Pricing your AI product: Lessons from 400+ companies and 50 unicorns | Madhavan Ramanujam
Pricing your AI product: Lessons from 400+ companies and 50 unicorns | Madhavan Ramanujam🎙️ Madhavan Ramanujam shares why 95% of AI startups get pricing wrong, a simple 2x2 framework that can 10x your pricing power, how to 4x deals with one negotiation trick, and more
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Madhavan Ramanujam is the world’s foremost expert on pricing and monetization strategy. As managing partner at Simon-Kucher, he helped over 250 companies, including 30 unicorns, architect their pricing strategies. He’s the author of the definitive book on pricing, Monetizing Innovation. Now he’s back with a sequel, Scaling Innovation, which reveals how to build enduring businesses by dominating both market share and wallet share. He recently left Simon-Kucher to launch his own fund, 49 Palms, focused on helping early-stage AI companies. In this conversation, we discuss:
Where to find Madhavan Ramanujam:• LinkedIn: https://www.linkedin.com/in/madhavansf/ • Promo email for Scaling Innovation: promo@49palmsvc.com — If you’re purchasing more than five copies, send a screenshot of your receipt to enter Madhavan’s exclusive bundle raffle. Where to find Lenny:• Newsletter: https://www.lennysnewsletter.com • X: https://twitter.com/lennysan • LinkedIn: https://www.linkedin.com/in/lennyrachitsky/ In this episode, we cover:(00:00) Introduction to Madhavan and his work (04:30) The core thesis of Scaling Innovation (09:20) Common traps founders fall into (12:06) Beautifully simple pricing (15:00) Mastering negotiations (26:51) Other strategies for effective pricing and monetization (27:35) How AI pricing is different (31:33) Handling POCs (36:25) The importance of mastering monetization (38:58) Choosing the right AI pricing model (43:13) Current trends in AI pricing (44:48) Strategizing for outcome-based models (50:23) Packaging strategies for scaling (51:37) Adapting pricing strategies over time (53:40) Key axioms for pricing success (58:00) Takeaways for founders (01:01:33) Lightning round and final thoughts Referenced:• The art and science of pricing | Madhavan Ramanujam (Monetizing Innovation, Simon-Kucher): https://www.lennysnewsletter.com/p/the-art-and-science-of-pricing-madhavan • Cursor: https://www.cursor.com/ • The rise of Cursor: The $300M ARR AI tool that engineers can’t stop using | Michael Truell (co-founder and CEO): https://www.lennysnewsletter.com/p/the-rise-of-cursor-michael-truell • Sierra Finn: http://www.sierrafinn.com/ • Chargeflow: https://www.chargeflow.io/ • GitHub: https://github.com/ • Intercom: https://www.intercom.com/ • Warren Buffett’s quote: https://www.goodreads.com/quotes/11478913-if-you-ve-got-the-power-to-raise-prices-without-losing • Sierra: https://sierra.ai/ • Clay Bavor on LinkedIn: https://www.linkedin.com/in/claybavor/ • Mission: Impossible—The Final Reckoning: https://www.imdb.com/title/tt9603208/ • Delphi: https://www.delphi.ai/ • Dara Ladjevardian on LinkedIn: https://www.linkedin.com/in/dara-ladjevardian/ • Sam Spelsberg on LinkedIn: https://www.linkedin.com/in/samuel-spelsberg/ • Lennybot: https://www.lennybot.com/ • Granola: https://www.granola.ai/ • Simon-Kucher: https://www.simon-kucher.com/ • Josh Bloom on LinkedIn: https://www.linkedin.com/in/joshuabloompricingconsulting/ Recommended books:• Monetizing Innovation: How Smart Companies Design the Product Around the Price: https://www.amazon.com/Monetizing-Innovation-Companies-Design-Product/dp/1119240867 • Scaling Innovation: How Smart Companies Architect Profitable Growth: https://www.amazon.com/dp/1119633060 • Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers: https://www.amazon.com/Business-Model-Generation-Visionaries-Challengers/dp/0470876417 • Thinking Fast and Slow: https://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555/ • Contagious: Why Things Catch On: https://www.amazon.com/Contagious-Things-Catch-Jonah-Berger/dp/1451686587/ Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com. Lenny may be an investor in the companies discussed. My biggest takeaways from this conversation:...Subscribe to Lenny's Newsletter to unlock the rest.Become a paying subscriber of Lenny's Newsletter to get access to this post and other subscriber-only content. A subscription gets you:
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