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Sales

lastmod 2026-07-16created 2020-05-155 edits

Sales refers to selling goods and the like, transferring ownership of the goods to the customer. A business built on selling is called a sales business, and those who conduct sales are called sellers, sales dealers, or sales companies.

Sequoia's product pricing guide

Pricing is a matter of judgment, not a math problem

Raising perceived value: consider the gap between price and value (as the customer sees it)

  • Evernote sets different premium prices by country (income levels differ, so the standard of value differs)
  • Ebay offered sellers the feature of adding photos to product listings for 25 cents from the start, but people did not use it much (because they didn't know its value). However, it turned out that sellers who used this feature tended to get higher click-through rates and higher prices, and by "providing this data along with the feature," eBay raised the feature's perceived value. Since photo hosting did not actually cost eBay 25 cents, together with other options it generated hundreds of millions of dollars in net profit.

Let your price tell a story

  • The price you set for a product affects its perceived value. People assume a $50 wine is better than a $10 wine. In other words, price is a proxy for quality
  • One way to expand the customer base is to offer products for various tastes at the same price point (like the iPhone in 5 colors)
  • Another way is to offer different versions at various price points
  • No matter how much research you do, you can't be sure what customers want.
  • If you let customers build their own packages, you can get real-time feedback on pricing and the product lineup.

Know your pinch points

  • Given two customers, they perceive a product as having different value.
  • Understanding these different groups lets you find the "pinch points" where people think, "this is something I should pay for."
  • In 2005, when it started charging, Linkedin listed the features that 90% of its customers did not use, judged that they were more valuable to heavy users, and split them off. Among them, the "power search" and "contact other members" features became the foundation of LinkedIn's premium accounts.

Design for snap judgments

  • Prices cannot be set with traditional economics. "People don't behave rationally"
  • When buying, people decide first in "a very short time," before logic and reason can step in. Rather than making the effort to assess the value of something new, they take the easy route in a way that makes them feel their judgment is right.
  • When looking at shoes like loafers (Loafer, a type of shoe) online, people assume a pair worn by a model in a hoodie and ripped jeans is cheaper than one worn by an office worker carrying a briefcase. Without thinking about the materials or stitching that go into making the shoes, they pick an easy question: "How much would a student & an office worker spend on loafers?" That amount becomes the benchmark for judging whether these loafers are expensive or discounted.
  • Weebly, a website-building tool, initially emphasized "it's free and easy," but people perceived it as a "cheap-looking product with no features." It changed the tagline to "Create a site as unique as you are" and began showing demo websites that looked like millions of dollars had gone into them.
  • Evernote banned SWAG (giveaway souvenir items), so that Evernote would not be associated with things like cheap mints or stress balls (squeezable rubber balls). Nike and Apple do not put their logos on anything that isn't their own product. Instead of software bundle deal promotions like MacHeist, which it also banned, Evernote created tie-in products with notebooks such as Moleskine (which actually cost more than the service).

Decoy Pricing

  • When the Economist magazine sold online for $59, print for $125, and print+online for $125,
    • 84 out of 100 students chose the $125 combo, and 16 chose the online version.
    • However, when the print-only option was removed, 68 chose the cheaper $59 version.
    • ㅤㅤIn other words, print has no value as a package, but it influences consumers when they make a Snap Judgement.
  • A decoy product makes other products look better.
  • The same goes for B2B products. With $500/month for 10 users and $1000/month for 25 users, set $1200/month for unlimited users. Then most choose $1200 instead of $1000.

Forming a pricing hypothesis

  • A Pricing Worksheet is provided as a file. Fill in 4 fields
    1. What should come to mind when customers first see your product: on the left, things that could be alternatives to your product; on the right, complements that could be used with it.
    2. Factors from snap judgment and factors that emerge from detailed analysis
    3. Visualize perceived value, based on the prices of other alternatives and complements.
    4. Who to market to

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