Testing Early and Often
When we first started selling ads at Yelp, we had no idea what customers would be willing to pay, so we picked a number and priced our initial packages at $50 per month. We wondered if the market would bear more, so the next month we raised prices to $100. To our sales team’s surprise, new customer signups actually increased at this higher price. So the next month we tried $150, then $200, then $300… where we found a good equilibrium point that held for a couple years. Of course this testing wasn’t very scientific, as we had few sales people and no real control group. Nonetheless, the results were pretty obvious (ACV up 6x with no decrease in velocity!), so it taught us the value of testing even when it’s the “quick and dirty” kind.