March 11, 2022

A Guide to a Better Pricing Model with Ajit Ghuman

In this replay episode, we're discussing the complex balancing act that is pricing. How can we craft a pricing structure that fits just right when it comes to serving all of our business’ needs?

Ajit Ghuman, Director of Pricing and Packaging at Twilio, has pricing down to a science. He says it’s a path best approached one step at a time. Ajit gives us his step by step framework to simplify the pricing process and how to do it with confidence.

Ajit’s advice: Don’t fear pricing!

Transcript
WEBVTT 1 00:00:08.199 --> 00:00:16.879 Conversations from the front lines of marketing. This is be tob growth. Welcome 2 00:00:16.879 --> 00:00:22.359 in to Friday show. Today I am sharing an episode from or Bob Growth 3 00:00:22.480 --> 00:00:27.879 Archive. Pricing can be a complex balancing act, to say the least, 4 00:00:27.920 --> 00:00:32.159 so the question that we're going to explore today is as follows. How can 5 00:00:32.200 --> 00:00:37.439 we craft a pricing structure that fits just right when it comes to serving all 6 00:00:37.520 --> 00:00:43.320 of our business needs? A jeep is now director of pricing and packaging at 7 00:00:43.439 --> 00:00:49.439 chillio. This interview with a jeet is actually from his time at a previous 8 00:00:49.479 --> 00:00:53.399 employer, but man, he has pricing down to a science, and that's 9 00:00:53.399 --> 00:00:59.159 why I'm resharing this here today. He says that it's a path best approached 10 00:00:59.359 --> 00:01:03.560 one step at a time, and then he breaks down that framework with us 11 00:01:03.600 --> 00:01:07.480 to help simplify the pricing process and really help us ensure that we're doing this 12 00:01:07.519 --> 00:01:14.239 with confidence. So enjoy this episode from the Archive, a guide to a 13 00:01:14.280 --> 00:01:23.519 better pricing model. Here we go, a Geet, a Jeep Gooman, 14 00:01:23.640 --> 00:01:27.920 I'm so glad that you get to join us on this show. Thank you 15 00:01:29.000 --> 00:01:32.840 having him so par out. Yeah, man, we were talking, I 16 00:01:32.840 --> 00:01:37.319 think it was was just before break, but you were born my mind even 17 00:01:37.319 --> 00:01:41.560 in Settin up for this call. So I cannot wait to get into everything 18 00:01:41.560 --> 00:01:46.319 that we're getting going to get into today. Just to kick off, what 19 00:01:46.560 --> 00:01:52.159 is a commonly held belief about marketing that you passionately disagree with? Yeah, 20 00:01:52.280 --> 00:01:57.680 about about pricing, right, like is a question or marketing? Yeah, 21 00:01:57.680 --> 00:02:00.879 well, I mean for either because usually, yeah, I guess in particular, 22 00:02:00.040 --> 00:02:05.040 tell me more of a commonly helped belief about pricing that you disagree with. 23 00:02:05.879 --> 00:02:08.879 So, basically, like we were talking last time, and I've been 24 00:02:08.960 --> 00:02:15.759 kind of on this process where I've seen so many companies kind of think about 25 00:02:15.759 --> 00:02:22.919 their product development process in a couple different silos, and I'm actually really frustrated 26 00:02:22.960 --> 00:02:25.879 about it because the product manager says so, it's not my job to think 27 00:02:25.919 --> 00:02:29.680 about how this thing is going to be sold and it's not my job to 28 00:02:29.680 --> 00:02:32.479 think about how it's going to be marketed or priced as a market and I'm 29 00:02:32.560 --> 00:02:36.960 like, but you do know that if you don't think about it, your 30 00:02:37.000 --> 00:02:39.759 products not going to be successful, right, and so I do think about 31 00:02:39.840 --> 00:02:44.000 it, but what I see is like, time and time again, we 32 00:02:44.080 --> 00:02:47.000 are such a technology driven culture out here in the valley that we're like hey, 33 00:02:47.000 --> 00:02:51.439 we're just going to build the best technology and we literally think build it 34 00:02:51.479 --> 00:02:54.639 and people will come. Not exactly writing. We high the sales people, 35 00:02:54.759 --> 00:03:00.680 but it's so true. So much more. It's so true. Yeah, 36 00:03:00.759 --> 00:03:04.439 it's like yeah, if it's a good enough product, go worry about churn 37 00:03:04.520 --> 00:03:07.479 and pricing and all that later. Yeah, and I mean the honest truth, 38 00:03:07.639 --> 00:03:12.280 and this is the marketers truth that people don't like to hear, is 39 00:03:12.319 --> 00:03:15.120 like you can have a shitty product and do well and you can have a 40 00:03:15.159 --> 00:03:21.879 great product and not do well, and that's the difference that sometimes technical leaders 41 00:03:21.879 --> 00:03:25.639 and technical companies don't realize that their exit. I'm sorry to say sales force 42 00:03:25.680 --> 00:03:29.719 is not that great of a product, but it still doesn't any well. 43 00:03:29.719 --> 00:03:32.680 It's terrible. I hate sales first man, especially it's it is literally the 44 00:03:32.680 --> 00:03:38.560 bane of most salespeople's existence because they are like, I'm just doing data entry 45 00:03:38.599 --> 00:03:43.280 these days, like I don't actually get sell, but it's their successful company. 46 00:03:43.400 --> 00:03:46.159 So they were really good at marketing on the whole whole nine yards of 47 00:03:46.199 --> 00:03:52.599 marketing. Yeah, absolutely. So what's the main thing about pricing that you'd 48 00:03:52.599 --> 00:03:54.759 say? They people will say, okay, it's this guy's job, it's 49 00:03:54.800 --> 00:03:59.639 this guy's job. WHAT'S THE GIST? Is it that it's complex? Is 50 00:03:59.639 --> 00:04:02.599 that what you disagree with? Or someone more? That's the impression. So 51 00:04:02.680 --> 00:04:05.680 people kind of think, okay, marketing will figure it out, or men, 52 00:04:05.759 --> 00:04:10.719 most companies not even marketing. It's people think it's like we don't really 53 00:04:10.759 --> 00:04:14.080 know anything about the customers, so we will let sales figure it out. 54 00:04:14.159 --> 00:04:18.319 Right. And you find these places and companies with that have just put some 55 00:04:18.439 --> 00:04:23.560 random pricing on the board and have survived for so wrong and you look at 56 00:04:23.600 --> 00:04:27.800 them like you could have done so much more here and instead of being a 57 00:04:27.839 --> 00:04:30.399 twenty million dollar company, you can have been a thirty five million dollar Revenue 58 00:04:30.399 --> 00:04:34.360 Company and you could have a double valuation by now, right. I mean 59 00:04:34.399 --> 00:04:38.759 that's the literal impact of what you could have done. Now, I'm not 60 00:04:38.800 --> 00:04:42.279 saying like see, I am not the founder. I think founders are great, 61 00:04:42.319 --> 00:04:44.800 I think they create a lot of value, but I think there is 62 00:04:44.839 --> 00:04:47.079 more that can be done and it's not out of reach. In all these 63 00:04:47.120 --> 00:04:53.079 consulting companies that offer value, they have experience. But do you really need 64 00:04:53.160 --> 00:04:57.480 to spend a hundred K to have somebody else tell you about your startup? 65 00:04:57.519 --> 00:05:00.560 Then you you know you know your customers, you know what they like, 66 00:05:00.879 --> 00:05:02.639 what they care about. You know how much they're going to pay. It's 67 00:05:02.759 --> 00:05:06.639 just the matter of knowing a few steps and a process by which you need 68 00:05:06.680 --> 00:05:11.000 to come about. Okay, I've checked off the boxes. I this is 69 00:05:11.040 --> 00:05:15.720 my kind of decision framework and now I am confident that I have a pricing 70 00:05:15.720 --> 00:05:18.040 structure that is going to do serve my needs. That's really what we're talking 71 00:05:18.079 --> 00:05:21.639 about, right. Are you following the simple process that's going to solve you? 72 00:05:21.680 --> 00:05:26.600 It's not rocket science and it's definitely not worth the teach you in business 73 00:05:26.600 --> 00:05:30.519 school, which you know complex conjoined analysis and you know, let's look at 74 00:05:30.560 --> 00:05:33.879 the impact of this attribute. Nobody does it like that and you don't have 75 00:05:33.959 --> 00:05:39.279 to. But a GE I get all these people coming to me telling me, 76 00:05:39.720 --> 00:05:43.759 work, man, we got a higher this firm. We don't know 77 00:05:43.920 --> 00:05:46.959 how much we could charge. What if? We're leaving money on the table? 78 00:05:46.199 --> 00:05:48.839 What if? What does it look like? IS THEY SCALE? Will 79 00:05:48.959 --> 00:05:54.680 scale look like? So how would you respond to all these? I think 80 00:05:54.759 --> 00:05:58.639 I think the too honest people are leaving money on the table more often than 81 00:05:58.720 --> 00:06:02.240 not. I don't think the consultancies are bad, right. I think they 82 00:06:02.240 --> 00:06:06.279 offer value. I think they have experience, but I think you have, 83 00:06:06.319 --> 00:06:12.160 as a business, the most knowledge about your market and your customers and you 84 00:06:12.199 --> 00:06:15.199 just need a simple framework. So at my current company, nor where I 85 00:06:15.680 --> 00:06:19.920 do all of the pricing and packaging, and this whole realization started once I 86 00:06:19.920 --> 00:06:25.800 started this project, is hey, this is actually simple, but there is 87 00:06:25.839 --> 00:06:30.040 no document that I can read that just tells me here, just take this 88 00:06:30.199 --> 00:06:33.959 sequence of steps to come up with the process. And if I found out 89 00:06:34.079 --> 00:06:36.759 what to do by calling people. I'm like, Hey, you're pricing at 90 00:06:36.759 --> 00:06:40.639 this company. Tell me how you did this right. So I called five 91 00:06:40.680 --> 00:06:44.360 six people in the industry and I just knew what I needed to know. 92 00:06:44.519 --> 00:06:48.839 And that's an investment of four or five hours. So that's my pr w 93 00:06:49.040 --> 00:06:51.959 right. If you if you know just the sequence of steps you need to 94 00:06:53.000 --> 00:06:56.519 take, you can cut all of that out and be more confident. It's 95 00:06:56.519 --> 00:06:59.879 really about confidence in the decision that you want to make for your business. 96 00:06:59.920 --> 00:07:03.120 Sure, okay. So can you give me example of you know? Where 97 00:07:03.160 --> 00:07:06.399 would you start? Where do you even start? How do you even know 98 00:07:06.560 --> 00:07:13.399 you should start focusing on pricing? Right? I would say that there it 99 00:07:13.439 --> 00:07:15.800 depends on the life cycle of a company. Like, how do you know? 100 00:07:16.319 --> 00:07:19.920 At some point, when you're starting, you need a number on the 101 00:07:19.920 --> 00:07:25.199 table, right. So it may be that not critical. When you're really 102 00:07:25.240 --> 00:07:28.839 starting out and you have a new product in a new market. You just 103 00:07:28.879 --> 00:07:31.519 testing things out. Okay, I think you can survive. It's not probably 104 00:07:31.560 --> 00:07:35.560 the end of the word. As you get successful, what happens is the 105 00:07:35.600 --> 00:07:41.000 decisions you made early on, kind of these implicit assumptions, start to bite 106 00:07:41.079 --> 00:07:46.240 you. You start to under under cell. Sometimes you create more friction in 107 00:07:46.279 --> 00:07:49.120 the sales process than is actually necessary, depending on how you set up your 108 00:07:49.160 --> 00:07:54.560 structure. And I can give you some examples of other value companies that have 109 00:07:54.560 --> 00:07:59.439 found that out. And it's a natural, totally natural and expected transition that 110 00:07:59.519 --> 00:08:03.000 companies have to go through as they get bigger, they get serious and then 111 00:08:03.040 --> 00:08:05.920 they solve this problem. Can you chalk a little about the friction piece? 112 00:08:07.160 --> 00:08:09.759 You know, make cutting you are I mean the friction. I'll give you 113 00:08:09.759 --> 00:08:13.120 an example, and this is a public example. So mixpanel. I spoke 114 00:08:13.199 --> 00:08:16.240 to their head of pricing and they were when they came out, they were 115 00:08:16.360 --> 00:08:22.240 charging for their analytics software by event. Right now, event is the only 116 00:08:22.240 --> 00:08:24.920 thing at that point that they could measure and track and they said, of 117 00:08:24.959 --> 00:08:28.759 you will just give you charge by event and all of these customers, as 118 00:08:28.759 --> 00:08:33.519 you have different type of customers using your product, they're like, well, 119 00:08:33.519 --> 00:08:37.679 we're not getting valued out of this and you're charging is by event. You 120 00:08:37.679 --> 00:08:41.919 know, it's not really proportional to how our users are using the system. 121 00:08:41.000 --> 00:08:43.759 Right. So it will okay, it's a fine it's a rough metric, 122 00:08:45.200 --> 00:08:48.840 but that company has been allowed for a long time to have only realized it 123 00:08:48.879 --> 00:08:52.720 now and that I was like, you should. You guys would probably had 124 00:08:52.799 --> 00:08:56.679 changed it little bit. So so I you know, I cover you know, 125 00:08:56.000 --> 00:08:58.960 as you know, I'm writing a book on the topic, and I 126 00:08:58.000 --> 00:09:03.000 covered this with the head of pricing and he mentioned how they selected a new 127 00:09:03.039 --> 00:09:07.200 pricing variable which now was like the trackable users on the website, similarly to 128 00:09:07.279 --> 00:09:11.279 the daily active users on a mobile. Now that is more, much more 129 00:09:11.279 --> 00:09:13.879 relevant to business, because they're like, okay, well, I'll pay you 130 00:09:13.919 --> 00:09:18.320 based on the usage I have on my product. Right, that's if the 131 00:09:18.320 --> 00:09:22.120 product is being used, I win and you win. Otherwise, people start 132 00:09:22.120 --> 00:09:26.759 to have these questions, especially in the enterprise. I'm paying you K or 133 00:09:26.879 --> 00:09:30.240 hundred ky whatever, I'm paying you, and but I'm not happy, and 134 00:09:30.320 --> 00:09:35.480 that's where the challenge is. Right you have these hard upsell or renewal conversations 135 00:09:35.480 --> 00:09:39.759 where people are like it's not working for me, and the new conversations are 136 00:09:39.799 --> 00:09:43.759 hard as well, where you're creating Roy orders and you kind of rationalizing and 137 00:09:43.759 --> 00:09:50.639 you're force fitting your sales team to work with an outdated methodology. HMM, 138 00:09:50.000 --> 00:09:54.559 that's so interesting. Yeah, one of the points you were bringing up about 139 00:09:54.600 --> 00:09:58.600 this is about how sales one of the indicators, along with what you're just 140 00:09:58.679 --> 00:10:03.279 talking about about friction, is is one of the indicators is sales is even 141 00:10:03.360 --> 00:10:05.480 following the pricing model. Can you talk a little bit more about that? 142 00:10:05.759 --> 00:10:09.600 Yeah, I've seen I've seen that in some of my own experiences. The 143 00:10:09.639 --> 00:10:13.840 thing is that, if so, let's say you're an enterprise company, right, 144 00:10:13.879 --> 00:10:16.600 you've always sold a certain way and you've gotten good at doing that. 145 00:10:16.679 --> 00:10:20.919 Now now that comes at time to institutionalize that right and you figure out how 146 00:10:22.000 --> 00:10:24.639 to do it properly. If you do it in a cookie cutter manner, 147 00:10:24.679 --> 00:10:28.639 you'll do what in the industry is a good, better, best model. 148 00:10:28.120 --> 00:10:31.879 All of the different pricing charts and what the V see's tell you, like 149 00:10:31.960 --> 00:10:35.919 it's just like the schooky cutter approach. And if you look at I like 150 00:10:37.000 --> 00:10:39.879 the guys that price intelligently. But there they have a podcast, right, 151 00:10:39.960 --> 00:10:43.840 and they go through pricing pages. If you start to go through pricing pages 152 00:10:43.919 --> 00:10:46.399 and see how everybody does, just US put better best. The problem is 153 00:10:46.440 --> 00:10:52.240 if you have an enterprise company, it's custom scoped. There are many modules 154 00:10:52.320 --> 00:10:54.600 that you have to figure out and if you create so I have been in 155 00:10:54.639 --> 00:11:00.240 a company where this has happened and where these pretty much cut and dry solutions 156 00:11:00.240 --> 00:11:03.320 were offered to the sales team. They didn't like it. The problem was, 157 00:11:03.440 --> 00:11:07.480 hey, you're adding ten features here that I'm going to go back to 158 00:11:07.519 --> 00:11:11.720 the customer next year and upsell the five features. So why have you bundled 159 00:11:11.799 --> 00:11:16.519 these five features into this this bundle? I'm not I don't want to sell 160 00:11:16.559 --> 00:11:20.399 them right now. And they're not interested in these because this is not how 161 00:11:20.440 --> 00:11:24.480 the usage scales right. So and so you blocked your upsell potential and your 162 00:11:24.519 --> 00:11:28.759 sales team is like, well, I guess I'm the experienced a is not 163 00:11:28.840 --> 00:11:33.879 going to follow your pricing and the inexperienced a is going to end up with 164 00:11:33.960 --> 00:11:37.639 lower ASPS because he's just going to say this is what this is my pricing, 165 00:11:37.679 --> 00:11:41.240 and I've been in that situation where there is a revolt and the sales 166 00:11:41.240 --> 00:11:45.559 steam is like this is does, doesn't work for me and somebody gets fired. 167 00:11:45.840 --> 00:11:52.399 So that's the problem with implementing bad pricing actually in a bigger environment and 168 00:11:52.519 --> 00:11:56.320 not thinking thing through. Hey, everybody work in the sweet fish here. 169 00:11:56.360 --> 00:12:00.440 If you've been listening to the show for a while, you know we're big 170 00:12:00.480 --> 00:12:05.039 proponents of putting out original, organic content on linked in, but one thing 171 00:12:05.080 --> 00:12:09.000 that's always been a struggle for a team like ours is to easily track the 172 00:12:09.039 --> 00:12:11.759 reach of that linkedin content. That's why I was really excited when I heard 173 00:12:11.759 --> 00:12:16.360 about shield the other day from a connection on, you guessed it, linked 174 00:12:16.440 --> 00:12:20.440 in. Since our team started using shield, I've loved how it's let us 175 00:12:20.440 --> 00:12:26.279 easily track and analyze the performance of our linkedin content without having to manually log 176 00:12:26.360 --> 00:12:31.080 it ourselves. It automatically creates reports and generates some dashboards that are incredibly useful 177 00:12:31.080 --> 00:12:35.840 to see things like what content has been performing the best and what days of 178 00:12:35.879 --> 00:12:39.360 the week are we getting the most engagement and our average views proposed. I'd 179 00:12:39.440 --> 00:12:43.960 highly suggest you guys check out this tool. If you're putting out content on 180 00:12:43.000 --> 00:12:46.039 Linkedin, and if you're not, you should be. It's been a game 181 00:12:46.120 --> 00:12:50.399 changer for us. If you go to shield APP DOT AI and check out 182 00:12:50.480 --> 00:12:54.039 the ten day free trial, you can even use our promo code be to 183 00:12:54.159 --> 00:12:58.879 be growth to get a twenty five percent discount. Again, that's shield APP 184 00:12:58.919 --> 00:13:05.320 DOT AI and that Promo Code is be the number two be growth all one 185 00:13:05.360 --> 00:13:13.080 word. All right, let's get back to the show. Absolutely, if 186 00:13:13.120 --> 00:13:16.000 I was to look for some indicators, it would be that we put out 187 00:13:16.000 --> 00:13:20.600 this pricing model, but the contracts, either the finalized contracts that I'm seeing, 188 00:13:20.639 --> 00:13:24.720 don't match. Is that right? Or what will be some other things? 189 00:13:24.799 --> 00:13:30.159 Or will be the complaints? Yeah, I give you another example up 190 00:13:30.279 --> 00:13:33.919 one I can share because I have it's in the book. So gainsight, 191 00:13:33.960 --> 00:13:37.679 like they had this good, better, best model and I interviewed Johnny Cheng, 192 00:13:37.799 --> 00:13:41.759 who is now at cooper and Johnny was like when I came in and 193 00:13:41.840 --> 00:13:46.120 I saw they had these three packages, but the only sold the middle package 194 00:13:46.200 --> 00:13:48.000 and that's the only one. Like is like, I don't know why we 195 00:13:48.000 --> 00:13:52.159 have these three packages when we already sell the middle package. And then there 196 00:13:52.240 --> 00:13:56.360 is shelf where right. So the thing you have to see is all of 197 00:13:56.399 --> 00:13:58.879 the features that you sold. At some point some features are not going to 198 00:13:58.919 --> 00:14:03.960 be used and they're consistently not being used. So that shelf where you sold 199 00:14:03.039 --> 00:14:09.519 him but nobody's using it yet. It Causes Debt for your implementations team because 200 00:14:09.639 --> 00:14:11.799 later around the road they may have to implement it. So that's what he 201 00:14:11.879 --> 00:14:16.480 realized, which is the very analysin its situation to the situation I discussed. 202 00:14:16.519 --> 00:14:18.879 And then he said, Oh, wait, wait, we need to move 203 00:14:18.960 --> 00:14:24.360 this totally to a better pricing model, different for commercial enterprise, more modular. 204 00:14:24.440 --> 00:14:28.879 So we eliminate all of the chelf where and we make sure we are 205 00:14:28.919 --> 00:14:31.440 pricing these that if you have. Why have three plans if we are always 206 00:14:31.480 --> 00:14:35.399 going to big the Middle Plan? So, and that was their main market, 207 00:14:35.519 --> 00:14:39.559 right. I believe gain science main market was mid market and that's where 208 00:14:39.600 --> 00:14:43.879 the pricing was the worst. That's all my canness is no. So this 209 00:14:43.960 --> 00:14:46.159 is like two or three years ago. Oh, yeah, totally, they 210 00:14:46.240 --> 00:14:50.399 probably fixed it some of the older yeah, we've game sites for listening then. 211 00:14:50.519 --> 00:14:54.120 Can I see the yeah, exactly know. I'm sure they pick as 212 00:14:54.159 --> 00:14:58.360 well. Now that's crazy, though. That's awesome. There is some points 213 00:14:58.360 --> 00:15:01.960 you brought up a out, you know, even like more money up front. 214 00:15:01.960 --> 00:15:05.039 What did you mean by that? Again, like, because I think 215 00:15:05.080 --> 00:15:07.879 that's such a crucial point for a lot of businesses, is how we get 216 00:15:07.919 --> 00:15:11.840 cash up front. Is that possible? Yeah, exactly. Yeah. So 217 00:15:13.519 --> 00:15:20.279 the point is, let's say you sold a package for Twentyzero Bucks, right, 218 00:15:20.320 --> 00:15:24.639 and maybe you were able to get twentyzero whatever. Yet there were four 219 00:15:24.840 --> 00:15:30.480 things in there or three things that in historically were being up sold all the 220 00:15:30.559 --> 00:15:35.279 time for much higher prices. So most companies in the valley, and this 221 00:15:35.320 --> 00:15:39.639 has happened after two fifteen, have gone some more of US SASS growth model 222 00:15:39.720 --> 00:15:46.080 land and expand. It's less of I'll say you this big block of software, 223 00:15:46.159 --> 00:15:48.519 and it's less of that and it's moving to, I'll see you, 224 00:15:48.559 --> 00:15:52.080 the small thing, and then you keep increasing your usage. Right, that's 225 00:15:52.519 --> 00:15:56.279 fair. The valley has shifted to and is going so now, if you 226 00:15:56.320 --> 00:16:00.759 have this fixed thing and you provided these features that you were going to sell 227 00:16:00.960 --> 00:16:06.039 later, then you cannot go and sell these things later to the customer anymore. 228 00:16:06.120 --> 00:16:10.480 So it you really have to be thoughtful about what the customer journey has 229 00:16:10.559 --> 00:16:12.360 been for your customers in terms of feature, you say, so that you 230 00:16:12.399 --> 00:16:17.799 can design something that's going to maximize up cell. There is a lot of 231 00:16:17.799 --> 00:16:22.080 research now that points. O would like beyond the point, beyond, like 232 00:16:22.159 --> 00:16:26.960 I around roughly fifty millionaire are, there is an inflection curve where GDM now 233 00:16:26.960 --> 00:16:33.120 has to focus on existing customers, to upsell more products to existing customers as 234 00:16:33.159 --> 00:16:38.600 a biggest driver of growth leading to IBO, not new business. So that's 235 00:16:38.720 --> 00:16:42.519 the biggest type of when you said that was fifteen million are or is that 236 00:16:42.600 --> 00:16:47.679 like around zero? Around Five Zero Fifteen? Okay, yeah, the rough 237 00:16:47.840 --> 00:16:52.279 estimated. There is a point in evolution structure companie beyond which you got to 238 00:16:52.360 --> 00:16:56.639 start focusing on that upsell path a lot more because it's, I believe it's 239 00:16:56.679 --> 00:17:02.279 like three to four times cheaper in terms of customer acquisition rate. Wow, 240 00:17:02.559 --> 00:17:06.519 it is a cheat for its cheaper and this is a Pacific Rest survey price 241 00:17:06.519 --> 00:17:10.880 intelligently also talks about that all the time. And before that you are more 242 00:17:10.920 --> 00:17:15.480 focused on new business acquisition. You logo acquisition. If you look at the 243 00:17:15.519 --> 00:17:22.480 valley, everybody's focused on new logo acquisition always. Nobody's solving the upsell expansion 244 00:17:22.799 --> 00:17:26.920 volume of upsell paths. However, if you did that intelligently, and I 245 00:17:27.000 --> 00:17:33.480 know of companies who have, you did not suffer anything during the COVID pandemic 246 00:17:33.559 --> 00:17:38.240 because you intelligently kept charging more for usage for an existing customer base and you 247 00:17:38.319 --> 00:17:42.720 kept selling them more even when you couldn't go to the broaden market during during 248 00:17:42.759 --> 00:17:48.720 a recession. So it's an incredibly powerful lever. Yeah, absolutely, Wow, 249 00:17:48.720 --> 00:17:52.079 it's awesome. So what have you seen to speak to some of how 250 00:17:52.079 --> 00:17:55.960 powerful can be? What have you seen from companies when they reject the idea 251 00:17:56.039 --> 00:18:00.119 that pricing is complex and we shouldn't go through a step I sell by, 252 00:18:00.200 --> 00:18:04.079 when they actually go through the step, I stab right? Undoubtedly they see 253 00:18:04.079 --> 00:18:10.960 their ASPS increase, they see deal velocities increase, they see pricing or option 254 00:18:11.039 --> 00:18:14.839 improve. So sales team actually starts to use it and they see the customer 255 00:18:14.920 --> 00:18:18.400 being actually happy. Regularity, easier renewals. Right. So, if you 256 00:18:18.640 --> 00:18:22.640 specially with this, if the model was wrong, and you fix the model, 257 00:18:22.680 --> 00:18:27.480 it has so many cascading effects. Easier in new wealth, easier contracts, 258 00:18:27.640 --> 00:18:34.400 no hassle negotiations upfront. It's easier to justify roy better ASPS, better 259 00:18:34.599 --> 00:18:38.519 lower turn rate like it's everything like. That's why I like II. Then 260 00:18:38.599 --> 00:18:42.279 remain so books. Yeah, they're saying this is just like one thing, 261 00:18:42.400 --> 00:18:45.960 is not a very tiny thing to fix. It fixes so many other problems 262 00:18:45.960 --> 00:18:51.359 in their business. If you do it right, that's huge. That's huge. 263 00:18:51.400 --> 00:18:53.759 You have me. So where do we start? Where do I begin? 264 00:18:53.880 --> 00:18:56.519 What's the first step? But which which I do right away? And 265 00:18:56.559 --> 00:19:00.880 then and then what should I do after that? Yeah, I mean I 266 00:19:00.920 --> 00:19:04.559 think they are roughly like there's like a decision diagnom I follow, but think 267 00:19:04.599 --> 00:19:10.480 of it as three or four steps. Think you consider yourself as a business 268 00:19:10.480 --> 00:19:15.000 owner or a product manager. I call it like PPP is just my framework. 269 00:19:15.039 --> 00:19:18.839 Think about your positioning. First, are you the premium player? Are 270 00:19:18.960 --> 00:19:25.079 you a pricing come you know pry? Are Your commoditized price comparitor? Think 271 00:19:25.119 --> 00:19:29.119 about where you are in your customer segment and just make sure you know what 272 00:19:29.200 --> 00:19:33.400 you want your position to be. Second, you come to packaging. Right, 273 00:19:33.519 --> 00:19:37.519 think about your customer segments. Do you have many customer segments? Build 274 00:19:37.559 --> 00:19:42.079 as many packages per customer segment that really solve their problem. Well, and 275 00:19:42.119 --> 00:19:48.440 then finally, pick the right pricing variable. Find something that maps to customer 276 00:19:48.640 --> 00:19:55.160 value. Right so historically there used to be Pur seat pricing, where it's 277 00:19:55.200 --> 00:20:00.319 a very standard model of software pricing that may not necessarily always map to value 278 00:20:00.359 --> 00:20:03.640 that a customer is getting. So the value now has a wall to usage 279 00:20:03.640 --> 00:20:07.799 based pricing, like the Trulos of the world. So select whether it's a 280 00:20:07.880 --> 00:20:12.720 capability or usage based model right. So we looked at positioning, we looked 281 00:20:12.720 --> 00:20:18.319 at packaging, we looked at the type of pricing variable. If you think 282 00:20:18.359 --> 00:20:22.079 about all this in a step by step process, you solve most of the 283 00:20:22.079 --> 00:20:26.279 problems right there and then what you need to do is you could do so 284 00:20:26.359 --> 00:20:30.119 a little bit of research on the price point itself, which is probably the 285 00:20:30.200 --> 00:20:34.359 least important problem here, but you can do some research using surveys and conjoint 286 00:20:34.400 --> 00:20:40.160 and what have you. And the final step, yet the longest step, 287 00:20:40.319 --> 00:20:44.720 is pricing operations. You have to if you have a bigger field sales team, 288 00:20:44.720 --> 00:20:48.839 then you have to build all of the materials, sales enablement, materials, 289 00:20:48.960 --> 00:20:53.519 pricing, calculated, CPQ, execution stuff. So first pass is strategy. 290 00:20:53.680 --> 00:20:57.000 Get it right in that order. If you get it right, it's 291 00:20:57.119 --> 00:21:02.000 very likely that you won't get the operations peace wrong, but the operation piece 292 00:21:02.039 --> 00:21:04.319 will take time, and that's where you involve. We are pricing OPS Fokes, 293 00:21:04.400 --> 00:21:07.839 right, that's where you in all other parts of the business and say 294 00:21:07.880 --> 00:21:11.559 hey, I've decided, this is the structure I'm going to follow. This 295 00:21:11.599 --> 00:21:14.839 is roughly the price points and there is more, like you know, there's 296 00:21:14.880 --> 00:21:18.200 some more details to it, but it's a simple structure and now I want 297 00:21:18.240 --> 00:21:22.359 you guys to operationalize that and tell me how to do it and then you 298 00:21:22.519 --> 00:21:26.039 can negotiate, you can delegate to it to some other team, but as 299 00:21:26.119 --> 00:21:30.559 the product manager or as the business owner, you made the important calls first. 300 00:21:30.559 --> 00:21:33.160 That's all I'm asking you to do. Just take the important calls for 301 00:21:33.160 --> 00:21:38.559 your product. MMM, that's so good. Obviously, this so range based 302 00:21:38.680 --> 00:21:44.799 on internal dynamics and everything. The time commitment by what would you say is 303 00:21:44.799 --> 00:21:48.880 a typical someone should budget? When they're saying okay, you know, really 304 00:21:48.960 --> 00:21:52.880 pricing, usually they're the red pricing conversation is like we need to Redo pricing 305 00:21:52.920 --> 00:21:57.519 like this week, and it's always crazy pressure and and they maybe the wrong 306 00:21:57.559 --> 00:22:02.319 decisions. Whatever. How long would you say? Typically, that process should, 307 00:22:02.319 --> 00:22:04.720 from beginning to end, go through all those steps should take. Right, 308 00:22:04.799 --> 00:22:11.039 if you are somewhat of a well runs established business. I would say 309 00:22:11.079 --> 00:22:17.119 it would take about a month or six weeks to come up with the structure 310 00:22:17.200 --> 00:22:22.079 and then probably a couple of months or more for operationalizing it. Now you 311 00:22:22.119 --> 00:22:26.720 can operationalize it in a manual fashion and do it faster, but to make 312 00:22:26.759 --> 00:22:30.119 the eye decisions is going to take at least a month to six weeks. 313 00:22:30.200 --> 00:22:33.000 That minimum right. I don't think you can do it in a week, 314 00:22:33.039 --> 00:22:36.319 but it is possible. You could do it in a week if you were 315 00:22:36.319 --> 00:22:38.519 coming out with a brand new product that nobody's ever seen. Right at that 316 00:22:38.519 --> 00:22:44.319 point you just have a hypothesis, sure, but for a functioning company that's 317 00:22:45.000 --> 00:22:48.359 probably say. That's the minimum. People do tend to fall in like if 318 00:22:48.359 --> 00:22:52.200 you go to a consultant, they will take more time because they want to 319 00:22:52.240 --> 00:22:55.559 do things properly and they want to charge where they are. I don't think 320 00:22:55.559 --> 00:23:02.079 you need that. The other problem is operationalized operationalization. Be a little careful. 321 00:23:02.720 --> 00:23:04.759 If you don't need to do the whole hog of a lot of automation, 322 00:23:04.880 --> 00:23:11.319 don't, because the CPQ step of implementing things and sale force is where 323 00:23:11.440 --> 00:23:15.319 there is the biggest failure rate. And if you think that is all going 324 00:23:15.359 --> 00:23:18.960 to be automated and it's going to be the most well functioning thing. Is 325 00:23:18.000 --> 00:23:22.759 never going to be that way and it is not that Wain even established companies. 326 00:23:22.839 --> 00:23:26.200 So that's just the pitfall that in probably need to watch out for. 327 00:23:26.880 --> 00:23:32.039 Wow, that's such good advice, man. That's so good. Is there 328 00:23:32.039 --> 00:23:36.160 anything that you would one a big you know, what's a big takeaway that 329 00:23:36.200 --> 00:23:41.240 you'd want our listeners to walk away with? The biggest takeaway is just don't 330 00:23:41.359 --> 00:23:45.480 fear you know. One is just think holistically. Without your product, GDM, 331 00:23:45.559 --> 00:23:48.680 right pricing is part of your product g DM. It's not separate. 332 00:23:48.160 --> 00:23:53.440 It's part of marketing. I would love for product managers to have ownership about 333 00:23:53.480 --> 00:23:57.519 it because it's their product and it's just a simple step by step framework. 334 00:23:57.599 --> 00:24:02.640 Like just think logically about the steps. It's not very complex. It's nor 335 00:24:03.200 --> 00:24:07.480 to what mathematical. Everyone can do it. Don't fear it. It's good 336 00:24:07.519 --> 00:24:11.079 advice. That's great advice, man. There's so much you've unpacked in this 337 00:24:11.160 --> 00:24:15.000 episode. I mean there's I know we're just scratching the surface and it's hard 338 00:24:15.039 --> 00:24:19.799 to even if you can cod so deep into this and so ag you've been 339 00:24:19.839 --> 00:24:26.319 working on this what's the name of your book again for all listeners? Yeah, 340 00:24:26.440 --> 00:24:29.559 thanks. So the book I'm writing on this is called a price to 341 00:24:29.640 --> 00:24:33.359 scale. Price to scale, what a great name. It's awesome. And 342 00:24:33.400 --> 00:24:37.720 then, and when is that going to be available? I'm hoping sometime in 343 00:24:37.799 --> 00:24:41.559 January. So this much sweet. That's around the corner. That's awesome. 344 00:24:41.920 --> 00:24:45.240 We're in January. That's fantastic. So you do this month or next, 345 00:24:45.240 --> 00:24:49.200 but still be huge. Yeah, what. So for all the listeners, 346 00:24:49.240 --> 00:24:52.880 if they want to go and check out the book, where would they go 347 00:24:52.920 --> 00:24:56.039 and check out your book? Yep, so it's my website. is a 348 00:24:56.119 --> 00:25:00.559 jeep, coomandcom. You can just landen on my website and navigate to the 349 00:25:00.559 --> 00:25:02.960 pricing book or, if you want to go additate to the book. It's 350 00:25:02.960 --> 00:25:07.119 a jeep, coomandcom forward slash pricing book. That's awesome, man, that's 351 00:25:07.200 --> 00:25:11.839 great. Definitely check out that book. I would say reserve it now, 352 00:25:11.920 --> 00:25:17.039 or rather make sure you subscribe through that link now, so then as soon 353 00:25:17.079 --> 00:25:19.559 as the book drops you can get that. I definitely be getting going to 354 00:25:19.559 --> 00:25:26.799 be getting a copy. This topic is so huge and comes up so much. 355 00:25:26.240 --> 00:25:29.920 Obviously I'm more on the snow obviously, but for those who don't know, 356 00:25:30.079 --> 00:25:33.880 I'm more on the sale side. Usually, the conversations and when you're 357 00:25:33.880 --> 00:25:37.640 communicating it from a sales point, people like, Oh, you should bill 358 00:25:37.680 --> 00:25:40.119 sell anything or sell any price. It's like know, you don't understand. 359 00:25:40.160 --> 00:25:44.359 When you're communicating, there's only so far you can be asked before you're like, 360 00:25:44.440 --> 00:25:47.839 I honestly have no idea in the client knows it, like they know 361 00:25:47.920 --> 00:25:52.000 without a doubt that you're just making up reasons and they're going to ask. 362 00:25:52.000 --> 00:25:53.160 They're going to be like, why are we paying for this if I thought 363 00:25:53.200 --> 00:25:56.759 you said we probably will be using that for the first couple months? Or 364 00:25:56.920 --> 00:25:59.160 why are we going to pay for this now? Can't we just pay for 365 00:25:59.200 --> 00:26:04.200 this? And so those conversations happen. With good pricing, your arming your 366 00:26:04.240 --> 00:26:10.519 sales team with the best weapons they could possibly have. Ordering certainly huge. 367 00:26:10.759 --> 00:26:15.119 Yeah, we I mean I think sales people are often given the short end 368 00:26:15.160 --> 00:26:19.440 of the stick and expected to be Superman. And you know, he's like, 369 00:26:19.480 --> 00:26:22.839 Hey, I have a product. You know you're a bad sales person 370 00:26:22.880 --> 00:26:26.720 if you can't sell it. But it's not the case. Like we make 371 00:26:26.839 --> 00:26:30.440 so many mistakes before we set up send a sales person out there, I 372 00:26:30.440 --> 00:26:36.079 think you know, I think there's little more empathies needed because they, you 373 00:26:36.119 --> 00:26:38.000 know, see, at the end of the day, they're going to maximize 374 00:26:38.000 --> 00:26:42.039 the valuation of their business. Yeah, big time, big time, and 375 00:26:42.039 --> 00:26:47.119 then all the up cells and everything else makes so much sense. A Gee, 376 00:26:47.240 --> 00:26:49.039 this was awesome. Thank you so much for being on the show. 377 00:26:49.119 --> 00:26:55.000 If people want to connect with you personally, is it best to connect with 378 00:26:55.039 --> 00:26:57.680 you on Linkedin? What's your preferred social platform? Yeah, linked in. 379 00:26:57.759 --> 00:27:02.160 This perfect. Okay, awesome, great. Well, I'm sure we'll have 380 00:27:02.200 --> 00:27:03.880 all the links in the show notes and everything, but a gee, thank 381 00:27:03.920 --> 00:27:10.079 you so much for joining us. BB growth is brought to you by the 382 00:27:10.119 --> 00:27:12.720 team at sweetfish media. Here at sweetfish, we produce podcasts for some of 383 00:27:12.799 --> 00:27:17.880 the most innovative brands in the world and we help them turn those podcasts into 384 00:27:17.920 --> 00:27:22.119 Microvideos, linkedin content, blog posts and more. We're on a mission to 385 00:27:22.160 --> 00:27:30.400 produce every leader's favorite show. Want more information, visit sweetfish Mediacom