Why ‘too expensive’ is just a decoy for leaving customers

This article summarizes an episode of  Lenny’s Podcast’s video series featuring Jason Cohen, founder of WP Engine.

Jason Cohen, founder of WP Engine/ Photo credit: Lenny’s Podcast

Jason Cohen, founder of two billion-dollar companies, including WP Engine, and an investor in over 60 startups, believes a product’s price is one of its most important features. He thinks most founders misunderstand what customers want, confusing general feedback with real demand and getting trapped in setting low prices.

Churn creates a mathematical ceiling on growth

Founders often celebrate new customer wins, but customer churn limits how much a company can grow. This problem cancels out growth and gets stronger as the company grows.

Cohen explains, “Cancellations automatically grow as you grow. Even if you’re doing everything right, marketing doesn’t. Marketing grows only as fast as you can improve marketing. We all know that’s quite hard. Cancellations always overtake marketing for this reason.”

A simple formula reveals your company’s maximum size
Over time, churn puts a limit on growth. When the number of customers who cancel each month is the same as the number of new customers who sign up, the company stops growing.

Cohen says, “There’s this maximum size you could ever be. It’s when churn equals growth. It’s simply the amount of new customers you add divided by that cancellation rate. That is the limit. A company that adds 100 customers a month with 5% cancellation will never have more than 2,000 customers.”

Surface-level churn reasons are a trap

When leaders realize losing customers is a problem, they ask people why they are leaving. This feedback seems useful, but it often misleads the team.

To check if exit surveys were accurate, Cohen ran an experiment. His team showed the same list of cancellation reasons to different users, but changed the order for each person.

Cohen notes, “We randomized the [cancellation reason] list so everyone saw a different order. Now all the items were picked equally. It’s complete noise. People are just picking the first one. They don’t want to tell you [the real reason]. They’re already out the door.”

‘Too expensive’ is rarely the actual problem
Among all the unreliable answers, one reason often shows up the most. But according to Cohen, the ‘too expensive’ reason is the most tempting and misleading feedback a founder can get.

Cohen argues, “That is never ever ever the reason. They already looked at your homepage, saw what you promised, looked at the pricing page, and decided to buy it. That means whatever was in their mind of what [the product] is, it is not too expensive. Something else happened.”

Finding that ‘something else’ requires a better method for finding problems. Just asking ‘why’ is not enough. To find the real problem, founders need to dig deeper for answers.

Cohen illustrates this with a medical analogy. If a patient dies, the immediate reason might be that they stopped breathing, but the real reason is the story behind it. You only solve the problem by peeling back those layers.

Low prices signal low quality to valuable markets

Repositioning value can unlock more revenue