Anti-lean Startup Pricing: How x.ai is Making it Work

Kyle-Poyar by

x.ai’s mission to build an autonomous AI agent is an undertaking that required about three years of intense R&D – an approach Dennis R. Mortensen, the company’s CEO, calls decidedly anti-lean. To follow through with this approach, x.ai had to raise substantial funds to validate the idea and build the initial model. And to sustain their efforts, they had to be sure to find customers not only willing, but eager to pay for the product.

To land on the perfect pricing plan, Stefanie Syman and Brian Coulombe, VP of Customer Experience & Communications and Customer Acquisition Director respectively, rolled out three pricing tiers:

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Here’s how they did it.

The Right Price Starts with the Right Mindset

“It’s our mission to democratize the personal assistant,” says Syman. “That’s how we’ve thought about our product from its inception, and what flows out from that idea pretty immediately is the need for a price point that’s digestible to the professional individual.”

“Not only do we think that everyone should be able to have an AI personal assistant for meeting scheduling,” Syman explains, “we see x.ai as a core piece of the technology infrastructure in much the same way that email is a core piece of that infrastructure. It’s part of the suite of tools that you need to operate, to be a functioning professional, whether you’re a big-economy professional, the CEO of a startup, or someone more junior who is just entering the workforce.”

“Thinking about the problem with that mindset, knowing and believing that we’re actually changing norms in a way that email changed norms, leads you to quickly understand where you need to land on price in terms of scale,” Syman says. From there, the team was ready to dive into the logistics of the pricing problem.

Anti-lean Pricing Depends on the Details

“We are a very data-driven company,” says Coulombe. “And, we really did our research on pricing.” The team conducted in-depth research on customer personas and use cases and tapped beta customers for specific feedback on pricing scenarios. They used surveys as well as in-person, roundtable-type discussions to collect customer input, which was then factored into the development of the pricing structure.

The Audience

‘We’ve spent the time to build a really nicely defined persona for our core customer,” says Coulombe. “We’ve clearly envisioned who that is and know details such as their job titles, company size, location, pain points and what it takes to get someone not only interested in the product but also willing to pay for the Professional (or mid-tier) edition.”

To reach this intial group of beta customers, x.ai gained exposure through organic word of mouth as well as a formal referral program. “Many of our initial beta users were CEOs at small startups who were using Amy and Andrew to schedule meetings with people in similar roles at other companies,” Coulombe explains. “That was an effective way to get our product in front of more of the right people. We also started a program to reward our professional customers who referred us to colleagues.”

The company also enjoyed some good press, but most of their beta user growth was the result of a product-led approach that focused on creating “scheduling nirvana” – or Amy-to-Amy meetings – for customers. “Growth has really been driven by our existing customer base encouraging other folks in their network to sign up,” adds Coulombe.

Finally, the x.ai team also made use of the B2C2B approach. “Ours is one of those products that easily translates from someone starting the Professional edition, and then selling the product through to the rest of their team,” Coulombe says. “Once the team is using it, then other departments and company partners get wind of it, and before you know it we’ve onboarded a larger business.”

The ROI

Whether considering individual or company-wide use cases, the x.ai team focused on delivering value as a key component of the pricing strategy. “We all know that no one, except maybe SVPs, gets a personal assistant anymore,” says Syman. “We also know from our research that the people with the most scheduling-related pain are among our most successful customers. For these people, our mid-tier price point is not a big deal because the product delivers a huge value (in the reduction of their pain) that greatly exceeds the actual price.”

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The x.ai team uses a clear demonstration of this ROI in their marketing. “Emphasizing the ROI is one of the things that stands out as a total no-brainer,” says Coulombe. “If we agree that it typically takes about three-and-a-half five-minute emails back and forth to schedule a meeting, and we assume that you’re scheduling eight meetings a week, it’s simple to do the math and see that you’re spending close to ten hours a month just scheduling meetings.”

“On top of those numbers, we can also add in the ‘switching’ cost, cognitively,” adds Syman, “of your day being constantly interrupted by endless chains of scheduling emails.”

The Long-term Business Vision

The team also sought to understand how different price points might relate to one another. “Our starting point was conveying that the core product utility is the same across all editions,” says Coulombe. “But then we were able to start thinking through which users would be interested in which features.”

“Once we established our definitive editions, we ran the data to look at the percent split between each and then did the math to determine which scenario would drive the most revenue over time,” explains Coulombe. “So, for example, would a $39 midrange price point anchored by $59 high-end price point end up driving more revenue than, say, a $39 price point anchored by a $69 offering?”

Pricing is Always a Work in Progress

By closely examining what each segment of x.ai’s target market would be willing to pay, the team was able to build out a pricing structure that delivered an irrefutable value to both the customers and the company. And while they are happy so far with the market response, they acknowledge that pricing is always a work in progress.

“In any pricing scenario, we do our best to make informed choices, but we don’t present our results as the perfect solution,” says Syman. “We used the data to make the best decision we could, but we expect the strategy to evolve.”

For now, however, both Syman and Coulombe feel like they’ve hit a sweet spot. “We are indeed a software company and not a service company,” Coulombe says. “We’re beyond something like Netflix or Spotify and more in the realm of Dropbox. Our price point fits nicely between being something that everyone can afford and really utilize and something that is so premium that only a few people can afford it.” And if the company’s wall of Love Notes is any indication, x.ai’s customers agree.

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  • The most important business article of 2016. A much needed course correction to all the Lean Startup koolaid people who have taken Eric’s re-marketed business strategy to a level of unreflectiveness and amateurism that is not ideal (to say it in a nice way)!

  • Oh I love this article,

    Without the nice conceptual naming 100% anti-lean (though quite liking the concept if it fits) is sometimes necessary – these are just our reasons – they may have the makings of a pattern :

    – A mature team with (minor) exits – This means bootstrapping made sense and residential incubators for early dilution did not.

    – We know our market – we did not need to test value proposition hypotheses – we had the [arrogance/confidence/foolhardiness] to claim to know what people “should want” – though explaining this took a long time so requires an evolution of communication

    – Like x.ai ( which i will sign-up to on principle !!! ) we had some big R&D to complete before we could communicate our PoC as viable.

    – Unlike most SaaS startups the conventional wisdom of not selling to enterprise first was just wrong for us – So we have two global 100 titans amongst our first three customers – precisely because we solve a strategic enterprise problem (in our vertical).

    – We are very heavy touch – we sell through channel partners (who we know) – so wandering down the street in the vain hope of conducting surveys with people who understand our domain vision was not an option 😉 – maybe a little unfair as a description of lean methodology.

    On the flip side – as soon as your product is in the wild – feedback from users is “gold dust”, to be cherished and invested

    So – possibly my premature, generalising, and definitely opinionated conclusion :

    – If you have the experience, and courage, if you know your value proposition (big ifs !) and you are prepared to reject conventional VC wisdoms [so making yourselves pretty much unfundable until you make it] – then my friend you have a shot at the “anti-lean startup ” – Yes many will fail – but the winners have paid to play and generally have a big hairy goal in combination with less to prove !