Episode Transcript
[00:00:00] Speaker A: We can't underestimate the savviness of our customers as well. And whereas we don't want to assume that they understand the changes that we're making, we also don't want to assume that they don't understand anything about pricing. Right.
[00:00:13] Speaker B: Yo, Mike check. What's up, everybody? You're listening to the street pricing podcast, the only show where proven SaaS leaders share their mindset and mistakes in pricing so we can all stop guessing and start growing. Enjoy. Subscribe, and tell a friend. Now, let's break it down with your host and sought after slayer of bad pricing, Marcos Rivera.
[00:00:36] Speaker C: What's up? And welcome to the Street Pricing podcast. I'm Marcos Rivera, author, founder, and pricing coach, and today's guest is a pricing pro, well over ten years of doing it in consulting and SaaS and other spaces, and I'm excited for you all to learn from him. Today I have Kyle Westra. He's from Maxar Technologies. Kyle, welcome to the show. Mandy.
[00:00:57] Speaker A: Great. Thanks, Marcos. Glad to be here.
[00:00:59] Speaker C: Oh, I'm excited to have you because you know a lot, because you've seen it from all these different angles, and I can't wait for you to tell everyone what you've learned in your career. But before we get into that, why don't you tell us a little bit more about you and what you do?
[00:01:11] Speaker A: Sure. Yeah. Like you said, I've been in pricing for a while, although it was something of a second job for me. I was a foreign policy guy out of college, studying political science, economics, before getting my MBA in Chicago, getting tied up with the pricing strategy world after that, working as a consultant for six years with Wiglaf pricing, and then I've had a few in house b two B technology pricing leadership roles since then. So, like you said, I've been able to see it from a few different angles, which is great, while really focusing on the b two B technology side of things, where I think pricing can be especially impactful.
[00:01:49] Speaker C: Yes. I mean, it's. Right now, thinking about your current role at maxar, maybe a little bit on those guys, because it's nothing, maybe what people think. And I want you to explain a little bit about Maxar, because I think folks can learn a lot.
[00:02:01] Speaker A: Yeah, sure. So I've been with Maxar for just over a couple months, and they've changed quite a bit as a company over time, and then within the last couple of years as well. They are a geospatial intelligence company, so they used to manufacture their own satellites and then operate them and derive the insights from that imagery, that's split into two separate maxar companies. Now, there's maxar space systems, which is the hardware, and then Maxar intelligence, which is the software, analytics and insights as well. So we are private equity owned now. We're based here in Colorado, and I'm on that intelligence side. So the focus there is really on secure, precise geospatial intelligence. We work a lot with commercial and government. On the government side, it can be defense and intelligence, but it can also be agriculture, oil and gas, commerce related. I mean, on the commercial side, everything from the navigation apps that your phone depends on, to maritime activities, real estate, anything and anyone that needs to know exactly where things are, where things used to be, where things might go in the future. Satellite imagery is one of the most powerful ways of getting about that.
[00:03:12] Speaker C: Super, super cool. It's something you can touch and feel and see. And so this is around space, this is around earth, right? We're gonna get.
[00:03:20] Speaker A: Yeah, it's kind of fun.
[00:03:20] Speaker C: We're gonna get terrestrial with this thing, right? Maybe extraterrestrial, depending on what you say today. Right. But no, this is going to be a lot of fun, man. Thank you for jumping on the show. And are you ready to get street with me?
[00:03:31] Speaker A: I'm ready. Let's do it.
[00:03:32] Speaker C: All right, man. We want to keep this real, but a quick roadmap for the audience here. So this show is based on the book street pricing. So we're going to break this down in three main areas. The first one's going to be rewind. Let's jump back into a pricing story. Success struggle, something in the past that we could all learn from in the SaaS community. Then we'll bring it back to today and play what's working. Now, what are some techniques you think are, like, super effective in pricing? And then we'll talk about fast forward tomorrow or in the future. What's next? Where is it going? What's happening? We'd love to unpack some of that with you there. And then we'll rock and roll. How does that sound?
[00:04:06] Speaker A: Sounds great. Yeah.
[00:04:07] Speaker C: All right. Phenomenal. Well, Kyle, walk us through a story, man. Let us know what went on.
[00:04:12] Speaker A: Well, one of the great things about consulting is you get exposed to so many different types of companies, so many different situations, everything from high level business strategy to the real nuts and bolts of, okay, how do we actually implement this new pricing model, or how do we enable sales on these changes? How do we get an analytics team really up and going? But I thought a good story to walk through for this audience would be something that I did at my previous role with Bloomreach, which is e commerce technology b two b technology as well. During my time as head of pricing strategy there, and one of the things that we had to work on pretty quickly in my tenure, there was something that in some ways was a minor shift to a pricing metric, but in other ways was a really monumental shift. And threading that needle of figuring out how best to communicate this, how best to operationalize it, and how best to really deliver the change that was promised here took up a lot of time, took up a lot of effort, but I think continues to pay dividends. So Bloomereach is e commerce marketing as well as search optimization on websites. On the search optimization side, there was a, again, a change to the pricing metric that we wanted to deliver. Changing the pricing model from a per page view pricing metric to a per API metric. It sounds relatively straightforward, and in many ways it was. Those two metrics align pretty well with each other, but there were some aspects in which APIs fit better than page views. So when you're looking for a pricing metric, especially on the software side, I think especially on b, two b as well. Some of the characteristics of a good pricing metric are that it's simple, understandable, it's transparent, everyone can see what it is, it's subjective, everyone agrees on the same number. It's fair, so it treats similar customers similarly. It's value aligned, so it makes it easier to sell and easier for customers to buy. It's cost aligned, so you know that as customers grow with you, you're protected on the margin side and growth aligned. It's something that as customers use more of it, you do a better job and you get paid more accordingly. So without getting into too many details, there are some aspects in which how the product work APIs were a better value metric, they were more transparent as well. Everyone's definition of an API aligned, whereas page views, it can differ whether you're looking internally or using Google Analytics or a separate tool like that. So again, in some ways it was a pretty small shift, but in other ways it completely locked us in, in a good way to all of those different criteria that I mentioned. Another important one is since a lot of the technology costs for a company like this are AWS or another cloud server, it really collapsed us along that cost alignment line so that we knew as customers are using our product more, we aren't finding ourselves in situations where accidentally our costs are ballooning, but the usage isn't something like that. So it was relatively simple, but relatively powerful as well.
[00:07:26] Speaker C: Yeah, I would say I agree 100%. And one of the things that I think a lot of companies are a little worried about doing is should we change what we charge for like that? It could be very scary. It's a lot scarier than maybe putting on something as an add on or maybe nudging a price up five or 10% is like changing the thing you fundamentally charge for. Could even have, I mean, depending on how you do it could have implications on customer success, on what you're tracking. Could we have technology implications on? Do you even track that thing that you want to charge for? So from page views to APIs now, that's, it does seem on the surface like, okay, it's just kind of one thing for the other, and they're kind of, I don't know, cousins of each other. Well, they're kind of somewhat related, but I'm sure somebody, as you were looking at the page view metric, just before you decided to go down this path of API, you probably saw that page views wasn't quite working as well as you were hoping. Did you see any symptoms of a problem to even go down this path and change it in the first place?
[00:08:25] Speaker A: Yeah, so those had been identified even before I joined. But there were some issues, like I alluded to, wherever usage could get out of whack with cost or with value alignment, for instance. I believe it was mobile views wouldn't necessarily trigger a page view in the same way, but we would still be delivering the same type of value we would as in a browser experience. Similarly, like I mentioned, it wasn't a objective metric. There were always disagreements between how customers saw their own page views, how we saw them. That just created a customer success mess. Frankly, it made sales life and account management's life much harder than it had to be, and it caused unnecessary friction, was a turn risk. So I think what you're getting at too, and you're absolutely right, is that even if on paper something like this looks slam dunk, it's a huge, huge change management initiative and opportunity as well. Customers, understandably, if we're touching something as sensitive and as core to the model as a price metric, immediately think that we're trying to screw them over somehow or that their bills are going to skyrocket. So this requires a lot of analysis into what customers have been paying, what they would be paying in order to fine tune what those price points should be, so that customers are treated relatively the same afterwards as they are before. If that's appropriate. Now, if there are situations in which customers have been getting a screaming deal or customers have been overpaying, those are both situations in which, in the name of fairness and transparency and long term customer relationships, we just start trying to bend those needles and getting them back into parity with the rest of their customer segment, whatever that should be. And those can be difficult conversations on either side. So really spending a lot of time with our own internal sales team explaining why we're doing this, helping them develop talk tracks for different types of customers, and really positioning ourselves as partners throughout this process, helping to develop better dashboards for tracking. It's super, super critical to successful operationalization, but also on the execution side, because if sales doesn't understand why you're doing something, if they're not able to communicate it, the whole thing is going to fall apart.
[00:10:39] Speaker C: I completely agree. I always say sales will prove your pricing right or wrong, whether or not it's right or wrong. And so the idea is they need to buy in, understand it. Also understand how it helps them win, helps customers win, helps the company win. So you get that alignment all the way around. And no doubt about it, I feel like you're really pointing out some really important things for folks in that even though it's on paper page views, API seems like a done deal. But all these things in the background starts to leak out. And when you change a value metric, when you're charging for users and now you're charging for channels or you're charging for GB and used to charge for something else, like you'll find in your customer base. And here's where it gets a little scary that there's some in the new model, you'll find folks that will be paying freaking three x, five x more than what they're paying now, maybe ten x. And then you have others, that price actually might go down for them under the new metric, right? And now you got to figure out like, oh crap, like do, how do we have these tough conversations, you know, from, from one side of, you know, hi, your price is about to go up ten times to, yeah, let me give you money as I give you value, right? I mean, obviously that's not how you run the contract, but those are real things that real companies have to worry about.
You made the shift. Everybody was on board with this page viewed API thing. You did it and you already started talking about getting sales alignment and all that fun stuff. But let's dig a little bit more into that. What happened as you were executing and rolling this out how did you manage this thing?
[00:12:10] Speaker A: You're absolutely right. Again, the rollout is critical to make sure not only that we understand where we're going, but how it's going to affect different groups of customers separately. It's not good enough, enough to know that on net were going to have x effect on revenue, y effect on gross margin. We need to really understand segment by segment what is changing, because the talk track for a customer whose bill, according to new list prices is going to go up ten x, like you said, versus one who might see 30% of what theyre paying before. Thats an entirely different scenario. And being able to talk to those specific scenarios is key to managing that relationship and figuring out how at least you can start getting in the direction of normalizing and right sizing what their contract should be. So again, spending a lot of time with sales, having open office hours for sales, come in and be able to talk about specific customers that they have, figuring out with them, okay, what type of scenario are they going to be walking into? How can we get ahead of that? How can we really focus on the value story here and get customers to understand that the change that we're making here is actually fairer to both sides and it's one in which we will only be growing as they are growing and using our tool more and getting more value from it as well. And understanding along with sales that these are going to be difficult conversations. It's much easier said than done. So coming up with game plans again and okay, we probably can't get this customer to five x their bill this next conversation, but how do we start taking baby steps in that right direction? How do we manage this relationship from the point of view of we want this to be long term and we want to continue to have success together? So how do we use that as our frame of mind? Not immediately and naively demanding that they get to list price, but kind of walking with them continuously down this path of, okay, how do we, how do we continue to make a better relationship together? So again, spending a lot of time open office hours with sales, being able to get into really granular specifics customer by customer, which of course requires us and kind of our own internal customer success point of view to make sure we've done all the work necessary to understand what actually is it that we are proposing and how does that affect customer by customer and able to pull in those numbers to show that we've done that type of homework, that we really understand the implication of what we're doing down to the customer by customer level and are able to help sales understand how to have that conversation.
[00:14:46] Speaker C: Yeah, I love this a lot because the segmentation carries over a little bit more.
[00:14:50] Speaker A: Right.
[00:14:50] Speaker C: So now you understand the sort of the data, the information that went into the impact of these different groups of customers. But I like the office hours approach. That's pretty cool. I mean, it's basically like joint game planning, like how we're going to solve for this together. So sales doesn't feel like, you know, you're trying to, like, pull a fast one on them and, you know, make it harder for them to hit quota. Right.
[00:15:09] Speaker A: Which is an ivory tower thing where we're coming up with plans in the background and then just expecting them to operationalize it. It frankly wasn't something I had really done before, and the recommendation came from one of my colleagues there. But it was fantastic and I'm definitely going to do it again.
[00:15:24] Speaker C: Team, I want to take a quick pause here to ask you for a huge favor that'll mean a lot to me. Please review and share the show. Share it with your team, your friends, your peers. Not only will it help them stop the guesswork in pricing, but it'll also help you and increase the chances that you'll take action and change for yourself. All right, much love. Now back to the show. Nice. So now that you got sales working, you got a process within the joint game planning. Here's the proof for the data that talks about how we want to approach this stuff. I love the scenarios, scripting and all that ahead of the conversation. That's going to be big. But now, okay, they're cool and you're rolling this thing out. And inevitably you're probably going to get some customers that are fine, and then you'll have a group that are completely ticked off that you even touched the model in the first place. So give me a sense for how do things play out with that whole rollout page views to APIs.
[00:16:16] Speaker A: Yeah. And I'll just add that there is a third customer bucket where they get it immediately and they're like, fantastic. Where do I sign? We had like a whole migration plan planned, but as part of that, we actually had customers asking to get onto this model sooner rather than later. So I think we can't underestimate the savviness of our customers as well. And whereas we don't want to assume that they understand the changes that we're making, we also don't want to assume that they don't understand anything about pricing, it's an inherent part of their business relationship with us as well. And they're going to spend a lot of time with it. So it's again, kind of a tricky needle to thread. But in consulting and in this situation, there are situations where customers, they get it. They almost get it faster than we expect. And so those can be great customers to migrate early. We have a little bit more goodwill with them. Perhaps we'll learn as we migrate them. Okay, this worked better than we thought. That worked worse than we thought continuously to develop that talk track. Have some internal champions too, both on the sales side. If they have a good conversion, like okay, they have some good confidence, but can also use that customer as an example, sometimes even as almost like a reference to other customers as well, if it's that type of industry, to help understand why this migration makes sense, or at the least is not a gotcha, is not pulling out the rug underneath them. But you're absolutely right. Most customers kind of fit in that middle ground of like okay or absolutely not. So it's tough.
[00:17:50] Speaker C: It is tough. I'll tell you why I said that. The reason being because you're 100% right. But the ones that are in your mind as you're rolling this out, sitting at a SaaS company trying to, you know, you're getting a little bit nervous that this new pricing is about to hit the streets. You got what, two, 3000 customers and they're about to see new pricing and so on. If you didn't prepare with sales, write the scripts, get the data in your hands, and you just kind of blanket rolled everything out to everybody, I would be nervous because you're treating everyone the same and different customers are going to react differently. But what I love about your approach is that you kind of broke it down. And I think that's the big takeaway for all of these SaaS folks out there is you don't want to just roll out in a reckless way, a new pricing metric for everybody and say, here's a new one, you convert or die right type of thing. That's a really bad approach, by the way. But your customers, like you said, are not as maybe blind or dumb as you may think, but they're also not as savvy and all knowing as you may think. And so I think the idea is not to over index. Either end. They'll get it. It's fine. As long as you're clear and they understand it, they'll get it. They can sniff out b's too, just like everybody else. And so you want to kind of treat them as just good, you know, knowing people who kind of understand this kind of stuff, rational, you'll get the irrationals on the edge. That's okay. And those come in, but those aren't the only ones that you're serving. Okay. So I would optimize for a reasonable customer that would understand this stuff and then roll from there. I wouldn't do anything too crazy on either end.
[00:19:19] Speaker A: I think that makes a lot of sense. And undergirding all of that is really this idea of just prepare as much as you can and over prepare because you don't know what type of customer you're going to be walking into. So you don't want to assume that they have a certain level of savviness or a certain level of understanding. Better to be pleasantly surprised than caught off your guard, of course. And on the irrational customer point of view, yeah, we need to understand that.
Whether it's rationally irrational or just something completely out of the blue, there are all sorts of reasons why customers are going to balk at a change to their contract. Some of it is a negotiation strategy. Some of it, you know, is maybe a symptom of other things going on inside the house. But regardless of what it is, I think the core message is the same around just being really clear on what the value story is. And like you said, not bsing, you know, even in the situations where you need to talk to a customer about increasing their bill, they understand, even if they've been getting a screaming deal, if the situation is such that, look, guys, we cannot afford to serve you as we have in the past, right? That's just the brass tacks of the situation. Like either we need to start to right size this, or unfortunately, this relationship isn't going to keep working out because for a business relationship, both sides have to be making money. And if you're hemorrhaging due to the actions of a certain customer, you're better off not having that as a customer. So ideally, you know, you find a way to make that work. But at the end of the day, if someone is negative margin, you have to either right size that relationship or say, I'm sorry, try your luck somewhere else.
[00:20:57] Speaker C: Yeah, see, now you're getting street with me. You're getting real. Now you may have to tell that customer you're better served elsewhere, right? Versus here.
The big thing I want to make sure everybody's capturing too, is that these preparatory steps, the over prepare, that's not something for the faint of heart. That's not something you do in a week's. Worth of work that actually takes some thought and time to do it right. It makes sure that you're being a little bit more methodical. I think sometimes under the pressure of the board and some other things, you got to make the change. You got to roll it out or do it from some other arbitrary time limit, it forces you to rush. And I think when it comes to things like changing a value metric, pricing metric like the one you talked about rushing, I think could be a whole load of pain and problems.
[00:21:41] Speaker A: I would say 100%. There are some things in pricing that you can change relatively quickly and reverse course. If you need to list prices relatively easy to change, something as fundamental as a pricing metric or pricing model, you need to be really sure that you are taking the right next step, because continuously changing things like that just leads to confusion internally for your own operations and sales, and externally for the market, for your customers, for your competitors.
I could not agree more that this requires a lot of work deliberation. This represented months of very close, detailed work.
[00:22:21] Speaker C: There you go. There you go, man. Just to punctuate this whole thing, I got to know, so what happened? They said, oh, my God, we're so glad we did this, because what, ARR went up, or, I mean, LTV went up? What happened?
[00:22:32] Speaker A: Yeah, well, unfortunately, my visibility into the outcome of it disappears a little bit. I was there for a few months into the rollout, so, like I said, there were some really positive signs in regards to some customers wanting to migrate even earlier than we thought, some other migration conversations going easier than we thought. I'm sure there continue to be some holdouts. That tends to be the nature of these types of businesses. And if it's a key enough customer, then you find a way to make that work. But I hope that they've continued to sign all new contracts onto this model, limit the exceptions as much as they can. And I know because it's just a matter of algebra, it's just a quantitative fact that this pricing metric is much better aligned with the value they're providing, their cost to serve. It's simple, it's objective, it's transparent. It's really somewhat unusual to find a pricing metric that checks all of those boxes. And I think they really hit it out of the park with this one.
[00:23:27] Speaker C: Yeah, absolutely. Those early signs, customers are asking, can you please charge me this way?
[00:23:31] Speaker A: That's usually a cool. That's a good sign.
[00:23:32] Speaker C: Yeah, I love it, man. That's fantastic. Let's take us back from the rewind now to today.
I'm curious to get your take on what's working really well in pricing and packaging.
[00:23:42] Speaker A: In your view, super high level at Maxar. It's a really solid company. It's been around for many years. It's seen a lot of success. It was public, like I mentioned earlier, got taken private. So there's a really strong foundation there from which to build. I think the challenge there is the classic innovator's dilemma of how do we ensure that we keep doing well what we do well, serve the customers that we serve super well, and continue to grow those relationships while innovating with new products, new customers, new use cases. The technology is always improving. The competitive landscape is getting crowded very quickly. So figuring out again, how do we serve both of those markets? Essentially that goes for the product suite as well. On the most.
It's funny to call satellite technology simplistic, but at the most simplistic level, there's a raw image file that you can get. What's complex about satellite imagery, metro area. Right.
But in addition to that, there's all sorts of analytics and insights that you can, you being Maxar or any provider could put on top of that kind of raw material. So it's also a question of like, how much value add is the right value to add for every type of customer. Some customers just want that raw data and to do all the insights themselves. Some don't want the picture. They want to know what should I do about it? And I think this is something that's true for a lot of B. Two B technology companies is where in that spectrum of I'm a raw material for other people versus. Don't worry about the raw materials. I'll tell you what to do about it. There are pluses and minuses of both of those. It's not a binary decision either. There's a whole gradient of where you can fall. But that's something that I think a lot of companies are thinking about right now is kind of, again, where in that value chain do we fall and does that vary for different types of products, for different types of customers? In which of those do we choose to serve and which ones do we choose not to serve?
[00:25:42] Speaker C: Yeah, I think that makes a ton of sense because they may want, they may value something differently in that particular, for instance, the data versus the raw, because they're going to do something with it. So it's really knowing what your customer is going to do with your stuff is actually a really big piece of the puzzle in figuring out, okay, how do we frame this all that but you know, it's funny though, because I imagine a lot of your customers come from like a, either like government or military or something like that, right. And I'm curious because those are really tough folks to sell to in price in general for any software. I'm not just talking about space and gis and all those things, I'm talking just for anything. They're really tough. And I'm curious if you've seen so far, I know you haven't been there for like that long, but sort of what seems to resonate with the government or military type of buyer in a pricing and packaging model, kind of what seems to work or frankly what doesn't work. And I think a lot of folks would take away a lot from there. But do you see anything right on the quick? I know that you've only been there a little bit.
[00:26:41] Speaker A: I am still wrapping my head around it, new to that kind of B 2g business to government side of things. But I think in some ways it's not that big of a change. You still need to have a value story there. Your customers still need to understand what it is you're selling and how helps them to solve their job or their mission. For IP heavy stuff like imagery, it's super important that you align on what the use and what the licensing is like. So if you sell to one entity, can it share with every other entity within its area, or is it confined just to that one group? That becomes super important, which isn't something I've really had to deal with before, that level of complexity for intellectual property. So in some ways they're not a big change. In other ways it does kind of put some things on its head that I have been trained to expect for enterprise markets and have experience things like flexible budgets. Right. I think we tend to think especially for technology, especially for larger enterprise customers. If you have a real strong value case, whatever budget they set is probably flexible, because if you can demonstrate that for each incremental unit that you're selling, they are deriving greater incremental value from that, why would they limit it to an artificial budget? That's not necessarily the case in government for civil stuff. If they're just looking for an imagery of their city for city planning purposes, their budget's probably pretty limited, even for defense and intelligence type use cases. From what I understand, there are lots of situations where they got their budget requisitioned from Congress five years ago. Let's say it's $50 million. If you're putting something together for $70 million, they're not going to buy it, they're not going back to Congress and saying, oh, actually this provider wants 20 million more. That's just not a scenario that works. So there might be a little bit of wiggle room, but it does seem like it becomes more of a, okay, how can we create the right amount of value for this use case given the budget that they have and help to deliver on that?
[00:28:50] Speaker C: Yeah, how do you fit into that number? Right, because nobody wants to go back to Congress and try to raise the number up or expand it and so on and so forth. Unlike profit seeking enterprises that are trying to get more incremental spend will get us a sacramental profit. We're good, we get it. But on the government side of things, it's just like, no, you kind of have to, we have this box that we have defined and it took like freaking six years to make this box. So don't mess with it and let's fit within here. And I think that makes tons of sense. Have you found that? Yeah, I always found that these contracts tend to be a little bit longer in terms of length. I also found that if you do a really good job, that your retention is fairly good too. Like if you're able to serve them super well, you don't want to be swapping out different providers every year.
[00:29:38] Speaker A: Yeah, I think that's true. And like, speaking of fitting in the box, I think if you do do a good job and you're able to develop a long term partnership, you can help to define what that box is. Not in an anti competitive way, but just you have the technical experts and the domain experts, mostly on the commercial side. So helping, and this isn't even specific to government. Right. But helping any of your customers understand really how best to derive value from your products can help to develop that relationship, develop the size of size and shape of that box for that next contract in the future if they better understand, again, how to use your stuff, how to create value from it. It's market making in that way.
[00:30:22] Speaker C: Yeah, I think everybody should take that away. That's like, hey, influence the box over time, you're not going to be able to make it that much bigger during the sales process. And so in the end, I guess just like standing in line in any DMV, you have to have patience. And maybe the government sale is a patience game versus a maximized profit game.
[00:30:44] Speaker A: In the beginning, I think so. And I think at least in this industry, geospatial intelligence, sometimes called EO Earth observation, there's the sense that it's still a very young, nascent industry and that there's a lot of market making to do for the various providers that are out there on the government side, but also especially on the commercial side. It's pretty clear why Google Maps needs a good understanding of where things actually are. Their maps wouldn't work without it. But once you especially get to a long tail of business, better understanding how you can serve customers that don't immediately jump to mind that maybe don't have multi million dollar budgets to work with, but still could get real value, incremental value, probably more out of the insight side of the gradient that we were talking about earlier of providing that type of information to them. Again, there seems to be a pretty good sense of like there's a lot of untapped value there for everyone and everyone's kind of trying to figure out how best to design those products, how best to message them, how best to serve those types of customers, especially for companies that are designed more around large contracts, long contract cycles too. How do you start to make more of a model that can serve that long tail again without jeopardizing what's made you successful in the past?
[00:32:04] Speaker C: That's right. Yeah. That shift, that balance between the two, I think is going to be the key thing to achieve for a lot of folks, man. No, I think your talk full of lessons all the way around. I could talk to you all day long. Let's move a little forward to the future. Now. Where do you think pricing is going, man? Where do you feel like if either for you and for your model or just in general, where's it headed in the next few years?
[00:32:25] Speaker A: So most approximately, for my day to day, it's about setting up the pricing organization. The pricing organization is relatively new there. So really just getting clear on roles, responsibilities, processes, tools, analytics, roadmaps, all of that kind of real foundational stuff, which is a bit like putting my consultant hat back on, which is part of the fun, but really being there at the beginning and developing a stronger muscle in that regard so that we can really catapult to the next stage of development for the company. I do keep a foot in the consulting world on the side though, and there are some things that I think are going to be, that are already important. But people, even though they're spending a lot of time on them now, I think they're just going to become even more important. One of those is the balance between subscription models and usage models. So figuring out for every industry, for each individual company, what's the right amount between a flat yearly subscription or actually metering the usage up and down? They're both generally pretty good at value alignment, but you almost inherently are making trade offs in simplicity in the type of relationship you have with your customer, the requirements on the analytics and the dashboarding side, and your own ease of upselling in crosssell as well. Generally speaking, I would say subscriptions tend to be more simple, a little more straightforward, a little more predictable of capped on the high side, but also capped on the low side. Whereas usage models can be up and down, but not every company wants up and down, and not every customer wants up and down too. Some just say stop making this complicated on me, just give me one price, I will pay it happily and I will forget about this. So I think there's been a lot of movement toward usage as even better value aligned. But people have lost track of some of those other important aspects of a pricing metric, namely simplicity and transparency too, where maybe a customer hypothetically could get a better deal under a usage model. But it's so overwhelming and so complicated that they would prefer just to pay the price that you give them and understand that behind the scenes you're figuring out you, the provider, are figuring out the usage, and it's all making sense. You can think of on the b two C side, the transition we've had in cell phone plans where you used to be metered for everything that you used, customers never really liked that, even if hypothetically you could limit your usage as much as possible and maybe have a lower bill. But generally speaking, for customers and now providers as well, it's just a simple fee. Use it however you want. Maybe there's a cap on usage in there somewhere, just to protect providers from someone who's really just going crazy with their streaming, something like that. But generally there's that type of movement toward simplicity and back into the subscription direction. And I think that's going to be important for b two B technology too. That again, I think has swung pretty far toward the usage side and might find that some kind of hybrid approach or even swinging back more in the subscription direction ends up solving more of their problems than they would think.
[00:35:34] Speaker C: I think that's a pretty hot take. I think that's a hot take because a lot of companies are pushing down this usage base is fair. Look it, you pay, you don't use it, you don't pay. How much more fair can you get? But here's the thing that I think a lot of folks, I think you're striking this really at the center, is that, yes, it's aligned. Right. Usage based models are very aligned with the clients, but alignment requires attention. And if you have to pay attention to all this stuff, then it may not just be worth it. Just like, let me pay the freaking flat price or the subscription, whatever it is. I don't have to think about it. Right. Which is, I think, I think a really important point that you pulled up there. I think a lot of folks listening can take that away as well. All right.
[00:36:16] Speaker A: And I would just add too quickly on that, that it requires so much more work operationally, too, in terms of dashboarding and usage tracking and. Okay, so now they've used additional units. Do you charge them a separate overage rate? Do you recontract them?
Is there an upsell there? It's doable. And some companies do it very well and it works really well for some companies, but that doesn't mean it's the path that every company should take.
[00:36:42] Speaker C: I agree with you there. We're not all snowflakes and AWS is at the end of the day.
[00:36:45] Speaker A: Right.
[00:36:45] Speaker C: But you're.
[00:36:46] Speaker A: And there are opportunities to differentiate yourself by doing the opposite of what they do.
[00:36:50] Speaker C: Yes. Which I think you said are the swing. Right. So this is pendulum swing back and forth. Right. And maybe there are some. There's some appetite to go back to. Yeah, that's great on the usage, and I get it. But just give me a number, make it easy. I know what I'm going to pay. It's fair in my budget and I'm fine. And like you said, it kind of caps the downside and the upside, the cap collar thing. Right. So there's another maybe an avenue for that. In all this usage based talk and hoopla. I'm not against usage base. I think it's great where it fits. I don't think it's.
[00:37:23] Speaker A: And there are plenty of hybrid models, too, where maybe there is kind of a foundational price per month, price per seat, something like that, and the usage aspect on top of that. And, you know, maybe it's 90 ten on the subscription or maybe it's 90 ten on the usage. This is an avenue for a lot of experimentation, simulation, continuous improvement.
[00:37:41] Speaker C: Definitely, definitely. Yeah. One size does not fit. All for sure, man. Listen, thank you for coming in here. You dropped a lot of knowledge all the way across the arc, man. We did. We got atmospheric with this whole thing. From my perspective. Right. From that value metric change, you know, some of the. The things you did to stand up a new new pricing structure we talked about usage based pricing. We hit a lot of different angles here that transitioned from old to new. So thank you so much for sharing your very deep experience in pricing and packaging. I think it did a lot for the community today. Did you have fun talking about it?
[00:38:14] Speaker A: No, this is great. My pleasure. We could keep going for hours.
[00:38:16] Speaker C: We could. We probably could. Would you be willing to come back in the future? Let us know updates. What's changed, what went up, maybe down the line? What went on? Excellent, man.
[00:38:26] Speaker A: Yeah, that would be great.
[00:38:27] Speaker C: I want to thank you again, man. You just. I think they have a lot of food for thought for the audience today.
[00:38:32] Speaker A: Great. Really glad to hear it. And I hope if people have any additional questions, they feel free to reach out.
[00:38:37] Speaker C: Oh, here's the thing. There is one more question, and it's my favorite question, which is your jam, your favorite song, music, whatever it was, growing up so we can learn about. Kyle. What was it?
[00:38:48] Speaker A: Oh, man.
[00:38:49] Speaker C: Don't think too hard. You got to tell me what's natural.
[00:38:52] Speaker A: I have to say, what naturally comes out is a song called city of New Orleans, made popular by Arlo Guthrie. I don't know if you know.
[00:39:02] Speaker C: So wait. So I think my parent needs to know. You're a music guy, right?
[00:39:05] Speaker A: In general, I'm a music guy, yep. I grew up playing piano, singing classical clarinet through high school, through college, rather than, and then picked up guitar in college as well. And with a friend who was also studying economics with me, we started writing songs about economics and finance, topics under the bull and the Bear. So you can still find us on Spotify. And we wrote an album called Recession Sessions, which is all about the great Recession, since we were navigating that when we finished college and we got some attention from NPR, from freakonomics, marginal revolution, places like that. So that was a lot of fun. And you can also find a song specifically about pricing called Price Gouging Blues by the Bull and the Bear, which I think will hopefully resonate gouging blues especially well with this audience. But all of that to say, city of New Orleans is just like a great Americana folk song, and it was one that we used to warm up with frequently when we would have just kind of our jamming in our writing sessions. So it's great for warming up the fingers, great for warming up the voice. And it's just kind of like, it's a centering song for me, too. It's just one that kind of helps me focus and brings back a lot of nice memories from that time as well.
[00:40:26] Speaker C: I love it, man. And I love the price gouging booze. I got to listen to that one, too. But listen, you were fantastic today. Thank you so much for dropping.
[00:40:34] Speaker A: Oh, my pleasure. This has been a lot of fun.
[00:40:36] Speaker C: Superman. So listen, team, that was Kyle Westra. I want you to take these lessons. Don't waste them. Bring them to work on Monday. Talk about it with your team. Get something going and in motion that moves you more away from the guesswork. It moves you a bit closer to that growth lever. So remember, stop guessing and start growing.
[00:40:55] Speaker B: Until next time, thank you and much love for listening to the street pricing podcast with Marcos Rivera. We hope you enjoyed this episode. And don't forget to like, like and subscribe. If you want to learn more about capturing value, pick up a copy of street pricing on Amazon. Until next time.
