Podcast · About 1 hour 20 minutes

The art and science of pricing (Madhavan Ramanujam)

Lenny Rachitsky with Madhavan Ramanujam · Lenny's Podcast Free Intermediate

Madhavan Ramanujam has helped architect pricing for dozens of well-known companies, and here he walks through how real teams actually choose a value metric and a pricing structure. It covers the subscription versus usage question head-on (around the 1:03 mark) alongside willingness-to-pay and packaging. Useful for hearing how practitioners reason through the tradeoffs rather than reading a tidy summary.

  • Pick your value metric first (per seat, per transaction, per GB, per outcome), because that choice shapes everything downstream.
  • Willingness to pay should be designed into the product early, not bolted on after launch.
  • Subscription and usage each have real tradeoffs, and the right answer depends on how clearly your product's value maps to what a customer consumes.
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It answers 2 questions

  1. Should I charge a subscription or charge per transaction for my product?
  2. How should I think about pricing so my unit economics actually work, instead of guessing a number and hoping?

Read with it

  1. When you are the only one selling something like your product, cost-plus and competitor benchmarks give you nothing to anchor... Wiley (2016) Book · Book, ~240 pages Monetizing Innovation: How Smart Companies Design the Product Around the Price Madhavan Ramanujam and Georg Tacke
  2. A16z boils the whole decision down to one honest rule of thumb: usage-based pricing tends to fit products whose main user is... Andreessen Horowitz (a16z) Essay · About 8 minute read Usage-Based Pricing Is Popular, But Is It Right For You? Our Rule of Thumb Tugce Erten and Mark Regan
  3. Before you agonize over subscription versus per-transaction, this piece shows the common middle path so you do not force... Chargebee Article · About 7 minute read The Great Middling: Hybrid Pricing Model and its Growing SaaS Relevance Harikrishna
  4. This is a clean, plain-language walk through the numbers that decide whether your pricing actually works: contribution margin,... Mercury Article · ~12 min read What is unit economics, and does it matter for your startup? Dan Kang
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