Jason M. Lemkin and Lenny discuss when companies can justify price increases. Most recent hikes weren't matched by real product improvements, and companies often underestimate the value of free users: Lenny's 590,000 non-converting newsletter readers matter more than you'd think. Freemium models and long trials build quality and advocates.
March 8, 2024
Almost 600,000
8%
30%
That recur. And every time you rip a customer off you, you lose, you lose. That relationship's damaged, isn't it? And you know, a controversial. I think I say to the product team, but I think this is the right thing. If you're going long is like, everyone raised prices last year, as you know, right? Everyone raised prices. The question I asked folks is, did you earn it? What feature did you shoot? Did you. If you raised prices 8% last year, did you add 30% more value to your product? You know, in the old days, pre, Pre this crazy years, the answer usually was yes. People would wait up, they would wait a couple years, right? And that this, the whatever product from four years ago was so much better. It really was, really had earned 19.95 instead of last year. No one earned their price increases. No one came out with an amazing new addition, an amazing new functionality that earned it. They just sent you an email saying, you know, you're paying more. So we get one pass. But earn it. Earn your price increase. Have the longest free trial possible. Own it. And, and this VP of free thing, like it's gotta be founders working with product. Cause no one else cares about the free. You can't expect the sales team to care about free, can you? You can't expect the marketing team to care about free. Not unless they can immediately monetize them, right? Unless they can ram them into conversion. People ignore. Abuse their long tail in the last 18 months. But your long tail is your. Is it these? These are your. Even if they don't convert that much, they're your advocates. I mean, how many people read your newsletter? 500,000 people, right?
Almost 600,000.
Okay, 600,000. Now, not all of them convert, do they?
No, no, that's exactly how I look at it. It's kind of the same.
Okay, Brian Bell, what about the 590,000 of them that love Lenny, that don't convert, right? If you over monetize them, then your whole. Then, then Lenny's empire, Lenny's community doesn't exist if you over monetize them. But who. But when you bring in a VP of sales for Lenny and a VP of growth and a VP like you can't expect them to. To. To care as much about that long tail as you, right?
I love your passion around this. So what I'm hearing partly is you're a big fan of freemium, essentially, right. And the benefits of product LED growth where there's something you could just use indefinitely, or do you still think it's a trial where There needs to end at some point. Or is it just like now? Freemium is great in a lot of cases.
Listen, I'm a big fan of long tails when they work. They don't always work for enterprise products. I'm a big fan of delivering more value than you take out for your customers. And I am a big fan overall of Free because and I know you'll agree with me this, every founder figures this out at some point. Free products are better software products that cannot offer a free edition cut corners because they don't have to be good at onboarding. The products that do not have a free edition have human beings that bridge the gap between buying and deployment. And that's okay at ServiceNow and that's okay in certain products. But the products are the best products. Invest the the engineering cycles to have a free edition. Whether that's truly free, whether it's an extended free trial, whether it's a long tail or a medium tail. The amount of all of your product is better. And if people can actually if you have a free edition, all of your, all your customers benefit, even your enterprise customers benefit, they all benefit.
This idea of VP of free. I think technically it's probably the head of growth for a PLG company or the person leading the self serve part of the business.
But even they in, even in the organizations I work with that have those structures that that person is focused on monetizing that, that tail who, who stands up for the 590,000 other readers of, of Lenny who. Who's our champion?
Yeah. And you're. You're 100% right. That's exactly how I think about the newsletter. There's this free audience and ideas. Over time they get convinced this is worth my money and let's give it a shot.
Yeah. So yeah and your V and your growth person like let's say 1% converts. I'm just making that up. Going from 1 to 1.1 actually is a big deal at that, at that scale or 1.2. Right. That, that's okay. But. But you've got to nurture the 490,000, not spend all the calories just ramming the paid edition through. Right. This. But only it's, it's a fun thing because once you hit a little bit of scale, this is part of your job as founders and product leaders is who's going to be this VP of Free.
