buying it? Number two, at what price would you consider superhuman to be priced so low that you'd be worried about its quality and you wouldn't buy it? At number three, what price would you consider superhuman to be starting to get expensive so that it's not out of the question, but you'd have to give some thought to buying it? And number four, at what price would you consider superhuman to be a bargain, a great buy for the money? Now, most startups orient around price point number four. This is especially true for greenfield opportunities, marketplaces. You've got to set the transaction value around price point four, basically when you want as many people to sign up as humanly possible at the top of the funnel. But the price point that supports our best-in-class, best-in-cattery position is actually the third one. It starts to feel expensive, but then you sit down and you think about the time that you spend an email, the ROI, and you still buy it anyway. And it turns out that the median answer for the third question was $30 per month, and that's how we picked our price. And once we picked our price, we then do a quick gut check on market size. For example, we're a venture-scale company. But at the time, the question that we had to ask is, could we grow into a billion-dollar valuation? Well, let's assume that at that point, our valuation is 10 times our ARR. So our ARR would have to be $100 million. Well, that would be 300,000 subscribers at $30 per month. And that is conservatively assuming no other ways to increase ARPU. You mentioned the price increase. You can also go at market. $100 million. Well, that would be 300,000 subscribers at $30 per month. And that is conservatively assuming no other ways to increase ARPU. You mentioned the price increase. You can also go at market. You can sell new products and so on. We asked ourselves, without those tricks, Do we think we can get to hundreds of thousands of subscribers? And we answered emphatically, yes. And so we went ahead with that price.…

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