The art and science of pricing | Madhavan Ramanujam (Monetizing Innovation, Simon-Kucher)

When we talk about pricing, many people quickly gravitate to, like, dollar figures. That's just a price point, that's a dollar figure. But when we think about price, we think about it as a measure. Like, you know, a liter is a measure of volume, price is a measure of value. And when you think of it this way, it really stands for, do people actually want your product, and would they actually buy it? And that is the whole willingness to pay conversation. And entrepreneurs and companies need to do this much earlier so that they can understand, you know, are they on the right track?

(instrumental music) Welcome to Lenny's Podcast. I'm Lenny, and my goal here is to help you get better at the craft of building and growing products. Today, my guest is Madhavan Ramanujam. Madhavan is the author of Monetizing Innovation, the most widely read book on pricing strategy. He's also senior partner at Simon-Kucher & Partners, which is the premier consulting agency for companies looking to get help with their pricing. And unsurprisingly, when I ask people on Twitter who the smartest person on pricing is, Madhavan was by far the most mentioned. In this episode, we get deep into all manner of pricing strategy, especially focusing on five lessons, four product teams on thinking about pricing. Enough talking, let's get into it. I bring you Madhavan Ramanujam after a short word from our wonderful sponsors. This episode is brought to you by Lemon.io. You achieve product market fit, you're able to activate, engage and retain your customers, but you don't have the engineers that you need to move as fast as you want to, because it's hard to find great engineers quickly, especially if you're trying to protect your burn rate. Meet Lemon.io. Lemon.io will quickly match you with skilled senior developers who are all vetted, results-oriented, and ready to help you grow, and all that at competitive rates. Startups choose Lemon.io because they offer only handpicked developers with three or more years of experience and strong, proven portfolios. Only 1% of candidates who apply get in, so you can be sure that they offer you only high quality talent. And if something ever goes wrong, Lemon.io offers you a swift replacement, so that you're kind of hiring with a warranty. To learn more, just go to lemon.io/lenny and find your perfect developer or tech team in 48 hours or less. And if you start the process now, you can claim a special discount exclusively for Lenny's Podcast listeners, 15% off your first four weeks of working with your new software developer. Grow faster with an extra pair of hands. Visit lemon.io/lenny. This episode is brought to you by Mixpanel, offering powerful self-serve product analytics. If you listen to this podcast, you know that it's really hard to build great product without making compromises. And when it comes to using data, a lot of teams think that they only have two choices, make quick decisions based on gut feelings, or make data-driven decisions at a snail's pace. But that's a false choice. You shouldn't have to compromise on speed to get product answers that you can trust. With Mixpanel, there are no trade-offs. Get deep insights at the speed of thought at a fair price that scales as you grow. Mixpanel builds powerful and intuitive product analytics that everyone can trust, use, and afford. Explore plans for teams of every size and see what Mixpanel can do for you at mixpanel.com. And while you're at it, they are hiring. Check out mixpanel.com to learn more. Madhavan, welcome to the podcast.