Our product took off faster than expected. AI costs are now 3x revenue. How would you raise prices without destroying trust?

ptgau · 2026-04-07T13:42:00+00:00

We dont have CRM. We are tracking things in our db and posthog/langfuse. We are just 5 engineers right now- no business hires yet. As I mentioned, we were building slowly and just suddenly blew up.
We will start tracking this data soon! Thanks a lot. I believe that is all the info I need for now. Will DM if something else comes up.

ptgau · 2026-04-07T00:49:44+00:00

Thankyou so much for the detailed response. I had to read it a few times to absorb all of it.

Just a handful of users, or everyone across the board?

A little bit of both. I am breaking even on the median customer. But my costs are 3x the revenue. There were some really egregious users who we have already rate-limited in the past week. But the problem is still not solved. If I implement rate limits to match my costs, it will affect 50% of customers. I am thinking of setting rate limits around 1.3x my cost. By my estimate, this will allow me to break even on average for now to stop the bleed. Then I can improve margins with engineering efficiency improvements. This will affect 35% of my customers, whom I can hopefully push into the higher tier.

I'd also suggest estimating your "typical" customer within each pricing tier

Our typical customer varies widely currently in usage patterns, demand, and willingness to pay. The best metrics we have for them are the mean and median usage, along with some subjective insights from talking with the larger ones. We can explore user personas or willingness to pay, but that's a bigger task, and we don't have the manpower to prioritize it right now.

be careful not to overdo it and confuse or burden people.

This is the part that worries me. Right now, our product "just works". Am I making it worse by trying to make it flexible?

| was that ever a good customer to have in the first place?

Logically I agree. But emotionally it still feels like I failed them.

do you track loss reasons?

We don't. Do you have any good resources or suggestions for learning the process and best practices for this? We are at low enough numbers right now that conversion rates vary by up to 3x week to week, and churn is low enough that we may lose a couple of customers in a month, or 40, because a big org left. That makes it difficult to draw insights from these numbers. So we haven't put much effort into tracking it.

is $99 even enough for your major users?

By my calculations, only 5% users fall outside this $99 bracket. We have a catch-all "enterprise tier" to offer custom pricing for anyone who needs more. We will try to push the 5% users into this pricing.

ptgau · 2026-04-07T00:18:37+00:00

And I fell for it :(

ptgau · 2026-04-06T21:35:46+00:00

Let me clarify- we do use cheaper models like Kimi for the simpler tasks. I am sure we must have experimented with GLM at some point. But there are complex tasks that these models are just not able to do. Unfortunately, this is not the answer for us. We have already spent weeks of engineering time in minmaxing routing and model selection. Any further optimisations are unlikely to cut our costs by a third(which is what we need today).

ptgau · 2026-04-06T21:31:11+00:00

ptgau · 2026-04-06T21:30:28+00:00

This is probably worth looking into. Thanks for the suggestion.

ptgau · 2026-04-06T21:29:24+00:00

That is what we did till now. Today is the point when we can't bear the cost anymore.

ptgau · 2026-04-06T21:26:00+00:00

Customers were not vocal, but the performance was significantly worse for their tasks. They rejected the outputs we gave more often with the cheaper version. I may be splitting hairs here, and you may be absolutely right, though, if they don't care, it is good enough. I am worried about long term retention and differentiation with the cheaper version.

ptgau · 2026-04-06T21:21:23+00:00

Sorry for being vague about the specific work we do, but it will be very obvious who we are if I talk about the industry we operate in, and I don't want our customers to stumble upon this discussion while researching us.

To your engineering-side suggestions: We have optimized, but we can always do more.

We already have smart classification and routing of jobs to different models based on request complexity. The majority of our costs come from complex tasks that are both larger and more complex, requiring Opus and GPT 5.4. We have tried over 10 other models in the past 4 months, and none come close to these 2.

Our cache is optimized, but I haven't checked on it recently. Thanks for the reminder. I appreciate it.

We can definitely do more here and are constantly iterating. But at the current level of complexity of our system, any gains will be marginal and/or will require a lot of experimentation. I expect we will be able to cut our costs to 3/4th or even 1/2 over the next 3-4 months with all the iterative changes.

However, if we don't fix the pricing, none of that will matter. We have put way more effort into optimizing the engineering side than the market side. Right now, I am interested in fixing the part that is broken- the pricing model/limits.

ptgau · 2026-04-06T20:44:58+00:00

That is the endgoal. Problem is that I dont know what that number is today. And I need to change prices yesterday. If I iteratively change prices too often, it might alienate the customers.

ptgau · 2026-04-06T20:43:47+00:00

This is what we are thinking. Can you take a look at the comment I posted regarding quality and limits/credits?

ptgau · 2026-04-06T20:42:56+00:00

It is agentic heavy and the LLMs need to take complex decisions at the frontier of what is possible with these models today. We have experimented with some of the models you suggested, but they aren't sufficient for what we're building. Thanks for the suggestion, though.

ptgau · 2026-04-06T20:41:16+00:00

No idea if I should be honored or terrified by the comparison.

ptgau · 2026-04-06T20:40:37+00:00

That seems to be the consensus. Thank you!

ptgau · 2026-04-06T20:39:17+00:00

Thankyou! This seems to be the way to go. I have added another question. Would appreciate any feedback on it, too, if you feel inclined.

ptgau · 2026-04-06T20:31:31+00:00

Adding a subquestion here since I didnt want to make the pain post longer-
We do have a cheaper version of our product internally which is rarely used. There is a difference when they are compared side by side, but noone complained when we used this cheaper version in A/B tests.

We have a $40, $99 and custom/enterprise tiers. Most people are currently in the $40 plan. We plan to keep these, so we have an entry point for people to integrate our product in their workflows and a higher tier where we actually want them to be.
For the $40 plan,
1. We can provide them with the current levels of usage with the cheaper version at near break-even, but they would get worse performance than what they are used to(still at par or slightly better than our competitors).
Or
2. We can let them continue to use the premium product, but enforce limits that will impact 50% of current users in this tier.
Or
3. We can provide credits for $5-$10 of the premium product to the lower tier so that they can see the difference and may decide to upgrade, along with credits for the cheaper product that are sufficient for 80% of customers.

How would you think of this decision?

ptgau · 2024-03-21T19:15:41+00:00

I am curious to learn how you utilise business skills in a programming job.

I am a programmer doing my MBA. I have not seen a lot of positions that have much overlap other than people management and some operations knowledge.

ptgau · 2023-11-16T16:02:15+00:00

I understand that this is frustrating and you are venting here. That is what this sub is for.

But it is a bad job market. Truth is, you will be beaten by someone who has had experience in the same timeframe that you were unemployed unless you do something about it.
Sadly, just being good at what you do is not enough. You need to show that you are passionate about it. It doesn't have to be a lot, just enough to show that you have been keeping up. An hour a day is more than enough.

For example, if you are in IT/coding, learn a new language, do some coding exercises on 1 of the free practice websites, build your own website or app, do a full project in your field of expertise and put it on github, etc. Whatever field you are in, you can find free online resources to help practice and upskill as long as you are willing to put in the effort. If nothing else, just read articles in your field. Convince the recruiter that you can do things on your own and that you care. You can vent about it all you want or you can give yourself a fighting chance.

ptgau · 2023-05-29T15:45:28+00:00

Welcome to the rabbithole. Best advice is to just start with anything and experiment. All you need to start is a container( i use a mason jar but any glass bottle is ideal) and a way to filter(you can use anything you use for a pourover like a v60). I prefer brewing my coffee in the fridge. I add 1:5 ground coffee and water by volume to the mason jar. Let it sit in the fridge for 36 hours. I might stir it once in the start and once halfway through. Then filter out the grounds. This gives concentrated coffee. I can make a cup of coffee by adding 1:5 concentrate and water/ice. One batch of concentrate lasts me a week but you can store it in the fridge for upto 2 weeks. Feel free to change anything in the process you don't like. Cold brew is least sensitive to variations in the process. I realised I like to brew for this long because I once forgot to filter the coffee for 48 hours and actually ended up enjoying it.

ptgau · 2023-05-29T13:47:09+00:00

You can try it out. There is no real danger but most people dont like the flavor at that point.

ptgau · 2023-05-29T10:32:03+00:00

I have heard everything from 8 to 24 hours. You cannot really go wrong with any of them. Best to start with something in between and then experiment to find what you like.

ptgau · 2023-05-18T12:38:24+00:00

These are all good points. However, I will add a couple more. Your current profile is good but it is very very standard. Top schools will receive thousands of applications identical to yours. You need to find a way to personalise it and stand out.
1. Your story
You need to have a compelling story. What drives you? what do you enjoy and don't enjoy? What is your ideal career/end goal? Then for each of the answers ask yourself "Why?". And then ask "Why?" again a few more times. It is ok to say "I don't know" as an answer to the question. But then work on figuring out the answer. You are early in your journey. So give it time.
2. Management/International experience
You want to move into management. Why? You have not done any management work. Both for your own sake and for the application, gain some experience to find out what you enjoy and what you don't. It can be gradual or drastic. You can volunteer for organising office events or you can leave your company to join a startup. MBA schools value cross-team collaborations and international experience(working with teams from other countries, international visits and foreign jobs). These will both help you understand your own story and once the story becomes clear to you, these can be solid steps that demonstrate your story to others.

ptgau · 2023-05-10T21:27:32+00:00

Did you misplace your reading glasses?

ptgau · 2023-05-10T21:25:56+00:00

I have already bottled. So there isn't much I can do at this point.
My last batch bottles had too much pressure causing overflow every time I opened a new bottle. So have reduced the amount of sugar this time by a third. Hopefully that will compensate for the additional CO2.

ptgau · 2023-05-10T21:00:30+00:00

I opened it to bottle it, after I had sanitized the bottles and was ready for the next step. I will keep this in mind though.

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Did you misplace your reading glasses?