"Your pricing is all wrong!" He stared at me, angry. I've never met him before, but he was an imposing figure. He was tall and almost leaned over me, and wore a crisply ironed suit. He had a contingent of similarly dressed men behind him.
We were at an Atlassian booth in an IT conference announcing the launch of our new product, Jira Service Desk. It was my first day on the job. To make matters worse, I was the only Atlassian employee at the booth, and I had no idea what I was doing. I knew very little about the product, much less our pricing models.
To this day I am not sure why Atlassian thought it was a good idea to send me, on my first day of the job, to the largest conference for IT developers. Perhaps D.C. was a bit too far from Sydney, where the company was headquartered. Or they thought it would be better to focus on building the product, which we had just launched. Or maybe they wanted to haze me. Whatever the reason, it was trial by fire, and I learned a lot on that day.
The customer was complaining about Jira Service Desk's pricing because we priced it like every other Atlassian product. Up to that point, the pricing of our products was relatively straightforward - anyone who ever used the product was charged on a monthly basis. But Jira Service Desk had an entirely different use case. It was meant for anyone who needed help, including users who may only use the product once.
When we launched Jira Service Desk, customers were outraged about the exorbitant pricing. There were virtual protests. Angry tweets. Enraged emails. And in person showdowns, as I experienced on my first day on the job.
We changed the pricing (or rather, the pricing metric, as we will discuss later in this post) to agents who used the product. It ended up being a very large internal engineering effort because it was a new way of pricing.
In the end, it was worth it because customers were much happier. Jira Service Desk ended up being the fastest-growing product in Atlassian's history, and now it's the second-largest product in terms of revenue in a very robust suite of products. As of December 2020, Atlassian has a market capitalization of $50B.
The takeaways of this story are many: first, it's important to listen to your customers. Second, long term investments matter. Perhaps most importantly - mistakes happen. Even the most successful companies only learn about what the best approaches are after launching.
Pricing is a small component of go-to-market, or GTM, strategy.
What is "GTM" anyway?
Founders ping me asking me "how do I GTM strategy"? And "how do I send this over to my team so that we can communicate what it is?"
To summarize, GTM strategy is figuring out who your users are, how to reach them, and how to scale reaching them. In that order.
I've created a 43 slide deck that covers these questions for early stage founders, along with worksheets to fill in.
Feel free to copy these slides for your team:
For every software product, ultimately an individual is making a purchase decision.
There are a few questions that we need to answer about our buyers. What is their job title? What stage of the company are they in? What are their daily activities?
For every company, there are usually multiple personas.
How do we figure out our product's persona?
There are many strategies, some covered in the deck, but it's mostly getting to know our users and talking to them. After the 30th conversation, something clicks and we just know the answers to these questions after talking to them about their jobs.
Next, we figure out how to reach our target customers once we have figured out their personas.
In the beginning, it's mostly just convincing our friends and friends of friends to give us feedback.
After the hump of the first 5/10 customers, we then need to think more strategically about which channels to explore.
The biggest thing here is to experiment. When Amy Sun managed Uber's acquisition, she tried multiple channels and saw what worked and what didn't. The biggest point is to try, measure, and then allocate time, resources, and spend accordingly.
Scaling means thinking about how to price our product and when.
Many B2B companies have different pricing strategies. These are mostly relevant once your product is outside of its first ~5/10 users.
Pricing is another important metric. Most users think about pricing in terms of level (the amount to charge), when it's really important to think about metric (when to charge), and structure (volume, discounts, and free trial vs. not).
A quick note on pricing structures. I did an analysis of Forbes' Cloud 100, and looked at how many are freemium vs. free trial vs. demo. It was surprising to learn that the majority use the demo strategy (~70%). Most companies blend the strategies (i.e. either has a free product and a demo as well).
Once we have those figured out and have customer data, we need to learn about our LTV/CAC ratios. They're covered in the deck, but not going as much detail about those here.
GTM strategy is legos that form a whole. The above practices are examples of legos that you can use to figure out your overall strategy. It's tempting to think that GTM strategy is straightforward. As we look back, the pieces make sense - but as we look forward, they are nebulous.
Remember, these things are messy!
There's only one way that ultimately shows the right answer: time.