Madhavan Ramanujam - How to Price Products

My guest today is Madhavan Ramanujam. Madhavan quite literally wrote the book on how to price products. It’s called “Monetizing Innovations” and his concepts have been used by companies across the world like Porsche, Uber, LinkedIn, and SuperHuman. Our conversation is a masterclass on pricing. We discuss common mistakes when pricing products, why you need to focus on benefits rather than features, and how to pick the right monetization model. Please enjoy my conversation with Madhavan Ramanujam. Listen to Founders podcast. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Tegus. Tegus is the modern research platform for leading investors, and provider of Canalyst. Tired of calculating fully diluted shares outstanding? Access every publicly-reported data point and industry-specific KPI through their database of over 4,000 drivable global models hand-built by a team of sector-focused analysts, 35+ industry comp sheets, and Excel add-ins that let you use their industry-leading data in your own spreadsheets. Tegus’ models automatically update each quarter, including hard-to-calculate KPIs like stock-based compensation and organic growth rates, empowering investors to bypass the friction of sourcing, building, and updating models. Make efficiency your competitive advantage and take back your time today. As a listener, you can trial Canalyst by Tegus for free by visiting tegus.co/patrick. ----- Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes.  Past guests include Tobi Lutke, Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes [00:00:00] Welcome to Invest Like the Best [00:02:48] First question - How he arrived at a radically different way of building products [00:05:07] An example of coming up with a price before the product [00:08:35] Distinctions between a willingness to pay and positive feedback  [00:10:29] How to make sure you’re talking to the right potential customer in the first place [00:13:32] Productizing for different customer segments  [00:16:16] Questions companies should be asking to get accurate feedback [00:21:18] What he’s learned about the motivations of potential buyers [00:22:43] What leaders, killers, and fillers are [00:24:37] Some of the biggest mistakes companies make while following his formula [00:25:35] A rule of thumb for what is a benefit versus a feature [00:27:35] Five distinct pricing models for charging a customer [00:30:46] Whether or not the value piece of all of this revolves around time and money [00:33:27] What he tells entrepreneurs about pricing their products that most surprises them  [00:35:16] Defining the first four categories of failure  [00:40:13] Reasons why so many innovations fail to monetize and pricing being a CEO topic [00:41:51] Good rules that leaders can use to have a general sense for effective pricing  [00:47:38] Behavioral changes and observations as the absolute price move up and down  [00:50:36] Is there a pricing genius we should take note of? [00:53:18] The single question every leader should ask themselves [00:53:46] The kindest thing anyone has ever done for him