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🤝 5 Pricing Lessons from Charlie Munger

🤝 5 Pricing Lessons from Charlie Munger

Plus: The latest moves across the SaaS Landscape.

December 01, 2023

Pricing Moves 👀

🏷️ LOTS of Black Friday sales, including Dashlane, Zenfolio, and Circle.

🔍 Ahrefs added a “Limits” section listing all usage restrictions by plan.

📥 Dropbox raised the storage limit on the free plan from 2 GB to 5 GB.

🔺 ClickUp added a Plan Selector tool to help users choose the right plan.

🌎 Webflow added a Localization feature to all plans with a free preview.

PS. I spotted these updates using PricingSaaS. Sign up for free to track competitors and stay ahead of the curve.

5 Pricing Lessons from Charlie Munger

Charlie Munger is one of my all-time favorite thinkers.

My dad introduced me to Berkshire Hathaway years ago, and I’ve been reading about Warren Buffett and Charlie Munger ever since.

One of my favorite observations about these guys is twofold:

They both lived into their nineties
They don’t exactly prescribe to “healthy habits”

For example:

Munger claimed to have never “purposely” exercised in his entire life…

He lived to be 99!

Buffett eats like a child — 5 cokes per day, chicken nuggets 3x per week…

He’s 93!

I’m no biologist, but these aren’t exactly longevity hacks.

While they may have just hit the genetic jackpot, I always looked at this as proof that doing work you enjoy can be its own life source.

If you read anything about Warren and Charlie, you learn that they both spend most of their day reading — and they LOVE reading.

Charlie once said his kids called him a “book with legs” because of how often they would spot him in his favorite recliner, a book covering his face. The full quote is awesome:

In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time—none. Zero. You’d be amazed at how much Warren reads—and how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.

All that reading has allowed Munger to build a wealth of knowledge. He has an ability to connect ideas across disciplines and distill what really matters in simple, everyday language. He’s absurdly witty, and hilarious.

There are full books of his quotes (highly recommend The Tao of Charlie Munger), but today I pulled 5 favorites that I think can be applied to pricing strategy.

Full Disclosure: This isn’t the pinnacle of pricing analysis. Honestly, I just wanted an excuse to write about one of my intellectual role models.

Lesson 1: Differentiate

Mimicking the herd invites regression to the mean, (merely average performance).

When in doubt, use pricing as a differentiator. This doesn’t mean doing something crazy, but if your pricing looks exactly like your competitors, it might indicate that you don’t have a unique value proposition — which is the kiss of death in SaaS.

Lesson 2: Iterate

Without the method of learning, you're like a one-legged man in an ass-kicking contest. It's just not going to work very well.

A common theme of this newsletter is that modern pricing strategy should be iterative. Whether your company relies on sales, PLG, or both, experimentation is key to learning what works and what doesn’t. While market research has its place, I’m a strong believer in learning by doing (and think the two are complementary).

Lesson 3: Double down on customers that understand your value

I have a friend who’s a fisherman. He says, ‘I have a simple rule for success in fishing. Fish where the fish are.

If you’re having a hard time converting customers with the existing pricing model, it’s likely a sign that something needs to change. It might not necessarily be pricing — it could be product or positioning — but use pricing feedback to help clarify the personas your sales and marketing teams should be focusing on.

Lesson 4: Be wary of hype cycles

I am personally skeptical of some of the hype that has gone into artificial intelligence. I think old-fashioned intelligence works pretty well.

Don’t get me wrong, I believe Generative AI will be transformative (PricingSaaS wouldn’t exist without it), but I interpret Charlie’s point here as a reminder to be thoughtful when new innovations arise. Take pricing trends like usage-based pricing and PLG. Just because they exist, doesn’t mean they’re a fit for every product. Many SaaS players have learned that the hard way.

Lesson 5: Keep doing what works

We’ve had enough good sense when something is working very well to keep doing it. I’d say we’re demonstrating what might be called the fundamental algorithm of life — repeat what works.

The fundamental algorithm of life — I love that. If you you have a fundamentally strong pricing model, you really shouldn’t have to do much down the road. Take Hubspot. The core model for the marketing platform has remained the same for the last decade. Price points have risen, new features have been added, but the core model has remained consistent. If you get the big things right, pricing can be pretty simple.

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Whenever you’re ready, there are a few ways I can help you:

PricingSaaS Software: AI-powered pricing alerts for PLG SaaS companies.
PricingSaaS Services: Rapid research and ongoing support for growing SaaS companies.
Free Pricing Consultation: Schedule a call with me to talk through your pricing challenges and determine the best course of action.