How did you come up with charging $30 a month for your product?

#Superhuman #Gmail
rahulvohra's avatar
almost 3 years ago

Before we tried to address pricing, we first addressed our positioning.

Are we the Ford of email?  (Nope.)  Are we the Mercedes of email?  (Not quite.)  Are we the Tesla of email?  (Getting there!)

We started with this article by Arielle Jackson: Positioning Your Startup is Vital — Here’s How to Nail It.  Arielle advises using a formula like the following:

For (target customer)
Who (statement of need or opportunity),
(Product name) is a (product category)
That (statement of key benefit).
Unlike (competing alternative)
(Product name)(statement of primary differentiation).

She gives the example of Harley-Davidson:

The only motorcycle manufacturer
That makes big, loud motorcycles
For macho guys (and “macho wannabes”)
Mostly in the United States
Who want to join a gang of cowboys
In an era of decreasing personal freedom.

We thought about this hard for Superhuman.  We met up with Arielle (she's awesome), and did further reading.   In particular, Positioning: The Battle for Your Mind, was very helpful.

In 2015, we came up with this positioning:

For founders, CEOs, and managers of high-growth technology companies
Who feel like their work is mostly email
Superhuman is the fastest email experience ever made;
It’s what Gmail could be if it were made today instead of 12 years ago
Unlike Gmail
Superhuman is meticulously crafted so that everything happens in 100ms or less.

(Note: we've since expanded beyond this very tightly defined target.)

When you read this positioning, it's clear that Superhuman is a premium tool for a premium market.  In Monetizing Innovation, Madhavan advocates for developing pricing alongside product, in a way that supports the positioning.

Madhavan covers lots of ways to develop pricing.  We used one of the easiest methods, which is the the Van Westendorp Price Sensitivity Meter.  In late 2015, we asked ~100 of our earliest users these questions:

  • At what price would you consider Superhuman to be so expensive that you would not consider buying it? (Too expensive)
  • At what price would you consider Superhuman to be priced so low that you would feel the quality couldn’t be very good? (Too cheap)
  • At what price would you consider Superhuman to be starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it? (Expensive/High Side)
  • At what price would you consider Superhuman to be a bargain—a great buy for the money? (Cheap/Good Value)

The price point that supports our premium position is the third one: "when does it feel expensive, but you'd still buy it anyway?" (One can imagine that Tesla did this with the Model S.)

The median answer for the third question was around $30 per month.  And that's how we picked our price.

Once we picked our price, we had to do a quick gut check on market size.  For example: how can we grow into a $1bn valuation?  Let's assume that at that point, our valuation is 10x our run rate, so our ARR is $100M.  That would be ~300k subscribers at $30 per month — and that is conservatively assuming no other ways to increase ARPU (e.g. new products, or going upmarket).  We asked ourselves: do we think we can get to hundreds of thousands of subscribers?  We answered yes, and went ahead with the price!

[1] Positioning Your Startup is Vital — Here’s How to Nail It
[2] Positioning: The Battle for Your Mind
[3] Monetizing Innovation
[4] Van Westendorp's Price Sensitivity Meter

4 points
KrisABraun's avatar
@KrisABraun (replying to @rahulvohra )
almost 3 years ago

Thanks pointing at Arielle's writing -- will read. A recent and great book on the topic is April Dunford's Obviously Awesome, which takes a very practical approach to applying positioning in a way that's quite aligned with Superhuman's approach.

4 points
rahulvohra's avatar
@rahulvohra (replying to @KrisABraun )
almost 3 years ago

Cool, thanks for the heads up! Will check it out 🙂

2 points

This question is part of an AMA with Rahul Vohra.

View entire AMA with Rahul Vohra.
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