Episode Transcript
[00:00:00] Speaker A: If you don't have the differentiation and if you're not going after several degrees customers in your tam, then don't do good, better, best. Oftentimes, the biggest mistakes I see is a lot of companies putting way too much in the good entry level plan. 5x across, that's five plans max, that's five ads max, and that's five differences. Oftentimes that's really going to get you into a much better place. The fundamental thing in the journey that that user is trying to do is they want to build it for their time and they want to get paid. That's it.
[00:00:28] Speaker B: Yo, Mic 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.
[00:00:50] Speaker A: What's up and welcome to the Street Pricing Podcast. I'm Marcos Rivera, author, CEO and founder of Pricing IO, and today I want to talk a lot about good, better, best. This is by far the most popular way to package up a SaaS software these days, and it is amazing how many companies get it wrong. And so what I wanted to do is just take a few minutes to explain a little bit more about good, better, best. Someone who's seen it hundreds of times, who's seen the best do it, who's seen the worst do it, and hopefully this can help sort of untangle some of the misconceptions that are out there versus some of the best practices in getting this right. All right, so I'm going to break this down and jump right in to a couple of key things. The first one is, should you even do good, better, best? Is that even the right model for what you're trying to do? I'll talk about how do you not do it, so some of the big mistakes I've seen and those things to avoid. And then lastly, I'll talk about how to do it right or how to make sure you're successful at it. Okay, so those are the big ones we'll start with. Should you do good, better, best in the first place? And 72% of SaaS companies do it. I'm talking in the B2B space. B2C companies do it too, but I'm mostly B2B today. And I'll tell you, they mostly start with the concept because they saw it somewhere else, right? Software all around. We get it. It's I buy software myself and software companies buy software. It's all over the place. And so they'll see a good better best and they'll say, hey, you know what, that probably is something we should do. Let's go ahead and switch to that. It'll put a lot of thought into what goes into the tiers. And so oftentimes, if you're really thinking about should I even attempt a good better best in my packaging, the first thing you need to think about is how much of the TAM you're actually going after. And then the second thing is how configurable my product is. So I like to think of this as degrees and layers. So when you think about your tam, there's degrees in which they need you. Some need you a lot, some need you a little in that, in that total addressable market. Right? So you might have some customers that maybe need you for one thing, maybe they're trying to do a lot of different things and they need you for everything. You're going to have a spectrum. And so my point in degrees is how much of that spectrum are you really attacking and going after with your product? Listen, if you're just going after a small set of use cases or small sliver of the TAM and then your product can only do one thing. Don't do good, better best. Just stick to a very simple, you know, all in one, here it is, and then scale on something else. But I think for those that kind of push good, better, best too soon, what ends up happening is that their plans aren't well differentiated. They kind of, you know, plans you're better, your best plans start to look alike or there's only one thing that's different between them, but the price is twice as much. Doesn't make a lot of sense to a lot of folks. And so I always say if you don't have the differentiation and if you're not going after several degrees customers in your tam, then don't do good, better best. All right, Stick to something simple. Stick to an all in one. And then as you start to expand out and address different needs, as your product does different things, then you can start considering moving in and doing another tier. You don't have to jump from one to three. You could also have two. Two tiers are just fine, three. Some even push to the four. If they're really addressing a lot of the TAM and their product do a lot fine, they do four. Try to stay away from five or six. It gets too many options for folks to, to decide Between. So I'd say two, three or four oftentimes are the best number of tiers if it works for you. But again, making sure that you're able to see if you think it about in your tam solving different, the price level should be changing. You should be able to have, you know, a 5x10x difference in price that can, that's usually an indicator that you can push to good, better, best, sometimes even more. And so look for that differences in willingness to pay for the stuff that you're solving for. And then from a product perspective, if you can at least break down several of your product features, you could do a binary breakdown which is turn them on or off. You could also throttle them, meaning you can give some and then maybe some more in a different plan. And then things like integrations, things like configurations and setup. You have to look at it as a full spectrum, not just features A, B and C. But if you can start to create different experiences with all that stuff. And by the way, don't forget about services like onboarding and support as well. If you can layer in all that and create different experiences, then you're ready for good, better, best. So overall, just make sure you're attacking full time and that your product is ready to do it. So that's if you know that you're ready. How do you mess up in doing it? Oftentimes the biggest mistakes I see is a lot of companies putting way too much in the good entry level plan. If you have way too many things in that entry level plan, there really is no reason for them to move up. Okay, so you're solving for too many use cases in there and, and it really doesn't give them an incentive to do more. They got everything they need in the entry plan. Also, when you think about where do they go from that entry plan, if the jump to the next one is just way too far, then guess what, they're not going to make the jump. And they'll do unnatural things even and do little workarounds or use something else to stay within your plan. That's also something you don't want to do. So that's the, the number one mistake I see is a bloated, overloaded entry plan. And I get why you do it. Listen, you're trying to give them a lot of value. You're trying to, you know, make sure that the experience wows them and that they get everything they want. And then so give them much as you can in that entry plan to make them happy, to give them a lot of value. But what you're doing is you're simply over serving that base because in that base you're going to have a lot of different willingness to pay and again, a lot of different degrees in terms of what they need. So don't overstuff your entry plan. If you're sitting listening to this right now and you have good, better, best, really scrutinize that entry plan. Go back and look at it. Do I really need all that stuff? Do these, do these customers in here really need all that stuff? Go back and push and see if there's a way you can lean that down. All right, so we talked about, should you do it? Talked about some of the big mistakes I've seen in others. There's a, the second one, actually let me just throw this in here as an extra one, is there's no add ons. What I'm finding is that you're looking at a different, I see a very different dichotomy in the market. I see companies with way too many add ons nickel and dime their customers for everything. It's just not a good sensation. And then customers have no add ons at all. They lump everything in. And add ons are a real important part of good, better, best that get overlooked. The easy way to think about it is if you have a third or less of your customer base that actually wants this thing, whatever that feature or that service is, then pull it out and make it an add on. All right. Ideally you could also have your cake and eat it too and include that thing in a premium or your high level, whatever enterprise plan and then make it an add on for the other plans. And so you could have your, your cake and eat in two by, by doing both. The point is pulling things out as add ons. Give little stair steps for customers in a plan to start moving closer and closer to the next. And some just aren't ready to take that big of a bite and upgrade all the way and receive, you know, all the new, the 15 different features and this and all that. Some of them just want a, a bite so they can chew it and then they can take another bite and chew it and move on. So using add ons as a stair climber is also another really underused technique in, in good, better, best. So don't shove all your add ons in there. That's the big mistake. Pull it out and try to pick the ones that only a subset of your population really want. How many? I'd say look, three to five add ons per Plant is the maximum where you want to go. Again, too many add ons could just cause a lot of confusion, a lot of complexity. So try to keep a handful right. Again, people don't like making decisions across like a ton, a myriad of things. They want to keep a simple decision set. Do I want this or not? Move on. So keep it to a handful and then use that to create some stair steps. 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. All right, so how do you do good, better, best, the right way? I already hinted at a few things just by talking about the wrong way to do it. But from a right way perspective, you have a couple of really important points you need to make to get it right. There's nothing like good, better, best to really force you to understand your customers, like at a deep level, what they want, what they do, where were they, where are they now, where they're going. All that is super important to get good, better, best, right? So the first thing you want to do, you know, people like to mess around with the names, you know, starter, elite. I'll save that for another talk later. There's, there's some specific ways you want to name it, so it's super obvious which one is for who. But moving names aside, the first thing you need to understand is what are they doing now? How do they do that without your product? And then how do they do that same job, that same thing with your product? And so I'm going to get into this a little bit. Journey and jobs. And so a customer has a journey, they're working at a company and they're trying to do something in order to achieve an outcome for that company. Again, I'm staying in B2B for a second. If you're B2C, then just remove the company part, but you're doing a job across your journey in order to get to an outcome for the company. That's just kind of breaking it down in the fundamentals. And so if you don't really know what that journey is or you don't really know what jobs they're doing, it can get really muddy in terms of what do you put inside a good or better plan or enterprise Plan, it gets really foggy. So you start breaking it down first with the, the target users you're trying to go after, label them. You know, there's all sorts of Personas and ways to research and all that stuff. But you got to understand who's in your product first and fore most and then what are they doing? I would say what were they doing before your product and what they're doing after. Right. And sort of trying to get to that outcome. When you're designing good, better, best, you want that entry level plan to knock out the first few jobs in that journey. You don't need to, you don't need to knock out every job at the journey, just the first few to get them to a good end point. And that's the hard part to figure out what's a good endpoint. What does that mean? Oftentimes it's usually two or three use cases that they're trying to get done that they're doing super manually, that when they start doing it in your system, it's like, oh, it's magic. Okay, finally I got this done. It takes me minutes versus hours or it takes me hours versus days, whatever it is, if you can get to that first job. So think about like I'll layer an example on top of this. So say you have a fitness software, okay. And you have a, your job as a fitness owner. Need to make sure that you, you know, you're checking in your members, you got your people and staff in there, you're paying them and your members are paying you. Right. Like those key four things, you do that first, that could be like your first entry plan, your first use cases. You don't need to get into all the fancy schmancy, algorithmic scheduling and marketing and all that other stuff. Those are the basic first things. They were probably doing it really painfully before. Another example, say for your lawyer and you're, you know, starting on your own, you're starting your own practice. Maybe it's you, maybe it's an assistant or two. And what does a lawyer really want to do when, especially when they're early in their journey starting up their practice, they want a bill and they want to get paid. Those are the first two jobs they want to get done. All this other stuff about, you know, optimizing their court appearance schedules or trying to, you know, more marketing or managing a staff and interns or whatever, that's all gravy later. But the fundamental thing in the journey that that user trying to do is they want to build their for their time and they want to get paid. That's it. So if you solve for that in the entry plan, then you can start earning the right to solve more problems for them. And that's where the second plan comes and that's where the third plan comes. And so ideally start with those basic fundamentals. Two, three steps doesn't have to be that complicated. Solve it and solve it freaking well. And then you want to move on and start solving more things for them in the next plans. And that's how you layer it. You want to avoid things like, you know, hey, basic plans or sorry, basic stuff goes in the, in the entry plan and then all the advanced stuff goes to the premium. That's not going to get you that far. Try to solve again the first couple jobs that really matter to them and then move on. And how do you know which ones matter? That's where the deep research and that's where the painful digging and understanding, all that stuff comes from. All right, so that's my point of view on good, better, best. Let me leave you with this quick guide of five. I call it the guide of five. Just kind of keep things easy to remember. You want to keep it again, less than five plans. I prefer two, three or four. You know, you don't need to go to five or six. So less than five plans in good, better, best packaging. Too many, five, six, seven. Just get way too many for people to decide between. You want to try to pull out. Remember I talked about add ons. Try to see if you can have maybe 3 to 5, 5 add ons in there is, is a really nice set of options. Typically the middle plan is going to have the most add on options. But try to layer them in there so that way people have things to bite off and chew instead of a, a full blown upgrade. The other five thing is when you think about the tiers and how much you're pricing and jumping them, right? So the price of the plans oftentimes that second jump from the middle to the high plan. So from better to best, that second jump is usually twice as much. And that's because as you go down the spectrum as the, you get down to the folks who really want to solve all those jobs and who really want to pay to get everything, their willingness to pay is way higher. They don't care, they're just going to, they want the best, they want to, they don't want to think about anything. Just give me the best. So you should be, it should not be a perfect linear jump from good to bad or to best when it comes to your prices, you should be able to charge a lot more for that best disproportionately. Okay, so one rule of thumb I picked up is a five times. So if your entry plan is 20 bucks, then your premium plan usually starts at five times that or a hundred bucks. Your entry plan is 50 bucks. Then your premium plan is starts at 5 times 50 which is 250 bucks. So look for that as a range. Yes, there are reasons to to break that rule, but use that as a rubric first from a pricing for each of those plans. So 5x I talked about 5 plans. I talked about 5 add ons. You also want to make sure that between each plan you have five differences you can point to that are obvious to regular people like me and you. Maybe there's different volumes in there. Maybe they have access to different integrations. Maybe they have different, I don't know, security or data. What it is. You need to point to at least five things that are very clearly different that capture the different experiences across. All right, so that's 5x across. That's five plans max. That's five ads max. And that's five differences between the plans you start there. Oftentimes that's really going to get you into a much better place or even the best place when you think about your packaging. All right, so hope that was helpful. Take it back. Go back on Monday, scrutinize that entry plan like I said. See if there's something you can pull out of there. See if there's an add on that you can add as a stair step and that'll start getting you on your way. You know, try to get 1% better. Like I always say, try to move away from that guesswork. You want to stop guessing. You want to start growing.
[00:14:25] 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 and subscribe. If you want to learn more about capturing value, pick up a copy of Street Pricing on Amazon. Until next time.
